3 September 2009 - San Miguel Energy Corp. (SMEC), the power generation arm of the Philippines conglomerate San Miguel Corp. (SMC), will invest $350m for its planned conversion of newly-acquired Limay diesel power plant into a compressed natural gas (CNG)-run power facility.
SMC president Ramon Ang said that the conversion will make Limay's operation more cost efficient. SMEC recently acquired the Limay power plant for $13.5m.
"Originally, we were looking at Limay. But we backed down because of the expected high bid reserve price and the expensive cost to produce at P18/kWh. Lately, we spoke to a company who wanted to put up a CNG tank.
"With CNG as fuel the cost of production of the power plant will go down to P3 to P4/kWh — which will make the cost of conversion high as well," Ang said, when asked why they proceeded with the purchase of Limay after earlier pronouncement that they are no longer interested on the power plant.
In explaining the low acquisition cost for Limay, he said, "buying it cheap is just one portion, now we have to spend hundreds of millions of dollars to put up a CNG tank. A CNG tank costs $150m and to convert the plant would cost $200m."
If they would pursue this plan, he said the conversion would take at least two years to complete.
Ang said if the plan pushes through, they would import CNG from other countries which is cheaper than running Limay on diesel.
"There are a lot of companies where we can buy CNG from. You can get in from Qatar, Indonesia and Malaysia," he said.