Coal, Combined Cycle

Senoko to add to its Singapore Electricity Market

Oct. 13, 2003 – Senoko Power is likely to grab a bigger share of Singapore’s electricity generation market in 2004 with the help of a new, efficient combined-cycle power plant.

Any gain by the big utility company, which is the city-state’s largest in terms of licensed power generating capacity of 3300 MW, will be a loss for its competitors PowerSeraya and Tuas Power.

“Senoko will gain a few percent each of the market share from Tuas and Seraya in 2004,” an industry source said.

Senoko Power and PowerSeraya now each have a 32 per cent share of Singapore power supply market, Tuas Power 24 per cent and SembCorp Cogen 12 per cent. SembCorp Cogen’s power production, however, is for its own use.

Senoko Power is scheduled to commission a new 360 MW combined-cycle unit in September 2004, increasing the total installed power generating capacity in Singapore to close to 8500 MW, compared with a peak demand load of only 5100 MW.

Theoretically, said a Senoko official Friday, his company should be able to submit more competitive prices in the wholesale market because of the higher fuel-burning efficiency at its new gas-fired combined-cycle unit. For that reason, he said, Senoko will rely more on its combined-cycle units and less on its thermal units.

But the strategy the company uses in the wholesale market will be just as important, he said.

“It’s like we’re armed with the necessary weapons, but we have to know how to fight with it,” the official said.

Faced with increased competition from Senoko, the industry source said, PowerSeraya and Tuas Power will have to chose between holding onto market share at the expense of profit margins or maintaining margins but losing market share.

Other industry sources close to the two companies said PowerSeraya and Tuas Power are likely to choose the second option because of a need to meet production and overhead costs.

Weaker-than-projected electricity demand in Singapore combined with increases in capacity has created market conditions that favor the most efficient producers, those with the most combined-cycle units.

Singapore’s power demand, which rises broadly in line with its gross domestic product, has remained stagnant in 2003, industry sources said.

Singapore’s GDP is expected to grow zero to one per cent in 2003, and three to five per cent in 2004, based on the latest government’s projections.

Meanwhile, the utilities will be commissioning new capacity over the next few years, capacity that according to the industry source was planned four or five years ago.

With demand lagging behind growth in capacity, the market is becoming one of survival of the fittest

“No one could have foreseen Sept. 11, the Enron debacle and the SARS outbreak,” the Senoko official said.

Senoko’s expected gain in market share next year could be short-lived, however. In 2005, all three of the big power generators will be bringing more efficient capacity onstream.

Singapore’s power generators are moving toward using more cost-efficient gas in place of expensive fuel oil.

“The rules have changed…It’s not unreasonable to expect more environmental friendly, more efficient, and more cost- effective combined-cycle plants to be producing more than the thermal plants, which are at a disadvantage in terms of cost efficiency,” said Tung Ho Kok, Tuas Power Supply’s general manager.

About 60 per cent of Singapore’s current power generation capacity is made up of thermal units running on fuel oil and diesel, with the remaining 40 per cent comprised of gas-fired units, but the actual production ratio is the reverse.

Senoko Power, with 1210 MW of gas-fired capacity and 1460 MW of oil-fired capacity, derives 70 per cent of its current production from gas-fired units and 30 per cent from oil-fired units because of the greater efficiency of the former, the company official said.

Senoko plans to add another 360 MW combined-cycle unit in 2005.

PowerSeraya, Singapore’s second-largest power generator, has 2460 MW of oil-fired capacity and 740 MW of gas-fired capacity. It plans to convert three 250 MW oil-fired turbines to burn Orimulsion by the end of 2005, which will make it the first company in Singapore to use the fuel.

Orimulsion will save PowerSeraya more than ten per cent on its fuel oil costs for the three units, a company official has said.

Tuas Power, which has 1200 MW of oil-fired capacity and 700 MW of gas-fired capacity, will commission a new 700 MW combined-cycle unit in 2005.

Observers in the industry say that in 2005 the power generator with the highest gas-fired capacity will have the largest market share, in theory anyway.