Dededo combined-cycle power plant, Guam

The government agency Guam Power Authority (GPA) has procured a 198MW independent power plant with a 25MW battery under a build-operate-transfer (BOT) structure to replace the western Pacific island's ageing and limited baseload power supply.

Korea's largest electricity utility KEPCO is the project's sponsor and, having also signed a contract in 2018 to deliver 60MW solar capacity, is set to become Guam's main power supplier, providing more than half of its total power supply. GPA expects power bills for customers will drop 7.95% as a result of developing the new IPP.

KEPCO's new flexible power plant at Dededo is to be part of a modern power system on the island, as the roll-out of renewable energy gains pace. The green-energy ambitious Guam Legislature just increased its renewable energy goals, to 50% by 2035, in a bill passed on 31 October (2019).

Winning bid

In April 2018 GPA received 18 expressions of interest for the up to 180MW power project at Dededo, shortlisted down to seven for the first procurement round:

  • Wärtsilä
  • Sojitz Corporation Japan
  • Osaka Gas Co
  • Toyota Tsusho Corp
  • Hanwha Energy
  • KEPCO / East-West Power Corporation
  • Samsung C&T Corporation Trading & Investment Group

The final bidders for the project were:

  • South Korea-based KEPCO / East-West Power Corporation
  • South Korea-based Hanwha Energy
  • Finland-based Wärtsilä

Osaka Gas had also made the final shortlist in April (2019), however it did not bid.

KEPCO bid a net present value (NPV) of $3.12 billion and emerged as GPA's preferred negotiating partner in June. Hanwha Energy's bid indicated $3.19 billion NPV and the third bidder Wärtsilä submitted a $4.01 billion NPV.

The project company KEPCO established is named Guam Ukudu Power, for which the owners are:

  • KEPCO – 60%
  • Korea East-West Power (a wholly-owned KEPCO subsidiary) – 40%

Hyundai Engineering is the EPC contractor under a $534 million contract.

IPP BOT contract

Guam Power Authority signed the 25-year BOT contract on 5 November. The independent power producer BOT contract features the following payments to the project company:

  • fixed capacity charge – $16.755 per kW-month for the first year
  • fixed operations and maintenance (O&M) charge – $11.5246 per kW-month
  • variable O&M charge – $0.0016 per kWh

The overall value of the contract is $2.02 billion in payments to KEPCO.

GPA judged the bid contract values using a "GPA system cost" method. They included in this instance the proposed KEPCO power plant and other GPA plant energy costs over the contract term. All the bids were compared using this method, with the bidders' impact to GPA system costs reviewed.

GPA did not review how KEPCO intends to fund the project.

The technology

The project at Dededo, Guam's most populated village, will feature a 198MW combined-cycle gas and steam turbine power plant, capable of burning ultra-low-sulphur diesel or natural gas, and a 25MW battery energy storage system. There will be three 45MW combustion units and one 63MW steam turbine. The battery will be able to provide 15MW for 30 minutes as back-up capacity

Siemens is supplying its SGT-800-57 model turbines for the project.

Construction starts in August 2020 and the commercial operations date is scheduled for October 2022. 

The power plant's fuel will be ultra-low-sulphur diesel (ULSD) provided by GPA, under normal contracting. Typically the ULSD is loaded in Singapore for transport to Guam.

GPA has told IJGlobal that "natural gas is not available at this time, but GPA intends to contract facility operations and LNG separately". The Public Utilities Commission may in future approve burning LNG.

The site is near to an existing GPA substation, with existing underground transmission lines, and also close to major load centres in northern Guam. Around three million gallons of treated water from a nearby wastewater treatment facility will be diverted to the power plant for cooling.

Advisers

The adviser to the GPA is Stanley Consultants, which has a role encompassing EPC monitoring, BOT procurement and owner's engineering advisory. Stanley Consultants used an advisory team including:

  • K&M Advisors
  • EA Engineering Science and Technology
  • Pond & Company

Guam's changing energy mix

Guam is a US territory in the western Pacific Ocean, with a population of close to 170,000 people (2017 figures).

The territory predominantly relies on petroleum products arriving by tanker for its energy supply. Around 40% of petroleum consumed is jet fuel, around 30% is unleaded gasoline, 20% diesel and 10% premium gasoline and propane. Energy consumption is increasing on the island.

Its power supply was badly afflicted by an explosion and fire on 31 August 2015 at two baseload power units with 80MW combined capacity: Cabras 3 and 4. Both were left inoperable. The 40-plus year old Cabras 1 and 2 units remained intact, while the two newer and more efficient units were the ones lost. Though the island is relying on them for the time being, GPA is seeking to retire the ageing Cabras units 1 and 2.

GPA sought to replace their capacity with a new flexible 180MW power plant, and thus launched the procurement for the new facility at Dededo. The idea is that the new power supply will be more efficient and flexible, capable of operating in complement with existing and planned renewable energy sources on the island.

The Guam Legislature voted in a bill – Bill 80 – on 31 October (2019) to update the territory's renewable energy policy to achieve 50% renewable energy by 2035. The proponent of the bill Senator Amanda Shelton has said Guam is spending $200 million per year overseas buying fuel. Bill 80 amends a target to reach 25% by 2035 which was seen as too easily achievable.

The GPA does already have some solar and wind capacity, including:

  • 25.6MW solar PV plant built by NRG Renew in Dandan
  • GPA's 40MW of solar on navy property
  • 40MW of energy storage built by South Korea's LG CNS

But as it targets a higher portion of renewable power, GPA is undertaking a procurement Phase III that entails procuring potentially 50MW of solar PV capacity with 300MWh of energy storage for delivery of renewable power at night. 

The potential award is for energy purchase agreements priced around $0.115 per kWh for the first year of a 20-year contract, with 1% escalation per year.  Engie with strategic partner Samsung SDI emerged as the lowest bidder last month (October 2019), with the contract being reviewed for approvals.

This contract is expected to bring GPA’s renewable energy portfolio to 25% by year 2022. 

Also recently, KEPCO in partnership with LG CNS signed a contract in 2018 to build at Mangilao a 60MW solar plus 42MWh storage project in the last awarded renewable procurement – Phase II. In the same round Hanwha Energy signed to build two 30MW solar plants at Dandan. These Phase II projects are in the design and financing stage.

Guam is not stopping there, with that 50% target to meet.

The GPA told IJGlobal that it is working on another procurement, expected to be announced in mid-2020, for its Phase IV of new renewable energy contracts.

Asset SnapshotDededo Combined Cycle Gas-Fired Plant (223MW)

Value:
N/A
Full Details

Transaction SnapshotDededo Combined Cycle Gas-Fired Plant (223MW) IPP

SPV:
Guam Ukudu Power
Concession Period:
25.00 years
Full Details