BIMP-EAGA Subregional Programs Power Interconnection

3rd Regional Power Market & Cross Border Interconnections Training 13th -17th November 2017 Quick Facts on BIMP EAGA Subregional Program

• Established on 1994 mainly to address socioeconomic development of less developed, marginalized and far-flung areas.

• To narrow development gap within and across the sub-region.

2 Quick Facts on BIMP EAGA Subregional Program • Geographically covers: - Entire Darussalam - 9 Provinces in and Sulawesi, Maluko Islands, Papua in - Federal States of and , and the of in - 26 provinces of Mindanao and the Island Province of Palawan in the Philippines

3 BIMP EAGA Subregional Program The BIMP EAGA

5 BIMP EAGA Institutional Structure

6 BIMP-EAGA Implementation Blueprint Results Framework Goal: To narrow the development gap across & within EAGA member countries as well as across the ASEAN-6 countries

Objectives: >Increase Trade >Increase Tourism >Increase Investments

Strategic Pillar 1: Strategic Pillar 2: Strategic Pillar 3: Strategic Pillar 4: Connectivity Food Basket Community Based Environment • Infrastructure Ecotourism •Sustainable Development • Food Security • Tourism Products Management of Critical Ecosystems • Air, Sea, & Land • Export Development & tourism Services infrastructure •Climate Change • Sustainable •Clean and Green • Power Livelihood • Community & Interconnection & Production Private Technologies Renewable Energy • Sector •Transboundary issues • ICT Participation • Environment • Trade Facilitation • CBET destination mainstreaming

Rolling Pipeline: Programs/Projects/Policy Support/Activities/Events

Results Monitoring (Outputs and Outcomes) BRUNEI DARUSSALAM-INDONESIA-MALAYSIA-THE PHILIPPINES EAST ASEAN GROWTH AREA (BIMP-EAGA) Part 2: Energy Cooperation in Subregional Program NO PROJECT TITLE Status 2017 (Include Lead Country) As of Today Activities with milestones 1 Trans Power Grid: Sarawak- West Kalimantan Power Completed/Commissioned Energized 20 Jan. 2016 Interconnection (Indonesia – Malaysia)

2 Sarawak-Brunei Power Interconnection Earliest completion target (Brunei Darussalam-Malaysia) Ongoing - 2019

3 Trans Borneo Power Grid: (Sabah-Sarawak) Ongoing Earliest Completion by Q3 2021 4 Trans Borneo Power Grid: MOU Signing by 15th (Sabah – ) Ongoing December 2017

Trans Borneo Power Grid: 5 Preliminary Study (Sabah – Palawan, Philippine) Ongoing conducted by December Pg 10 2017 Potential entry point for interconnection between Sabah- Philippines

• From the latest pre-feasibility study on Borneo Mindanao interconnection funded ADB, few entry point for the interconnection are studied. • The potential interconnection between Philippines 1 • from to Palawan and 1 • from to Davao Island. 2 • However, a more detailed and technical discussion 2 need to be conducted between two country for the interconnection.

11 Establishment of Sabah fully Integrated 275kV Backbone System will further enhance system grid reliability and provide flexibility for Cross Border Interconnection

Interconnection Legend: Kudat North to Palawan 275kV (Existing) 275kV (Future) Matunggong 132kV (Existing) 132kV (Future)

Mengaris WEST COAST EAST COAST Central Area Sapi Nangoh Sandakan

Lok Kawi POIC Lansat Kolopis Sandakan Papar Segaliud Interconnection Labuan to Mindanao Beaufort

Dam Road Town South Tenom Pangi Warisan Lahad Datu Upper InterconnectionPadas to Sarawak 2021 Kalumpang

Tawau Interconnection to Kalimantan 12 BRUNEI DARUSSALAM-INDONESIA-MALAYSIA-THE PHILIPPINES EAST ASEAN GROWTH AREA (BIMP-EAGA) Part 3: Power Interconnection Situationer Sabah Grid is further strengthen via 275kV backbone and Sabah-Sarawak Interconnection

SESB Grid Layout

 Robust grid with interconnection between Sabah West Coast and Sabah East Coast via 275kV grid.

 Installed capacity c.1,300MW

 Reserve margin c.400MW for potential export.

 Maximum Demand, 945MW

 Electrification rate at 95% (source from KKLW)

 Sabah State Long Term Plan aims to establish Sabah as Greenest State within 20 years plan 14 Preliminary findings show that Sabah-Palawan Interconnection Project is technically feasible and economically viable

Project Map Prelim Project Info

 The scope of project proposal cover 2 nos of HVDC Converter Station at Kudat Malaysia and Bataraza, Palawan that connected through 190km submarine cable.  The total estimated cost of development about USD300Mil  Based on JPPPET approved forecast, through PSS/E simulation, existing Northern Grid transmission line could cater 100MW transfer (without LSS Tadau 50MW) to Palawan until year 2030.  A meeting with Jabatan Laut, Sabah on 24th May 2017, has indicated that interconnection path is secure with with any dispute between countries, anchorage area and shipping activities. A detail alignment to be determined in the next stage.  In Palawan, existing transmission line that designed 138kV is traverse to south Palawan at Brooke’s Point and to Bataraza (propose Landing terminal) expected by year 2019.

National border

Kudat

Station

KUDAT KUDAT

Station

Converter Converter

PMU Convertor Convertor 13km 80km Submarine cable Palawan Side 110km Submarine cable OHL Total is190km Submarine cable 15 The electricity demand growth in Palawan, Philippine is expected at 8% with huge potential development of agriculture and Oil & Gas

Info 2016 El Nido

 Population growth at 3.35% per annum  Electricity demand growth at 8% Taytay  Average income at P95,000 ~ RM8000  23 Municipal area Dumaran  1769 Islands and Islet San Vicente Araceli  Home to 2 UNESCO heritage site

Roxas Palawan Economy 2015 at National %

Puerto Prinsesa

Aborlan Sources: Quezon Narra

Rizal S. Española

Brooke’s Point

* Palawan PDPFP & JEDAG Bataraza 16 The maximum demand for Grid-connected is about 44MW with overall demand in Palawan around 60MW as of April 2017

Generation Dispatch, Distribution & Retail  Three (3) IPP main players (PPGI, DMCI and Delta-P)  Palawan Electric Cooperative (PALECO) is a non-stock, non- with some other small profit electric cooperative, registered with the National players. Electrification Administration (NEA)  All plants are diesel  Granted a fifty-year (50) franchise to operate and supply generators. electric power services to its member-consumers.  Cost of generation:  2016 Snapshot: Asset = c.P1.57bil (c.USD32mill), Revenue = Before subsidy: c.P1.87bill (c.USD38mill), Net surplus = c.P15.77mill c.P9.17/kWhr (c.USD0.185 or (c.0.32mill), System loss = c.11% (including transmission loss RM0.80) of c.2%), Collection efficiency = c.98%. After subsidy:  Current grid Maximum Demand c.44MW, Total Installed c.P6.15/kWhr (c.USD0.124 or Capacity c.50MW. RM0.53)  PALECO grid is forecasted to have a power deficit commencing from 2023 and requires immediate power Transmission import.  Managed under National Power Corporation (NPC). Some sections of the grid designed for 138kV but energized at 69kV.

 Future grid expansion stretching to Bataraza (the proposed VSC-HVDC landing point for Palawan) by year 2020.

17 Existing, On-going & Proposed Transmission Line Facilities in Palawan

El Nido LEGEND:

69 kV Transmission line (existing) Taytay 69 kV Transmission Line (on-going)

138 kV Transmission Line (proposed) Dumaran San Vicente Araceli

Roxas

69 Kv Transmission line

69 Kv Transmission line Puerto Prinsesa

Aborlan

Quezon Narra

Rizal S. Española

Brooke’s Point NOTE: Puerto-Narra and Puerto to Roxas existingTransmission structure 138 Kv Transmission line was designed for 138 kV System voltage. Bataraza Part 3: Power Interconnections Situation Power What Who Why Where When How Interconne type (stake- (Location) (Timeline) (Strategy and ctions holders and Action Plan) (How) Benefi- Yes or No ciaries)

Trans Power Stakeholder: -Reduce Kudat, Sabah Initial -PPA between Borneo Purchase - Govt, State power tariff to Bataraza, Completion SESB-SPV- Power Grid: Agreement & Province Palawan Palawan Date by Q3 Palawan Power - DOE (i.e. Diesel 2022 Utility (Sabah- Philippines Plant) Philippine) - Malaysia -Get rid of - Conduct Energy fossil based *1st Phase Feasibility Study Commission capacity with 50MW with assistance - Reduce export & of ADB in Dec Beneficiary: Subsidy eventually 17 - Power from Govt 200MW based on Utilities - More Electricity - People reliable Demand power supply

19 BRUNEI DARUSSALAM-INDONESIA-MALAYSIA-THE PHILIPPINES EAST ASEAN GROWTH AREA (BIMP-EAGA) Part 4: Power Interconnection Benefits and Opportunities Some of preliminary project assessment

Positive Negative / Potential Risks • The project COD is targeted in 2021. • Palawan is supplied via a total of c.50MW diesel • While there is an existing Transmission franchises in Strong selling generators Potentially the Philippines, this will be the first Transmission market with • prolonged Tariff of c.P9.17/kWhr (c.USD0.185) before subsidy franchise that is involving cross boundary assertive project and c.P6.15/kWhr (c.USD0.124) after subsidy interconnection growth completion • Current MD of c.44MW and projected to grow up to • Project implementation may be prolonged to finalize 160MW in 2033 the interconnection agreement. • Palawan is forecasted to have a power deficit in 2023. • Due to the geographical location, connection to • Under the existing congressional act, NGCP is Scalability from Philippines main grid and piped-gas fuel supply are required to have 60% local ownership for backbone 100MW to presently not economically viable and HVDC Philippines transmission system 300MW + Fibre connection with SESB would be the preferred • As Palawan being a missionary segment (an island grid Optic economical choice. Restriction by operation separated from the Philippines main grid), • Potential business expansion on fibre optic for current there may be an avenue for an exclusion from the communication backbone.. Philippines existing regulation which requires endeavours from regulatory Palawan Provincial Council.. Upside for • SESB interconnection with Sarawak is currently under SESB post development plan, to be completed in 2021. integration • Sarawak excess power to be exported at a much with Bakun lower generation cost.

• The project itself is personally supported by the Strong support Governor of Palawan H.E. Mr Jose C. Alvarez, a strong from local political figure in Philippines. provincial • Mr Jose has indicated his personally commitment for council the project to be realized for the benefit of Palawan community.

• The HVDC project cost is c.USD300mill with a readily Financier & available financing by Sinosure (originating from equipment China) at 85% project financing manufacturer • Indicative financing of 4.5%. ready • The financing offer is subject to EPCC is awarded to NR Electric Co (China-based Tier 1 HVDC supplier).

21 Part 4: Power Interconnections Benefits and Opportunities for COOPERATION Benefits: 1. Firm Energy to meet Palawan Demand 2. Lower Electricity rate for Palawan 3. Reduction GHG emission 4. Optimized the Transmission Infra Opportunities: 1. Entice Investors 2. Competitive Electricity Rate

22 BRUNEI DARUSSALAM-INDONESIA-MALAYSIA-THE PHILIPPINES EAST ASEAN GROWTH AREA (BIMP-EAGA) Part 5: Power Interconnection Challenges and Constraints Some of preliminary project executional risks that being identified

Identified Risks Potential Mitigants • PALECO demand growth demand may be slower than • Impose minimum firm export energy in the PPA with staggered Uncertainty of projected increased throughout the PPA duration (Take or Pay) 1 Demand • Volatility of fuel price. • Selling price is indexed to market fuel price.

Palawan • Palawan current grid is not ready to accept 100MW supply • Palawan grid development is under the government ie National Transmission and require extensive network upgrade. Power Corporation (NPC). Palawan strategy is to request for 2 Network Not • Palawan requires c.USD50mill budget to make the grid immediate capital injection leveraging on the MOU once it is signed. Ready ready. • To get visibility on Palawan grid development plan for the project.

• Local Project may trigger local sentiments on Palawan domestic • Leverage on Palawan Governor strong interest on the project sentiment may power industry with strong objection on the project • RE can still coexist with the interconnection jeopardize the implementation. 3 • project There maybe competitive proposal to develop local RE resources Longer Cabling • Both Sabah and Palawan are surrounded by islands that are • To include the cable routing in the feasibility study by a technical Route Due To declared as National Marine Park. consultant 4 Protected Sea • Current proposed route may not be feasible and require Area (National longer routing which will impact the project cost. Marine Park)

HVDC power • Unavailability of power from SESB would result to LD / • Leverage with cross border interconnection 5 and grid penalties. • HVDC system will incorporate n-1 requirement via a symmetrical availability monopole configuration via a sea electrode/metallic return

Seismic • Seismic activities within the sea border may interrupt the • Preliminary findings found out that Palawan island is stable & out of Activities & supply and damage the infra ring of fire 6 Terrorism • Terrorism not implicated in Palawan Island

24 Part 5: Power Interconnections Challenges and Constraints 1. Geographical Condition (submarine cable approx. 180 km) 2. Differences in Electric Power Industry Design/Model 3. Initial Capital Investment 4. Approval of federal/local government/ 5. Acceptance of local people

25 BRUNEI DARUSSALAM-INDONESIA-MALAYSIA-THE PHILIPPINES EAST ASEAN GROWTH AREA (BIMP-EAGA)

Part 6: Overall Recommendations Part 6: Power Interconnections Overall Recommendations 1. Provide policy guidelines and timeline for the implementation of APG -(Ex.) Allow Gencos to enter into a bilateral contract outside PH jurisdiction. 2. Strong Government to Government Assistance/Support to facilitate Cross Border Interconnection. 3. Financial institutions such as ADB to provide special incentives for interconnection initiatives.

27 BRUNEI DARUSSALAM-INDONESIA-MALAYSIA-THE PHILIPPINES EAST ASEAN GROWTH AREA (BIMP-EAGA) Thank you for listening!

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Terima Kasih!

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