Owner/operator: AES Corp.
In April 2008, AES Philippines purchased the Masinloc coal-fired power plant in Zambales Province in the Luzon region. Originally constructed in 1998 as a two-unit, 600-MW plant, the facility uses coal from a variety of sources in the Pacific Rim. After AES finished overhauling much of its equipment, the expanded 660-MW (gross) plant’s availability increased from 48% to 74%, which enabled net electricity production to jump by 129% by 2010.
|Courtesy: AES Corp.
Though somewhat off the beaten path in Southeast Asia, the Philippines is the second-largest archipelago in the world and includes a string of more than 7,000 tropical islands located in the western Pacific Ocean. With an economy based on an expanding industrial base and a wide range of agricultural products, the country is increasingly attracting foreign investors.
In 2008, AES Corp. (AES) purchased the 600-MW (gross) Masinloc coal-fired power plant from the Republic of Philippines’ Power Sector Assets and Liabilities Management Corp. (PSALM) for $930 million. AES’s acquisition is one example of a foreign company making a significant long-term major investment in the country’s infrastructure. Masinloc is the Philippines’ first privatized thermal plant (Figure 1). In addition, last year AES announced that it has begun developing an expansion project, Masinloc II, which would add an another 660 MW and represent an infrastructure investment of up to $800 million.
|1. Pacific Rim powerhouse. The Masinloc coal-fired power plant is located about 250 kilometers (approximately 155 miles) northwest of Metro Manila and covers about 137 hectares (approximately 338 acres), including 11 hectares of land reclaimed from the sea. Courtesy: AES Corp.
The Philippine Power Industry
The Philippines has a population of more than 94 million (2010 estimate) and continues to face important challenges related to sustaining its growing economy. Its government has prioritized the need to improve employment opportunities, alleviate poverty, and increase its production of safe and reliable electricity.
After emerging from a crippling power crisis that occurred in the early 1990s, the Philippine government embarked on an industry privatization and restructuring program to ensure an adequate supply of electricity to energize its developing economy. This restructuring scheme is embodied in Republic Act No. 9136, the Electric Power Industry Reform Act (EPIRA).
Enacted on June 8, 2001, EPIRA seeks to ensure a reliable, secure, and affordable electric power supply; encourage free and fair competition; enhance the inflow of private capital; and broaden the ownership base of power generation, transmission, and distribution. PSALM was created to carry out the mandates established by EPIRA.
The Philippines’ total annual gross power production is approximately 60,821 GWh. Its energy industry’s own use of electricity is approximately 3,935 GWh, including the consumption of power plants and electricity used for pumped storage plants. Generation is fueled by natural gas (32%), coal (25%), geothermal (17%), hydro (16%), and approximately 10% by oil and renewables (all International Energy Agency 2008 estimates).
When AES bought the Masinloc Plant, which consisted of two 300-MW units, from PSALM, it was 10 years old. The plant’s history of inadequate maintenance and capital expenditures, which were further compounded by poor operating practices, had placed the facility in a poor state of repair, and it faced significant operational limitations. These issues resulted in high equivalent forced outage rates, low equivalent availability factors, and low net capacity factors.
Prior to the plant’s turnover to AES, the maximum net generation achieved by the Masinloc Plant was 433 MW on a nameplate capacity of 600 MW. Given the plant’s operational history, AES saw an opportunity to initiate a rehabilitation program to transform the plant and substantially increase its output. The rehabilitation program had two phases: The first focused on mechanical and major rotating equipment, and the second focused on boiler rehabilitation and environmental controls.
Efficiency and heat rate improvements were among the most notable achievements. The plant’s overall efficiency increased by 13%, which reduced the amount of fuel oil used for start-up. And the AES team reduced the plant’s overall heat rate by 1,500 points from the time AES took over the facility, dramatically increasing its overall efficiency. Specifically, the turbines’ efficiency improvement cut the plant heat rate by 500 points; the boiler by 500 points; the condenser system by 250 points; and the steam and water systems by 250 points.
These improvements helped to cut the plant’s carbon dioxide (CO2) emissions by 140,000 tons in 2010. Plant management also took other steps to reduce the facility’s carbon footprint:
- Diesel fuel usage for start-ups and daily operations was cut by 70%.
- Chemical usage was reduced over 60%.
- The plant’s coal unloading period was cut from over eight days to an average of 2.8 days, eliminating 2 MWh of in-house load.
The Masinloc management replaced three existing electrostatic precipitator (ESP) fields in each boiler and added a fourth ESP field to each boiler. This change significantly reduced the dust and particulate emissions and allowed a greater amount of ash to be captured, which in turn is sold to generate revenue.
Rehabilitation of the coal storage dust control systems greatly reduced coal dust emissions. This improvement eliminated the excessive spontaneous combustion of coal storage piles, as well as the foul fugitive coal pile combustion emissions and heavy sulfur emissions. The ash storage areas also were improved by implementing better storage techniques.
Promoting a Culture of Empowerment
To make the rehabilitation of the Masinloc plant sustainable, the AES management team improved the technical skills of its workers while fostering a culture of empowerment. The company led teams through job scope and skills analysis and equipped them with the necessary tools to drive improvements and achieve positive results. Today, through an empowered workforce that strives for efficiency and reliability, the operations of the Masinloc plant are achieving world-class performance levels.
To implement the new policy, team leaders reinforced a culture of improvement and continuously reviewed operations and maintenance performance to confirm the root cause of every problem in order to enhance the safety, planning, and execution of future tasks. Employees were encouraged to respond positively to the post-execution reviews; the process is not viewed as criticism but as a means of learning.
Making Safety Paramount
Safety is AES’s first value, and Masinloc is a good example of AES living by that value. At Masinloc, improving personnel safety performance has been an integral part of transforming the plant into a top tier facility. To successfully drive this change, the AES management team not only promoted more thorough technical safety skills among employees but also encouraged a proactive safety culture. After providing the technical safety foundation through training sessions, pre-job planning, and safety walks, the AES management team had employees focus on leading safety indicators so they could stop problems in their early stages. Although there is always room to improve safety knowledge and culture, the AES management team has worked hard to create a culture in which the employees recognize their part in being responsible for each other.
Masinloc’s Financial Turnaround
AES’s success in rehabilitating the Masinloc plant’s operations has not only made a positive impact on the local community and helped the Philippines meet its increasing demand for energy, but it also had a positive impact on the company’s bottom line.
During AES’s 2010 annual earnings conference call, AES Executive Vice President and CFO Victoria Harper noted that the company’s “strong operating performance [in Asia] was largely driven by our 660-MW plant in the Philippines, Masinloc, which should begin to meaningfully contribute beyond its prior operating forecast.”
In 2010, Masinloc’s gross margin improved by approximately $50 million compared to 2009. In 2011, AES was recognized for its improvement efforts related to the Masinloc plant by the Edison Electric Institute with its annual Edison Award, the electric utility industry’s most prestigious honor.
— Angela Neville, JD, is POWER’s senior editor.