3rd Regional Power Market & Cross Border Interconnections Training 13th -17th November 2017

BIMP-EAGA SubregionalPrograms

Power Interconnection

• 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.

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Quick Facts onBIMP EAGA Subregional Program

• Geographically covers:

- Entire Brunei Darussalam

- 9 Provinces in Kalimantan and Sulawesi,

Maluko Islands, Papua in Indonesia

- Federal States of Sabah and Sarawak, and

the Federal Territory of Labuan in Malaysia

- 26 provinces of Mindanao and the Island

Province of Palawan in the Philippines

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Quick Facts onBIMP EAGA Subregional Program

BIMP EAGA Subregional Program

The BIMP EAGA Subregion

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BIMP EAGA Institutional Structure

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BIMP-EAGA Implementation BlueprintResults 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 4:

Environment•Sustainable

Management of

Critical Ecosystems

•Climate Change

•Clean and Green

Production

Technologies

•Transboundary issues

• Environment

mainstreaming

Results Monitoring

(Outputs and Outcomes)

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

Strategic Pillar 1:

Connectivity

• Infrastructure

Development

• Air, Sea, & Land

Services

• Power

Interconnection &

Renewable Energy

• ICT

• Trade Facilitation

Strategic Pillar 2:

Food Basket

• Food Security

• Export Development

• Sustainable

Livelihood

Strategic Pillar 3:

Community Based

Ecotourism

• Tourism Products

& tourism

infrastructure

• Community &

Private

• Sector

Participation

• CBET destination

Part 2: Energy Cooperation in

Subregional Program

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

NO PROJECT TITLE(Include Lead Country)

Status 2017

As of Today Activities with milestones

1 Trans Borneo Power Grid: Sarawak-West Kalimantan Power Interconnection (Indonesia – Malaysia)

Completed/Commissioned Energized 20 Jan. 2016

2 Sarawak-Brunei Power Interconnection (Brunei Darussalam-Malaysia) Ongoing

Earliest completion target - 2019

3 Trans Borneo Power Grid: (Sabah-Sarawak) Ongoing Earliest Completion by

Q3 2021

4 Trans Borneo Power Grid:(Sabah – North Kalimantan) Ongoing

MOU Signing by 15th

December 2017

5 Trans Borneo Power Grid:(Sabah – Palawan, Philippine)

OngoingPreliminary Study

conducted by December 2017Pg 10

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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• from Kudat to Palawan

and• from Lahad Datu to

Davao Island.• However, a more detailed

and technical discussion need to be conducted between two country for the interconnection.

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2

1

2

Kudat

Mengaris

Sandakan

Lahad Datu

Semporna

Kota Belud

Kota Kinabalu Area

Sipitang

Keningau

Segaliud

Dam Road

Kalumpang

Beaufort

Kolopis

Papar

Ranau

Kimanis

Lok Kawi

Kunak

Tenom Pangi

Nabawan

Sapi Nangoh

Matunggong

Warisan

POIC

Sandakan

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Tuaran

Kalabakan

275kV (Existing)132kV (Existing)

275kV (Future)132kV (Future)

Legend:

Tawau

Labuan

PenampangLansat

Tenom Town

Upper

Padas

WEST COAST

EAST COASTCentral

North

South

Sandakan

TawauInterconnection to Sarawak 2021

Interconnection to Palawan

Interconnection to Kalimantan

Interconnection to Mindanao

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

Part 3: Power Interconnection

Situationer

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

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SESB Grid Layout

Robust grid with interconnection between Sabah WestCoast 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 asGreenest State within 20 years plan

Sabah Grid is further strengthen via 275kV backbone and Sabah-Sarawak Interconnection

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Project Map

Pala

wan

Sid

e

Co

nvert

or

Sta

tio

n

Total is190km Submarine cable

KU

DA

T

Co

nvert

er

Sta

tio

n

PM

U K

ud

at

13km

OHL

National border

80km Submarine cable110km Submarine cable

The scope of project proposal cover 2 nos of HVDC ConverterStation at Kudat Malaysia and Bataraza, Palawan that connectedthrough 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 100MWtransfer (without LSS Tadau 50MW) to Palawan until year 2030.

A meeting with Jabatan Laut, Sabah on 24th May 2017, hasindicated that interconnection path is secure with with any disputebetween countries, anchorage area and shipping activities. A detailalignment to be determined in the next stage.

In Palawan, existing transmission line that designed 138kV istraverse to south Palawan at Brooke’s Point and to Bataraza(propose Landing terminal) expected by year 2019.

Prelim Project Info

Preliminary findings show that Sabah-Palawan Interconnection Project is technically feasible and economically viable

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Araceli

Roxas

Taytay

El Nido

San Vicente

Puerto Prinsesa

Narra

Brooke’s Point

Rizal

Quezon

S. Española

Aborlan

Dumaran

Bataraza

Palawan Economy 2015 at National %

Sources:

* Palawan PDPFP & JEDAG

Population growth at 3.35% per annum

Electricity demand growth at 8%

Average income at P95,000 ~ RM8000

23 Municipal area

1769 Islands and Islet

Home to 2 UNESCO heritage site

Info 2016

The electricity demand growth in Palawan, Philippine is expected at 8% with huge potential development of agriculture and Oil & Gas

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Three (3) IPP main players(PPGI, DMCI and Delta-P)with some other smallplayers.

All plants are dieselgenerators.

Cost of generation:Before subsidy:c.P9.17/kWhr (c.USD0.185 orRM0.80)After subsidy:c.P6.15/kWhr (c.USD0.124 orRM0.53)

Managed under NationalPower Corporation (NPC).Some sections of the griddesigned for 138kV butenergized at 69kV.

Future grid expansionstretching to Bataraza (theproposed VSC-HVDC landingpoint for Palawan) by year2020.

Generation

Transmission

Dispatch, Distribution & Retail Palawan Electric Cooperative (PALECO) is a non-stock, non-

profit electric cooperative, registered with the NationalElectrification Administration (NEA)

Granted a fifty-year (50) franchise to operate and supplyelectric power services to its member-consumers.

2016 Snapshot: Asset = c.P1.57bil (c.USD32mill), Revenue =c.P1.87bill (c.USD38mill), Net surplus = c.P15.77mill(c.0.32mill), System loss = c.11% (including transmission lossof c.2%), Collection efficiency = c.98%.

Current grid Maximum Demand c.44MW, Total InstalledCapacity c.50MW.

PALECO grid is forecasted to have a power deficitcommencing from 2023 and requires immediate powerimport.

The maximum demand for Grid-connected is about 44MW with overall demand in Palawan around 60MW as of April 2017

Araceli

Roxas

Taytay

El Nido

San Vicente

Puerto Prinsesa

Narra

Brooke’s Point

Rizal

Quezon

S. Española

Aborlan

Dumaran

Bataraza

NOTE:

Puerto-Narra and Puerto to Roxas existingTransmission structure

was designed for 138 kV System voltage.

LEGEND:

69 kV Transmission line (existing)

69 kV Transmission Line (on-going)

138 kV Transmission Line (proposed)

69 Kv Transmission line

69 Kv Transmission line

138 Kv Transmission line

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

Part 3: Power Interconnections Situation

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Power Interconnections (How)

Whattype

Who(stake-holders andBenefi-ciaries)

Why Where(Location)

When(Timeline)

How (Strategy andAction Plan)Yes or No

Trans Borneo Power Grid:

(Sabah-Philippine)

Power Purchase Agreement

Stakeholder:- Govt, State

& Province- DOE

Philippines- Malaysia

Energy Commission

Beneficiary:- Power

Utilities- People

-Reduce power tariff Palawan (i.e. Diesel Plant)-Get rid of fossil based capacity- Reduce Subsidy from Govt- Morereliable power supply

Kudat, Sabah to Bataraza, Palawan

Initial Completion Date by Q3 2022

*1st Phase with 50MW export & eventually 200MW based on Electricity Demand

-PPA between SESB-SPV-Palawan Power Utility

- Conduct Feasibility Study with assistance of ADB in Dec 17

Part 4: Power Interconnection

Benefits and Opportunities

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

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Positive Negative / Potential Risks

• Palawan is supplied via a total of c.50MW dieselgenerators

• Tariff of c.P9.17/kWhr (c.USD0.185) before subsidyand c.P6.15/kWhr (c.USD0.124) after subsidy

• Current MD of c.44MW and projected to grow up to160MW in 2033

• The project COD is targeted in 2021.• While there is an existing Transmission franchises in

the Philippines, this will be the first Transmissionfranchise that is involving cross boundaryinterconnection

• Project implementation may be prolonged to finalizethe interconnection agreement.

Strong selling market with assertive growth

Scalability from 100MW to 300MW + Fibre Optic

• Palawan is forecasted to have a power deficit in 2023.• Due to the geographical location, connection to

Philippines main grid and piped-gas fuel supply arepresently not economically viable and HVDCconnection with SESB would be the preferredeconomical choice.

• Potential business expansion on fibre optic forcommunication backbone..

• SESB interconnection with Sarawak is currently underdevelopment plan, to be completed in 2021.

• Sarawak excess power to be exported at a muchlower generation cost.

Upside for SESB post integration with Bakun

• The project itself is personally supported by theGovernor of Palawan H.E. Mr Jose C. Alvarez, a strongpolitical figure in Philippines.

• Mr Jose has indicated his personally commitment forthe project to be realized for the benefit of Palawancommunity.

Strong support from local provincial council

• The HVDC project cost is c.USD300mill with a readilyavailable financing by Sinosure (originating fromChina) at 85% project financing

• Indicative financing of 4.5%.• The financing offer is subject to EPCC is awarded to

NR Electric Co (China-based Tier 1 HVDC supplier).

Financier & equipment manufacturer ready

Potentially prolonged project completion

• Under the existing congressional act, NGCP isrequired to have 60% local ownership for backbonePhilippines transmission system

• As Palawan being a missionary segment (an island gridoperation separated from the Philippines main grid),there may be an avenue for an exclusion from theexisting regulation which requires endeavours fromPalawan Provincial Council..

Restriction by current Philippines regulatory

Some of preliminary project assessment

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

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Part 5: Power Interconnection

Challenges and Constraints

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

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Palawan Transmission Network Not Ready

Identified Risks Potential Mitigants

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• Palawan current grid is not ready to accept 100MW supplyand require extensive network upgrade.

• Palawan requires c.USD50mill budget to make the gridready.

3

• Palawan grid development is under the government ie NationalPower Corporation (NPC). Palawan strategy is to request forimmediate capital injection leveraging on the MOU once it is signed.

• To get visibility on Palawan grid development plan for the project.

Local sentiment may jeopardize the project

• Project may trigger local sentiments on Palawan domesticpower industry with strong objection on the projectimplementation.

• There maybe competitive proposal to develop local REresources

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• Leverage on Palawan Governor strong interest on the project• RE can still coexist with the interconnection

Longer Cabling Route Due To Protected Sea Area (National Marine Park)

• Both Sabah and Palawan are surrounded by islands that aredeclared as National Marine Park.

• Current proposed route may not be feasible and requirelonger routing which will impact the project cost.

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• To include the cable routing in the feasibility study by a technicalconsultant

HVDC power and grid availability

• Unavailability of power from SESB would result to LD /penalties.

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• Leverage with cross border interconnection• HVDC system will incorporate n-1 requirement via a symmetrical

monopole configuration via a sea electrode/metallic return

Uncertainty of Demand

• PALECO demand growth demand may be slower thanprojected

• Volatility of fuel price.1

• Impose minimum firm export energy in the PPA with staggeredincreased throughout the PPA duration (Take or Pay)

• Selling price is indexed to market fuel price.

Some of preliminary project executional risks that being identified

Seismic Activities & Terrorism

• Seismic activities within the sea border may interrupt thesupply and damage the infra

• Preliminary findings found out that Palawan island is stable & out ofring of fire

• Terrorism not implicated in Palawan Island

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

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Part 6: Overall Recommendations

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

Part 6: Power InterconnectionsOverall 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.

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Thank you for listening!

Salamat Po!

Terima Kasih!

Kamsahamnida!

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