Expository Hearing 1of2 - Energy Regulatory Commission Hearing 1of2.pdf · engineering design, construction and ... • Transmission Substation * ... Transformers 115 kV Without N-1

TransCo

TransCo

APPLICATION FOR THE ALTERNATIVE RATE SETTING METHODOLOGY FOR

THE 2ND REGULATORY PERIOD (2006-2010)

Transmission Wheeling Rate Guidelines (TWRG)

National Transmission Corporation

18-Oct-05 Corporate Planning Group

TransCo3TRANSMISSION WHEELING RATE GUIDELINES (TWRG)

ERC’s Performance Based Regulation requires a price control arrangement determined prior to the start of a five year regulatory period.


TransCo4

1. TransCo Business Process2. Regulated Entity Assumptions3. Annual Revenue Requirement (ARR)

Demand ForecastForecast OPEX

OUTLINE OF THE PRESENTATION


TransCo5OUTLINE OF THE PRESENTATION

Return of Capital (depreciation) and Return on Capital• Regulated Asset Base (RAB)• Capital Expenditures• Regulatory Depreciation• Working Capital• Weighted Average Cost of Capital

Taxes


TransCo6

4. Price Control – Estimated Maximum Allowable Revenue (MAR)

5. Proposed Service Incentive Scheme

OUTLINE OF THE PRESENTATION

TransCo

TRANSCO BUSINESS PROCESS



TransCo8TRANSCO BUSINESS PROCESS

TransCo’s transmission service delivery process starts with planning and ends with customers satisfaction.In between are operation and maintenance, system operations, engineering design, construction and project monitoring, replacement/ decommissioning/disposal of existing assets, and support functions.


TransCo9TRANSCO’S BUSINESS PROCESS

PLANNING

Demand Forecast

Industry and Public Consultations

CUSTOMER SATISFACTION

Engineering Design Construction and

Project Management

Operation and Maintenance

Replacement / Decommissioning / Disposal of Assets

System Operations

Support Functions

QUALITY GRID OPERATION S

Other Considerations

Regulatory Requirements

Service Obligations

DOE ERC PSALM

TransCo

REGULATED ENTITY ASSUMPTIONS


TransCo

Regulated Entity - Assumptions

Application assumes:

• Services provided jointly by TransCo and Conssesionaire

• Concessionaire from January 2006, hence:

-Corporate tax payable

-Other taxes apply

• EVAT law applies (E.g. corporate tax rates)

TransCo

DEMAND FORECAST


TransCo

TRANSCO DEMAND FORECAST

Reflects conservative growth profile

Based on econometric modeling, with the Gross Domestic Product (GDP) as main explanatory variable

Considers customer demand growth forecast, particularly that of Meralco


TransCo14GROSS DOMESTIC PRODUCT (GDP)

% Growth RateYEAR

7.002010

7.002009

6.802008

6.502007

6.302006

5.302005


TransCo15

6,000

6,500

7,000

7,500

8,000

2004 2005 2006 2007 2008 2009 2010

MW

MW DEMAND FORECAST - LUZON

6,323

6,443

6,747

7,014

7,290

7,574

7,866AVERAGE ANNUAL GROWTH RATE

4.07%


TransCo16

1,000

1,100

1,200

1,300

1,400

1,500

1,600

2004 2005 2006 2007 2008 2009 2010

MW

MW DEMAND FORECAST - VISAYAS

1,029

1,096

1,167

1,242

1,323

1,409

1,499

AVERAGE ANNUAL GROWTH RATE

6.47%


TransCo17

1,000

1,200

1,400

1,600

1,800

2004 2005 2006 2007 2008 2009 2010

MW

MW DEMAND FORECAST - MINDANAO

1,177

1,263

1,344

1,434

1,533

1,642

1,762AVERAGE ANNUAL

GROWTH RATE6.89%


TransCo18

MW

6,000

7,000

8,000

9,000

10,000

11,000

12,000

DOE 6,829 7,343 7,964 8,635 9,372 10,171 11,018

TRANSCO 6,323 6,443 6,747 7,014 7,290 7,574 7,866

2004 2005 2006 2007 2008 2009 2010

DEMAND FORECAST COMPARISON - LUZON


TransCo19REASONS FOR LOWER FORECAST IN LUZON

Lower actual 2004 and 2005 levels; adjustments made to forecast for succeeding years

More conservative forecast by Meralco


TransCo20

1,000

1,100

1,200

1,300

1,400

1,500

1,600

MW

DOE 1,060 1,113 1,170 1,238 1,308 1,383 1,463

TRANSCO 1,029 1,096 1,167 1,242 1,323 1,409 1,499

2004 2005 2006 2007 2008 2009 2010

DEMAND FORECAST COMPARISON - VISAYAS


TransCo21

1,000

1,200

1,400

1,600

1,800

2,000M

W

DOE 1,271 1,371 1,458 1,535 1,615 1,697 1,784

TRANSCO 1,177 1,263 1,344 1,434 1,533 1,642 1,762

2004 2005 2006 2007 2008 2009 2010

DEMAND FORECAST COMPARISON - MINDANAO

TransCo

ANNUAL REVENUE REQUIREMENT (ARR)



TransCo23

BUILDING BLOCKS OF ANNUAL REVENUE REQUIREMENT (ARR)

Annual Revenue Requirement

OperatingExpenditure

Operating Expenditure -Operating and maintenance expenditure forecasts approved by the ERC

Taxes

Taxes - Corporate income taxes and other taxes

+

Depreciation

Depreciation - Regulatory depreciation on re-valued Regulatory Asset Base

+Return on

CapitalReturn on Capital -WACC-based return on Regulatory Asset Base (including working capital)

+

TransCo

FORECAST OPEX



TransCo25

Purpose

Designed to cope with the growth in load and expansion in facilities, at the same time maintain and further improve performance.

FORECAST OPEX


TransCo26DRIVERS OF OPEX

Key drivers of OPEX costs are:

-Quantity of assets to be maintained-Structural issues such as asset lives; planned redundancy (n-1); load factors

-Targeted performance, e.g. response times

-Unit labor costs and productivity


TransCo27

Initial forecast reviewed by Expert

Labor efficiencies (fewer staff per measure output).

Higher cost because of salary adjustments (Mercer Survey shows TransCo salaries below industry).

EXPERTS REPORT


TransCo28

Transco responded by revising forecast

New forecast shows improved operating efficiency against all measures.

TRANSCO RESPONSE


TransCo29FORECAST OPEX, BY GRID (IN MN PHP)

PARTICULARS 2005

FORECASTED OPEX (NOMINAL) in PHP 4,437 5,401 5,932 6,774 7,285 7,854LUZON 2,433 2,961 3,230 3,735 4,021 4,345VISAYAS 986 1,176 1,273 1,446 1,553 1,672MINDANAO 1,018 1,264 1,429 1,593 1,710 1,837

2009 20102006 2007 2008


TransCo30

Opex Category andSub-Categroy LUZ VIS MIN TOTAL LUZ VIS MIN TOTAL LUZ VIS MIN TOTAL

Payroll 1,029 395 471 1,895 1,201 469 591 2,260 1,468 580 712 2,759Network Related 954 492 550 1,996 1,221 593 681 2,494 1,295 587 686 2,568Non-Network Related 520 1 26 546 612 1 34 647 562 1 42 605

TOTAL 2,503 888 1,047 4,437 3,033 1,062 1,306 5,401 3,324 1,168 1,439 5,932

2005 2006 2007

FORECAST OPEX, BY GRID (IN MN PHP)


TransCo31

Opex Category andSub-Categroy LUZ VIS MIN TOTAL LUZ VIS MIN TOTAL LUZ VIS MIN TOTAL

Payroll 1,853 714 842 3,410 2,046 788 928 3,762 2,273 873 1,023 4,169Network Related 1,395 623 706 2,724 1,468 652 725 2,845 1,544 682 741 2,967Non-Network Related 589 1 50 640 617 1 60 678 646 2 71 719

TOTAL 3,837 1,338 1,599 6,774 4,131 1,441 1,713 7,285 4,463 1,556 1,835 7,854

2009 20102008

FORECAST OPEX, BY GRID (IN MN PHP)


TransCo32OPERATING EXPENDITURES

0500

1,0001,5002,0002,5003,0003,5004,0004,500

In M

nP

LUZ

VIS

MIN

LUZ

VIS

MIN

LUZ

VIS

MIN

LUZ

VIS

MIN

LUZ

VIS

MIN

LUZ

VIS

MIN

2005 2006 2007 2008 2009 2010

0500

1,0001,5002,0002,5003,0003,5004,0004,500

In M

nP

LUZ

VIS

MIN

LUZ

VIS

MIN

LUZ

VIS

MIN

LUZ

VIS

MIN

LUZ

VIS

MIN

LUZ

VIS

MIN

2005 2006 2007 2008 2009 2010Non-Network RelatedNetwork RelatedPayroll


TransCo33

TransCo Opex/MVA Installed (Real)

0

50

100

150

200

250

300

2003 2004 2005 2006 2007 2008 2009 2010

SKM Report Revised by TransCo

OPEX ECONOMIC EFFICIENCY

TransCo Opex / MVA Installed (Real)


TransCo34OPEX ECONOMIC EFFICIENCY

TransCo Opex/Cct Km

0

50

100

150

200

250

300

350

400

2003 2004 2005 2006 2007 2008 2009 2010


TransCo Opex / Ckt Km


TransCo35

TransCO Opex/MW (Real)

0

100

200

300

400

500

600

700

800

2003 2004 2005 2006 2007 2008 2009 2010



TransCo Opex / MW (Real)


TransCo36

TransCo Opex/RC (Real)

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

2003 2004 2005 2006 2007 2008 2009 2010

SKM REPORT REVISED BY TRANSCO


TransCo Opex / RC (Real)



Opex / ckt Km (2004 – 2010)

0

50

100

150

200

250

300

350

400

450

Powerlink (Aus) Electranet (Aus) SPI Powernet(Aus)

Transend (Aus) TransGrid (Aus) TransCo '04 TransCo SKM TransCo Revised

Powerlink (Aus) Electranet (Aus) SPI Powernet (Aus) Transend (Aus) TransGrid (Aus) TransCo '04 TransCo SKM TransCo Revised



Opex / MW (2004 – 2010)

-

100

200

300

400

500

600

700

800

Powerlink (Aus) Electranet (Aus) SPI Powernet(Aus)

Transend (Aus) TransGrid (Aus) TransCo '04 TransCo SKM TransCo Revised

Powerlink (Aus) Electranet (Aus) SPI Powernet (Aus) Transend (Aus) TransGrid (Aus) TransCo '04 TransCo SKM TransCo Revised


TransCo39

PARTICULARS 2005 2006 2007 2008 2009 2010

Payroll 1,895 2,260 2,759 3,410 3,762 4,169

Network Related 1,996 2,494 2,568 2,724 2,845 2,967 Non-Network Related 546 647 605 640 678 719

Total Operating Expenses 4,437 5,401 5,932 6,774 7,285 7,854

FORECAST OPEX, (IN MN PHP)

TransCo

RETURN OF CAPITAL (DEPRECIATION) AND RETURN ON CAPITAL


TransCo

REGULATED ASSET BASE (RAB)

Overview of CalculationsInitial Asset Valuation of RAB at Dec 2004Roll-forward RAB to Dec 2005Post valuation adjustmentsRoll-forward RAB for the 2nd

regulatory period (2006 to 2010)


TransCo42INITIAL ASSET VALUATION REPORT

1. Background2. Methodology3. Asset Categories4. Asset Lives5. Optimization6. Valuation Results and

Comparison


TransCo43BACKGROUND

• Transmission Wheeling Rates Guidelines -TWRG Sec. 4.6.1 and 4.6.2 (c)

• TransCo 2004 External Asset Revaluation Project Contractor:

Independent experts experienced in regulated regimeERC accredited assessors

TransCo complied with the procurement process of RA 9184


TransCo44VALUATION METHODOLOGY

• Indexation

• Absolute valuation using Replacement Cost Analysis

• Absolute valuation using Modern Equivalent Asset (MEA) analysis


TransCo45INDEXATION DEFINITION

• Adjusting value over time using statistical index like Consumer Price Index (CPI)


TransCo46REPLACEMENT COST ANALYSIS DEFINITION

• This method of valuation involves valuing the relevantassets at their current unit prices multiplied by their volumes.


TransCo47MEA DEFINITION

• Modern Equivalent Asset (MEA) -is the asset which, in the normal course of business, the transmission entity would use to replace the existing asset if it were to be replaced today


TransCo48ASSET CATEGORIES

• Transmission Substation *• Sub-Transmission Substation• Transmission Lines *• Sub-Transmission Lines• Underground Transmission

Cables• Interconnection Assets• Communications *• System Operations *• Metering• Non-Network Assets *

Valuation Method

1) Modern Equivalent Asset (MEA)

2) Indexation & Replacement Cost (for land & buildings)

3) Indexation & Replacement Cost

* Under TWRG Sec. 4.6.5


TransCo49

CATEGORY DESCRIPTION SKM STANDARDECONOMIC LIFE

TRANSCO COMPOSITEECONOMIC LIFE

TRANSMISSION LINE Lattice Steel Tower 50 30Wood Pole Line 25 30Concrete Pole Line 50 30Steel Pole Line 50 30

POWER CABLES Submarine HVDC/HVAC 50 30Underground HVAC 50 30

OUTDOOR SUBSTATIONS - Transformers 500 kVMEAs N-1 security 45 30

Transformers 230 kVWithout N-1 security 35 30With N-1 security 45 30

Transformers 115 kVWithout N-1 security 35 30With N-1 security 45 30

Reactors 35 30Capacitor Banks 40 30Outdoor Switchbays 40 30SS Establishment Assets 50 30

COMPARATIVE ASSET LIVES


TransCo50

CATEGORY DESCRIPTION SKM STANDARDECONOMIC LIFE

TRANSCO COMPOSITEECONOMIC LIFE

OUTDOOR SUBSTATIONS - Circuit Breakers 40 30INDIVIDUAL EQUIPMENT 500 kV, 230 kV, 138/115 kV

69 kV

INDOOR GIS 500 kV GIS switchbay 45 30SUBSTATIONS 230 kV GIS switchbay 45 30

115 kV GIS switchbay 45 30

SUBSTATIONS SECONDARY Protective Relays & Controls 15 30Metering Equipment 30 30RTUs, SCADA systems 15 30

COMMUNICATIONS OPGW Links 50 30PLC Links 35 30Radio Links 15 30

SYSTEM CONTROL 15 30

COMPARATIVE ASSET LIVES


TransCo51OPTIMIZATION

• Eliminate unnecessary redundant assets;

• Eliminate over design of assets; and

• Eliminate over capacity in the network• Applied to transformer, transmission

and sub-transmission lines


TransCo52VALUATION RESULTS

ODRC SUMMARY as 12/2004Valuation (Php Mn)

RC DRC ODRCTransmission Substations 58,004 39,599 38,779

Sub-Transmission Substations 9,143 5,081 4,841Transmission Lines 73,459 54,436 51,685Sub-Transmission Lines 23,735 9,910 9,885Underground Transmission Cables 0 0 0Interconnection Assets 19,662 16,730 16,730Communications 2,350 1,570 1,560System Operations 2,323 1,209 1,198Metering 400 278 268Non-Network Assets 10,075 9,002 8,709

GRAND TOTAL 199,150 137,815 133,655

ASSET CATEGORY


TransCo53VALUATION RESULTS COMPARISON (IN PHP MN)

RCN NET BOOK VALUE

TRANSCO BOOKS 163,119 94,921

RC ODRC

SKM VALUATION 199,150 133,655

INCREASE 36,031 38,734% 22% 41%

RC ODRC

TransCo

REGULATORY ASSET BASE:ROLLED FORWARD TO JAN 1, 2005



TransCo55ROLLED FORWARD ANALYSIS

Sec 4.6.10 of the TWRG requires that the initial revaluation report must estimate the rolled-forward depreciated RAB for each asset category at the start of the 2nd Regulatory Period i.e. January 2006.


TransCo56ROLLED FORWARD ANALYSIS

FORMULA:

RABcj,t- 1= RABoj,t- 1- RegDepn oj,t- 1+ CAPEXj,t- 1- RegDepncj,t- 1 - Disposalsj,t- 1

Where:

RABoj,t- 1 is the RAB opening for year 2005. The asset value as of Dec. 31, 2004 indexed to 2005 values using a CWIP factor to compensate for investment cost.

RegDepnoj,t- 1 is the Regulated Depreciation opening, 2005 per Asset Category

CAPEXj,t- 1 is the actual or budgeted capital expenditure (CAPEX) in 2005, increased by a CWIP factor

RegDepncj,t- 1 is the Regulated Depreciation for new additions to the RAB for year 2005

Disposalsj,t- 1 is the actual or budgeted net receipts from disposals in 2005

- + --Opening RAB

Regulated Depreciation

Additions (CAPEX)

Regulated Depreciation

DisposalForecast Receipts


TransCo57ROLLED FORWARD ANALYSIS (DEC 2005)

144,078.07 1,525.52 65.66 5,458.92 4,582.70 144,793.03 133,655.10 TOTAL

55.69 ----55.69 51.40 Capital Shares

1,781.55 ---84.17 1,865.72 1,722.20 Buildings & Improvements

21,744.76 --83.84 -21,660.92 19,994.69 Land & Easements

1,141.36 -0.64 16.24 -1,125.75 1,039.16 Non-Network Assets

1,179.34 ---61.69 1,241.04 1,145.57 System Operations

1,441.42 -0.25 7.63 170.58 1,604.63 1,481.20 Communications

180.67 ---13.21 193.88 178.97 Metering

-------Underground Transmission Cables

18,257.57 12.82 27.78 2,269.13 548.71 16,577.76 15,302.55 Interconnection

4,853.86 104.01 --189.73 5,147.59 4,751.62 Substation -Sub-Transmission

41,468.62 55.49 26.64 2,308.69 1,490.05 40,732.11 37,598.87 Substation - Transmission

6,912.12 1,167.50 1.40 -342.08 8,423.09 7,775.16 Lines - Sub-Transmission

45,061.12 185.71 8.95 773.39 1,682.47 46,164.86 42,613.71 Lines - Transmission

RAB cj,t-1Disposals j,t-1RegDepn j,t-1Capex j,t-1RegDepn

oj,t-1RAB oj,t-1

(12/31/05 values)

RAB oj,t-1(12/31/04

ODRC values)ASSET CATEGORY

144,078.07 1,525.52 65.66 5,458.92 4,582.70 144,793.03 133,655.10 TOTAL

55.69 ----55.69 51.40 Capital Shares

1,781.55 ---84.17 1,865.72 1,722.20 Buildings & Improvements

21,744.76 --83.84 -21,660.92 19,994.69 Land & Easements

1,141.36 -0.64 16.24 -1,125.75 1,039.16 Non-Network Assets

1,179.34 ---61.69 1,241.04 1,145.57 System Operations

1,441.42 -0.25 7.63 170.58 1,604.63 1,481.20 Communications

180.67 ---13.21 193.88 178.97 Metering

-------Underground Transmission Cables

18,257.57 12.82 27.78 2,269.13 548.71 16,577.76 15,302.55 Interconnection

4,853.86 104.01 --189.73 5,147.59 4,751.62 Substation -Sub-Transmission

41,468.62 55.49 26.64 2,308.69 1,490.05 40,732.11 37,598.87 Substation - Transmission

6,912.12 1,167.50 1.40 -342.08 8,423.09 7,775.16 Lines - Sub-Transmission

45,061.12 185.71 8.95 773.39 1,682.47 46,164.86 42,613.71 Lines - Transmission

RAB cj,t-1Disposals j,t-1RegDepn j,t-1Capex j,t-1RegDepn

oj,t-1RAB oj,t-1

(12/31/05 values)

RAB oj,t-1(12/31/04

ODRC values)ASSET CATEGORY


TransCo58REGULATORY DEPRECIATION

• Depreciation is calculated on a straight line basis (TWRG 4.8.1);

• Depreciation includes depreciation on opening asset (ODRC valuation) and depreciation on capital expenditure within the regulatory period; and

• Expressed in nominal terms


TransCo59DISPOSALS IN 2005

• Disposals- Net receipts from disposal are deducted from

the RAB – TWRG clause 4.6.10e- Net receipts defined as proceeds from sales

less the value of the asset (at the date of sale)[ TransCo suggests that disposals should be

accounted in the following way:Net cost of disposal included in ARR (ie, a gain on sale would be an income, a loss would be an expense)Value of asset sold deducted from RAB]


TransCo602005 FORECAST DISPOSAL

1. Tarlac 2 Electric Cooperative (TARELCO 2) 5.442. Aklan Electric Cooperative (AKELCO) 22.413. Central Negros Electric Cooperative (CENECO) 41.474. Bohol II Electric Coopertive (BOHECO II) 8.105. VMC Rural Electric Service Cooperative Inc. (VRESCO) 33.006. South Cotabato 2 Electric Cooperative (SOCOTECO 2) 215.187. Tarlac 1 Electric Cooperative (TARELCO I) 50.058. Camarines Sur 2 Electric Cooperative (CASURECO 2) 108.969. Leyte 2 Electric Cooperative (LEYECO 2) 29.0010. Misamis Oriental I Rural Electric Services Cooperative(MORESCO 59.9611. Misamis Oriental II Rural Electric Services Cooperative(MORESC 57.27


TransCo61

1. Subic Bay Metropolitan Authority (SBMA) 1st contract 7.362. Tarlac Electric Inc. (TEI) 19.823. La Union Electric Co. Inc. (LUECO) 10.624. Davao Light and Power Co. (DLPC) 14.895. Subic Bay Metropolitan Authority (SBMA) 2nd contract -6. Manila Electric Co.(MERALCO) not yet available7. Visayas Electric Co. (VECO) 5.938. Dagupan Electric Corp. (DECORP) 35.329. Mactan Electric Co (MECO) 6.8010. Iligan Light and Power Co. (ILPI) 60.92

2005 FORECAST DISPOSAL


TransCo62POST VALUATION ADJUSTMENTS

• Post valuation adjustments made:

-To account for missing assets

-Update WACC used in CWIP factor


TransCo63ADJUSTMENTS FOR MISSING ASSETS

• Inclusion of Missing Assets– Optimization of Naga-Tayabas 2,026– Omitted repeater stations 912– Omitted PABX at Mindanao 7– Sub-trans Lines 105

Sub-total 3,046• Deletion of Double Counting

- Interconnector land 1,427TOTAL Adjustment 1,618


TransCo64

SUMMARY: ROLLED FORWARD 2005 RAB , PHP MN

PhP MnRAB Dec 31, 2004 133,655 RAB Dec 31, 2004 indexed to Dec 31, 2005 144,793 Add Missing Assets less double countring 1,618 Modified December 2004 RAB 146,411 Less Depreciation on RAB (4,810) Plus CAPEX 5,459 Less Depreciation on CAPEX (66) Less forecast disposals (1,526) RAB Dec 31, 2005 145,469 Add WACC adjustment to CWIP factor (for WACC of 22%) 5,934 Add CWIP at Dec 04, not commissioned in 2005 8,054 Modified December 2005 RAB 159,458


TransCo652006 FORECAST DISPOSAL

1. Davao del Norte Electric Cooperative (DANECO) 162.232. Antique Electric Cooperative (ANTECO) 42.763. Guimaras Electric Cooperative (GUIMELCO) 15.434. Iloilo 3 Electric Cooperative (ILECO 3) 28.615. Iloilo I Electric Cooperative (ILECO I) 93.426. Bohol Light Company, Inc. (BLCI) 3.167. Agusan del Norte Electric Cooperative (ANECO) 62.638. Lanao del Norte Electric Cooperative (LANECO) 34.499. Cotabato Light and Power Inc. (COLIGHT) 13.8410. Ilocos Norte Electric Cooperative (INEC) 53.3311. La Union Electric Cooperative (LUELCO) 63.7312. Zambales 2 Electric Cooperative (ZAMECO 2) 17.2013. Peninsula Electric Cooperative (PENELCO) 162.87


TransCo66

ROLLED FORWARD RAB 2006-2010

Particulars (PhP Mn) 2006 2007 2008 2009 2010RAB (t)0 159,458 164,844 176,152 180,937 180,691

RegDepn(t) 4,994 4,994 4,994 4,994 4,983

Capex(t) 11,827 17,203 10,987 6,163 5,645

Disposal (t) 998 - - -

Capex RegDepn(t) 450 900 1,207 1,415 1,638RAB (t) 164,844 176,152 180,937 180,691 179,715

TransCo

FORECAST CAPEX


TransCo

Rationale

Part of TransCo’s submission to the ERC for the

Second Regulatory Period (2006-2010)

(Per Sec. 4.10.1 of the TWRG)

Review of Forecast

CAPEX

Conclusion

Introduction

FORECAST CAPEX

TransCo

Methodology

References

Transmission Development Plan

TransCo’s costing methodology

TWRG and Issues Paper

TransCo’s Capex forecast

Project feasibility studies

Introduction

Review of Forecast

CAPEX

Conclusion

FORECAST CAPEX

TransCo

Methodology (cont’d)

References

Demand forecasts

DBM Economic and Fiscal Targets

Project cost estimates

Other TransCo documents

Interviews

Introduction

Review of Forecast

CAPEX

Conclusion

FORECAST CAPEX

TransCo

Adjustments Made

Conversion from nominal to real

IDC removed

Use of conservative forecast

Adjustment on capitalized overhead

Inclusion of transmission line easement

Introduction

Review of Forecast

CAPEX

Conclusion

FORECAST CAPEX

TransCo

CAPEX Forecasts SubmissionTWRG Requirements

Project Cost > P 50-Million

Asset categories

Individual project profile

Summary spreadsheets

Introduction

Review of Forecast

CAPEX

Conclusion

FORECAST CAPEX

TransCo

Results of Review ExplainedDiscrete projects. SKM found no evidence that projects have been

split to fall below the P50-M threshold stipulated in the TWRG for detailed project disclosure.

Estimates are reasonable. The transmission line and substation cost estimates are considered within the reasonable range.

Prudent and efficient capital. The planning criteria used in the TDP are considered reasonable.

Conservative forecast (for Luzon only)- Impact on timing (deferment of 4 projects, from 1 to 2 years)- Impact on Capex forecast (0.5% reduction)

FORECAST CAPEX


TransCo74

HHHH

HH

H

H

G

SIRAWAY

ZAMBALESBASE

ZAMBOANGA CITYPUTIK

SANGALI

TUNGAWAN

SALUG

MALANGAS

DINAS

DAPITAN

OROQUETACITY

MOLAVE

PAGADIANSTA.CLARA

BASILAN

AURORA

KAPATAGAN

LUGAIT

COTABATOCITY

NULING

LEBAK

MALABANG

KIAMBA

TACURONG

KORONADAL

KIBAWE

VALENCIA

PULANGUI

AGUSAN

TAGOLOAN

APLAYA

MARAMAG

MT.APO

DIGOS

MALITA

MALAPATAN

GLAN

TAGUMMACO

MATI

LUPON

APEXNORTHDAVAO

TINDALOCATEEL

BANGANGA

SURIGAOANISLAGAN

SANTIAGOCABADBARAN

MADRID

BUTUAN

BAYUGAN

NASIPIT

GINGOOGBALINGOAN

PSC

CAMIGUIN

CAGWAIT

BAROBO

TRENTO

MONTEVISTA

MAASIM

GEN.SANTOS

ABAGAH

KABACAN

MATALAM

H D

D

MABUHAY MIDSAYAP

ISULAN

SURALLAH

KIDAPAWAN

MARCELINODON

MONKAYO

ASUNCION

NEWLOON

D

KOLAMBUGAN

D

AMPAYON

TALOMO

B.BATANG

CARMEN

D

D

TO TONGONAN(VIA PANAON IS.)

SAN FERNANDO

(BADAS)

NABUNTURAN

FRANCISCOSAN

PNOC

BUNAWAN

MAA

H

1,2,3 & 5

TAGO

H

H

PITOGO

SAMAL IS.

SIARGAO IS.

DINAGAT IS.

TANDAG

MACO

C

MALAYBALAY

DALWANGAN

PULANCOCALAMBA

TALACOGON

MATANAOTAP

BANSALAN

SIOM

PANGI

STA.BARBARAT.DANDA

OZAMIS CITY

JIMENEZ

COGON

LANOY

SARI

POLOMOLOK

SIMUAY

MAGANOY

BALIGUIANTUBOD

SINDANGAN

COMPOSTELA

KM. 13

SAN ISIDRO

LUNOCAN

MAKILALA

TUPI

SIQUIL

MAITUM

MANIKLING

SULU

TAWI TAWI

PROSPERIDADKIRAHON

GEN. SANTOS-TACURONG T/L

Gen. Santos-Tacurong, 80 kms, 138KV T/LGen. Santos : 100 MVA X’MERTacurong :100 MVA X’MER

(AUG-2007)

ZAMBOANGA CITY AREA 138 KV T/L

Sangali-Pitogo 32 kms, 138 KV T/L(MAY-2006)

MACO SUBSTATION

50 MVA S/S(DEC-2005)

MINDANAO S/S EXP-2005

Sta. Clara: 50 MVAKibawe: 75 MVAButuan: 100 MVA

Bislig: 50 MVANne Loon: 150 MVATindalo: 100 MVA

(DEC- 2007)

MINDANAO SUBTRANS. PROJECT 1

KM 13-Surigao City : 10 kms 69 KV T/LMaco- Tap-Mati: 20 kms, 69 KV T/L

(OCT- 2005)

ABAGA-KIRAHON 230 KV T/L

Abaga-Kirahon, 120 kms, 230KV t/L(AUG-2007)

MINDANAO GRID ON-GOING PROJECTS

TransCo

12,194.784,025.07145.89

46.1646.160.002nd Priority Tacurong-Nuling 138 kV Transmission Line Project

108.46108.460.002nd Priority Reliability Compliance Project I

582.92101.898.592nd Priority Power Circuit Breaker Replacement Program

252.770.004.512nd Priority Mindanao Mobile Transformer Project Project

96.7296.720.001st Priority San Francisco 138kV S/S Project (New)

2,242.47760.7226.461st Priority Pulangui-Bunawan 230kV T/L Proj.(Turnkey) (Stage 1)

1,714.78596.0519.981st Priority Kirahon-Pulangui 230KV Transmission Backbone (Stage 2)

1,182.51477.5412.591st Priority Aurora-Polanco(Dipolog) 138kV TL Proj (Turnkey)

1,233.77445.0814.08On-going Zamboanga City Area 138kV T/L Project

11.0311.030.00On-going Mindanao Subtransmission Projects-I

23.1223.120.00On-going Mindanao S/S Expansion Project

737.0559.9212.09On-going Mindanao S/S Expansion - 2005

104.12104.120.00On-going Maco Substation

1,002.89332.9311.96On-going Gen.Santos-Tacurong-Nuling Trans.Reinf.Proj.

43.8143.810.00On-going Bunawan S/S

2,812.21817.5335.62On-going Abaga-Kirahon 230kV TL Project

TotalPhPPhPUS$

Cost Disbursement2005-2010

(Millions, Real Terms)

STATUS/RANK

NAME OF PROJECTS

SUMMARY OF PROJECT COST DISBURSEMENTS FOR MINDANAO

FORECAST CAPEX


TransCo76

GT

BANATE

POTOTAN

LA PAZSIBALOMSTA. BARBARA

SARA

PANITAN

ROXASKALIBO

ALTAVAS

CULASI

NABAS

PANAYG

ALLEN

CATARMAN

CATUBIG

ORAS

TAFT

BORONGAN

MC ARTHURTACLOBANTUNGA

TONGONAN ORMOC

TOLOSA

WRIGHT

CALBAYOG

BILIRAN

ISABELPASAR PHILPHOS

BAYBAY

SAMAR

LEYTE

HD H

TALIBON

ALICIACARMEN

JANOPOLLOBOC

G.HERNANDEZ

ABUYOG

SOGOD

ST.BERNARD

TUBIGON

BORBON

LA CONSOLACION

MACTAN

STA.RITA

CADIZMAGALONA

D

D

DDINGLE

TALISAY

G

BACOLOD

SN. ENRIQUE

KABANKALAN

BAYAWAN

SN. CARLOS

GUIHULNGAN

BADIAN

BINDOY

BAIS

DUMANJUG

SIBONGA

ALCOY

ASTURIAS

TUBURAN

DH

MABINAY

AMLAN

MEDELLIN

PC

SIGPIT

BANILAD

NAGA

TALAVERA

TOLEDO

NEGROS

BOHOL

CEBU

SIBUYAN IS.

TABLAS IS

BINALBAGAN

BALASANMALCAMPO

TALISAY

TO MINDANAOVIA PANAON IS.

BABATNGON

MAASIN

UBAY

HILONGOS

HIMAY-ANGAN

GUIMARASISLAND

GUIMAR

AS S

/S

SUBA

DUMANGAS

PARDO

GCMC

CALINOG

SIGMADAU

BAGO

LA CASTELLANA

CAMOTE IS.

ROMBLON

TULINGON

SIPALAY

CAUAYAN

MARICALLUM D

MAMBUCALMIAGAO TIGBAUAN

SN. ISIDRO

COMPOSTELA

KAYETUSAN

BENIT CTS

PANAY-BORACAYINTERCONNECTION

3.5 kms, 69KV T/L, 30MVA X’MER

(DEC-2005)

NEGROS-PANAYINTERCONNECTION

Phase 1: 55kms, 138KV T/LPhase 2: 48 kms, 138KV T/L

(JUN-2007)

CEBU-NEGROS INTERCONNECTION

OHTL: 108 kms, 138 KV35 kms, 69 KV

Sub-Cable: 17.8 kms, 138KV(AUG-2006)

WRIGHT-CALBAYOG138 KV T/L

OHTL: 65 kms, 138KVCalbayog: 50 MVA X’mer

(DEC-2007)

CEBU III TRANSMISSIONOHTL: 2 kms, 138 KVQuiot: 100 MVA Xmer

(DEC-2005)

CEBU-MACTAN INT. PROJECT

XLPE Cable: 8.7 kms, 138KVMactan: 200 MVA, X’mer

Mandaue: 200 MVA X’mer(Nov-2005)

PANAY IV TRANSMISSIONDingle: 6-138KV PCB

Panitan: 5-138KV PCB(DEC-2005)

NEGROS III TRANSMISSION

Bacolod: 100 MVA X’mer(OCT-2005)

NEGROS V TRANSMISSION

OHTL: 52 kms, 69 KV(JUN-2006)

GCD

LEGEND :GENERATING PLANT

HYDROGEOTHERMALCOALDIESELGAS TURBINE

TRANSMISSION LINEEXISTING ON-GOING PROPOSED

350 KV HVDC

138 kV (Sub/Cab)

69 kV

SUBSTATIONH

GT

MAIN SUB.(138 kV)LOAD-ENDSUB.(69 kV)MAIN SUB.(230KV)

230 kV (Sub/Cab)230 kV

138 kV

350 KV HVDC (Sub/Cab)

350 KV CONVERTER STA.BPOWER BARGEPPEAKING PLT

250 KV HVDC 250 KV HVDC (Sub/Cab)

250 KV CONVERTER STA.

138 KV S/S 230 KV S/S 69 KV S/S

LEYTE-CEBU UPRATING/EXPANSION

Sub-cable: 32 kms.Compostela: 150 MVA X’mer

(OCT-2005)

LEYTE-SAMAR REINFORCEMENT

Babatngon: 50 MVA X’merOrmoc: 150 MVA X’mer

(DEC-2005)

Visayas Grid On-Going Projects

TransCo

811.83330.508.60On-going Wright-Calbayog 138kV T/L Proj.(Turnkey)

178.1826.502.71On-going Visayas Capacitor Project 1

146.96146.960.00On-going Panay-Boracay Interconnection Project

69.9569.950.00On-going Panay IV Transmission

2,741.22369.6542.35On-going Negros-Panay Interconnection Uprating (Turnkey)

130.66130.660.00On-going Negros V Transmission Project

23.0015.720.13On-going Negros III Transmission

3,196.31640.7345.64On-going Leyte-Cebu Exp/Uprating Project

2,951.75583.5342.29On-going Cebu-Negros Interconnection Uprating (Turnkey)

1,383.7261.8423.61On-going Cebu-Mactan Interconnection Project(Turnkey)

212.07212.070.00On-going Cebu III Transmission

8.008.000.00Completed Negros IV 138kV Transmission Project

156.90127.610.52Completed Leyte-Samar Reinf. 69/138kV Project

11.6011.600.00Completed Leyte-Luzon HVAC Interconnection Project

11.8011.800.00Completed Leyte-Cebu HVAC Interconnection Project (Stage1)

65.8565.850.00Completed Leyte-Bohol Interconnection.Project (Stage2)

TotalPhPPhPUS$

Cost Disbursement2005-2010(Millions)STATUS/

RANKNAME OF PROJECTS

SUMMARY OF PROJECT COST DISBURSEMENTS FOR VISAYAS

FORECAST CAPEX

TransCo

14,288.453,585.78191.12

55.9355.930.002nd Priority Southern Panay Backbone T/L Project

393.1368.725.792nd Priority Power Circuit Breaker Replacement Project

329.14104.084.022nd Priority New Naga Substation Project

110.98110.980.002nd Priority Bohol Backbone Project

1,299.48433.1215.471st Priority Northern Panay Backbone Project

TotalPhPPhPUS$

Cost Disbursement2005- 2010(Millions)STATUS/

RANKNAME OF PROJECTS

SUMMARY OF PROJECT COST DISBURSEMENTS FOR VISAYAS (cont’d)

FORECAST CAPEX


TransCo79LUZON GRID ON-GOING PROJECTS

LUZON SUBTRANSMISSION EXPANSION PROJECTS I & II (only 1 out of 12 components

is completed)

BIÑAN-DASMARIÑAS TRANSMISSION LINE

UPGRADING (completed-2004)

CLUSTER C EXPANSION PROJECT

(completed-2004)

LEGEND:.

ON-GOING PROJECT UNDER TDP 2004 (STILL ON-GOING UNDER TDP 2005)

ON-GOING PROJECT UNDER TDP 2004 (COMPLETED 2004)

WB-TGRL SUBSTATION PROJECTS(MAR-2005)

BAUANG-SAN ESTEBAN L2

STRINGING PROJECT(JAN-2007)

BINGA-SAN MANUEL 230 kV T/L PROJECT(MAY-2007)

SAN ROQUE HYDRO ASSOCIATED T/L

PROJECT(DEC-2005)

BATANGAS-TRANSMISSION

REINFORCEMENT PROJECT

(APR-2007)

T/L & S/S PROJECTS(NOV-2006)

LUZON TRANSMISSION LINE UPGRADING

PROJECTS – 1(JUN-2007)

TransCo

27.5111.380.29On-going WB TGRL - Luzon S/S Reinf Project

279.9219.074.66On-going T/L & S/S Proj- Package 1 & 2

145.7041.441.86On-going San Roque Asso. T/L & S/S

173.39173.390.00On-going Bauang- San Esteban L2 Stringing Project

1,304.76536.8913.71On-going Batangas Trans. Reinf. Project

19.5319.530.00Completed Sucat- StaMesa- Balintawak

119.06119.060.00Completed Pagbilao Coal T/L

43.8943.890.00CompletedNorthwestern EHV

4.984.980.00Completed Natural Gas Ilijan Associated T/L

1.701.700.00Completed Luzon(North) Subtransmission Project- 1&2

32.3632.360.00Completed Luzon Cluster C S/S Expansion Project

8.568.560.00Completed Lahar- Affected T/L Relocation Project

41.2641.260.00Completed Casecnan (Manablon) Hydro Associated TL

3.463.460.00Completed Calaca II Associated T/L

150.35150.350.00Completed Biñan- Dasmariñas T/L Upgrading

Total PhPPhPUS$

Cost Disbursement2005-2010(Millions)

Status/RankName of Projects

SUMMARY OF PROJECT COST DISBURSEMENTS FOR LUZON

FORECAST CAPEX

TransCo

519.2182.907.791st Priority Voltage Improvement Project - 1

35.1714.420.371st Priority Tap Hermosa- Balintawak

158.5798.741.071st Priority New Gamu 230 KV SS Project

3,516.981,285.9339.841st Priority Luzon(North) T/L Upgrading Projects- 1

1,040.75178.1615.401st Priority Luzon Transmission Equipment Upgrade

1,872.04329.9627.541st Priority Luzon S/S Expansion Proj- 1

439.46206.794.151st Priority Dasmariñas- Rosario 230KV T/L Project

1,545.93433.2219.871st Priority Binga- San Manuel 230kV TL Project

496.87232.264.731st Priority Biñan- Sucat 230kV Line Upgrade

Total PhPPhPUS$

Cost Disbursement2005-2010(Millions)


SUMMARY OF PROJECT COST DISBURSEMENTS FOR LUZON (cont’d)

FORECAST CAPEX

TransCo

SUMMARY OF PROJECT COST DISBURSEMENTS FOR LUZON (cont’d)

12,080.724,106.40142.40

0.460.460.002nd Priority San Jose- Balintawak T/L Upgrade

1.401.400.002nd Priority San Jose 500 KV Reconfiguration

16.6816.680.002nd Priority Naga- Tayabas T/L Rehabilitation

1.401.400.002nd Priority Mexico- Balintawak Reconductoring

20.263.450.302nd PriorityLuzon Voltage Improvement Project - 2

1.581.580.002nd Priority Luzon Mindoro Interconnection

1.221.220.002nd Priority Luzon Subtransmission Line/Equipment Replacement

0.680.680.002nd Priority Luzon Subtransmission Equipment Upgrade

0.000.000.002nd Priority Luzon Substation Expansion - 3

0.420.420.002nd Priority Luzon Substation Expansion - 2

55.229.410.822nd Priority Luzon PCB Replacement Program

Total PhPPhPUS$

Cost Disbursement2005- 2010(Millions)


FORECAST CAPEX

TransCo

US$ 985.3-Million

Revised (nominal) TransCo Capex, 2005-2010

5,218.05,715.010,240.416,170.511,415.76,416.9Total Pesos

93.2102.1182.9288.8203.9114.6Total USD

3,058.13,144.15,438.26,680.44,766.53,587.6Pesos

38.645.985.8169.5118.750.5USD

201020092008200720062005

FORECAST CAPEX

TransCo

4,408.05,000.29,260.915,168.111,032.96,416.9Total PhP capex

78.789.3165.4270.9197.0114.6Total USD2,489.62,662.04,788.56,117.64,539.63,587.6(PhP)

34.341.879.9161.6116.050.5(USD)

ForecastBudgetCapex

201020092008200720062005

US$ 915.9-Million

Revised (Real) TransCo Capex, 2005-2010

FORECAST CAPEX

TransCo

Comparative Forecasts

US$ 915.9-MRevisedReal

Nominal US$ 985.3-M Revised

US$ 1,027.8-MOriginal

Capex2005-2010

4.1% difference

FORECAST CAPEX

TransCo

Computers, and office equipmentPlant, tools, and equipmentFurniture, fixtures, and fittingsCommercial buildingsLand (all remaining land)Other

Buildings, civil works and establishmentControl room and control infrastructureAncillary infrastructureOther Land used for system operations

Non-Network AssetsSystem Operations

Buildings, civil works and establishmentCommunications plant and

infrastructureAncillary infrastructureOtherSparesLand used for communications plant

Buildings, civil works and establishment

Transformers (power)Circuit breakersInstrument transformersMeters and protectionCapacitors and reactorsBusworkOtherSparesLand used for substations

Buildings, civil works and establishmentTowers and associated linesPoles and associated linesUnderground cablesSubmarine cablesEasements owned by the Regulated EntityOther SparesLand used for transmission lines

Communication PlantSubstation ComponentsTransmission Lines

Asset Categories

FORECAST CAPEX

Documents

Expository Hearing 1of2 - Energy Regulatory Commission Hearing 1of2.pdf · engineering design, construction and ... • Transmission Substation * ... Transformers 115 kV Without N-1