KEPCO's Lebanon Deal

Utility giant takes over two power plants in Lebanon on O & M basis

The Korea Electric Power Corp. has taken over two large power plants in Lebanon to make inroads into the energy market in the Middle East and Africa, the company said recently.
The power company set up a local subsidiary, KEPCO Lebanon S.A.R.L(KELECO) in Beirut to undertake the deal involving the two power plants, which are large enough to supply half of the power needs in Lebanon.
KEPCO plans to engage in other phases of the energy supply operation such as those in the areas of power distribution, repair of power plant facilities and communication in an effort to diversify its business scope.
Chairman and CEO of KEPCO Han Joon-ho held the launching ceremony for its subsidiary in Beirut on May 16 with Lebanese government officials and Korean residents in the Middle East country attending. The Korean power company took over the two power plants in Lebanon in December last year in a deal with the Lebanese government. The two power plants to be run on operation and maintenance basis have a power generation capacity of 435 MW each, supplying half of the electricity demand in the Middle East country. The Korean energy giant paid $85.5 million for the right to manage the power plants for five years and repair them.
KEPCO President Han said the company has secured a bridgehead to advance into the power generation market in the Middle East rich with oil dollars due to high oil prices. KEPCO has been put into a good strategic position to make further inroads into the Lebanese power industry with the Lebanese government planning to privatize its power industry.
KEPCO decided to take over the operation rights of the power plants because their power loss rates related to power distribution were lower than other countries. The power plants in Lebanon sustained the power distribution loss rates of 45 percent due to damage to its power distribution facilities from Israeli bombings. KEPCO's power loss rate stands at 4.4 percent.
Lebanon imports electricity from Syria due to the power shortages, although the country has 10 power plants.
In the meantime, KEPCO is building a 200-MW coal-fired power plant in Cebu, the Philippines. The project is the third one that the Korean power company is undertaking in the Southeast Asian country, following 650-MW Malaya and 1,200-MW Ilijan plant projects.
A groundbreaking ceremony for the planned base load power plant in Cebu took place in Cebu on Dec. 16 last year with 600 Korean and Philippine people attending. Dignitaries included KEPCO Chairman & CEO Han Joon-ho, Minister of Commerce, Industry and Energy Lee Hee-bum, and Phillippine Energy Minister P.M. Lottilla.
The 200-MW(100 MW x two units) circulating fluidized bed combustion power plant is to be completed lby the first half of 2009 at cost of about $330 million. KEPCO has 60 percent stake in KEPCO Cebu Corp., a joint venture with Singapore-based Salcon Power Corp. The power plant will secure coal from Indonesia, if its domestic supply is not enough.
Electricity from the plant will be sold to local distributors and large-scale clients and power trade exchange, WESM. On the same day, KEPCO signed an MOU to acquire a 30-percent stake in Naga Power Plant , owned by Salcon Power Corp.. The Korean utility company will spend some 57 billion won to acquire its stake and participate in the operation of the Naga Power Plant with a capacity of 200,000 kW.
Earlier KEPCO signed an MOU with the Philippine government to raise the capacity of the Ilijan Power Plant from the current 1.25 million kW to 1.85 million kW. The power plant is located on Luzon Island, the largest island in the Philippines. The Ilijan project is being constructed under a BOT(build, operate, transfer) agreement for 25 years from March 1999, including three years of construction period. KEPCO's power generation capacity is likely to increase from the current 1.85 million kW to 2.85 million kW between 2008 and 2009. boosting its market share of the electricity market to 18.9 percent from the current 12.3 percent. nw

KEPCO Chairman & CEO Han Joon-ho, third from left, and Chairman of the Lebanese Engineering Association Samir Doumit at the name board hanging ceremony for joint- venture KEPCO Lebanon S.A.R.L(KELECO) in Beirut, Lebanon, May 16.

A view of Zahrani Power Plant, one of the two power plants that the Korean utility company took over in Lebanon.