They can outsource these dedicated units to third-parties to build and operate

(SINGAPORE) Big businesses like the ExxonMobil and Shell petrochemical complexes that want dedicated power plants to cater to their huge electricity needs can now outsource these to third-parties to build, operate and manage on their behalf.

And they can build these 'embedded' generating units on land that does not adjoin their plants, under the latest ruling from the Energy Market Authority (EMA).

Sources say the ruling will, for example, help ExxonMobil, the world's biggest oil company, which wants to build a power cogeneration plant on non-adjoining land for its upcoming US$4 billion petrochemical complex.

EMA's new policy on electricity self-supply - issued in an information paper - comes a year after big corporations first submitted proposals to the authority. It also follows industry- wide consultation by EMA.

Previously, private-sector investors, like the Shell Bukom refinery, could only build in-house power plants on adjoining land.

The generating units, plant facilities and land had also to be majority-owned by the companies themselves.

EMA said it took several factors into account in considering the policy revision. One is that Singapore is land-scarce.

Companies may also find it commercially sound to outsource generating units to third-parties to develop, own and operate for them. But EMA said it was mindful that this could distort market competition.

So it stressed that it will not allow outsourcing of such embedded generating units to a company 'if this creates market power or adds to the existing market power of the company'.

Also, there should be no exports - that is, the sale of electricity generated by such embedded units, outsourced to and owned by third-parties - to the Singapore power grid.

Industry players say that the changes make sense for companies that want embedded power plants but need third-parties to build and operate, as power generation is not the companies' core business.

PowerSeraya managing director Neil McGregor said: 'We are interested in growing our custom on Jurong Island, and we will certainly look at what this means. There is a niche for this, especially if it results in better efficiency for our customers.'

Similarly, Tuas Power president and CEO Lim Kong Puay told BT: 'We are certainly interested in it. It opens up new business opportunities.'

Tuas Power - recently bought by China Huaneng Group for $4.2 billion - is already in a joint venture supplying small utility cogeneration units to pharmaceutical plants at Tuas.

Like PowerSeraya, which is going into cogeneration to supply utilities like steam and power to petrochemical investors on Jurong Island, Tuas Power also plans to build a sizeable cogeneration plant there.

On the latest EMA rulings, Senoko Power CEO Roy Adair said: 'We are always interested in something that can add value to our company and improve our risk-management arrangements.'

Industry observers say one way EMA can make sure that third-party outsourcing of embedded units does not lead to any genco growing its market power is to cap this through licensed operating capacity.

Tuas Power, for instance, has licensed capacity of 2,670 megawatts (MW). Senoko Power, the largest Singapore genco, has 3,300MW, while PowerSeraya has 3,100MW. Other players include SembCorp with 815MW and KepCorp with 500MW.

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