THE government has recently decided to cancel the Japan Bank for International Cooperation (JBIC) loan for the Philippine National Oil Company-Energy Development Corp.’s (PNOC-EDC) Northern Luzon Wind Power Project Phase 1.

The P3.51-billion-worth project was originally intended to supply electricity, power and energy in Ilocos Norte and consumers in the Luzon grid. The project included the construction and installation of wind-turbine generators with a wind farm capacity, a substation and transmission lines.

In a letter to the Department of  Finance, National Economic and Development Authority (Neda) deputy director general Rolando Tungpalan endorsed the request of the PNOC-EDC for the full cancellation of the JBIC loan for the project.

“The requested cancellation is due to the substantial increase in the project cost [compared with the appraisal estimates] making the project no longer viable. The increase in cost was brought about by high demand for wind-turbine generators worldwide in recent years and further aggravated by the increase in price of raw materials for wind-turbine generator manufacturing, particularly copper and steel,” Tungpalan said in his letter to Finance Undersecretary Roberto Tan on October 11.

Tungpalan said that no civil works have been started for the project and no funds have yet been disbursed for the project.

Neda documents said the bids received for the wind farm component exceeded available financing, rendering the project financially nonviable.

The Neda Investment Coordination Committee approved a cost of P2.86 billion for the wind farm in Novermber 2006. This was the rate used by the PNOC-EDC in negotiating with the two lowest bidders.

However, the PNOC-EDC’s efforts were fruitless, since both bidders were not willing to reduce the contract price in accordance to PNOC’s levels.

“With the project rendered non-viable, and compounded by time constraints with the loan closing on October 24, 2007, the cancellation of the JBIC loan has become inevitable,” a Neda document said.

The project would have a loan maturity of 30 years and a grace period of 10 years. The interest rate for the wind farm is at 0.95 percent and another 0.75 percent for consultancy.

The signing date for the loan was March 28, 2002, while the effectivity date was October 24, 2002. The closing date is October 2007.

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THE government has recently decided to cancel the Japan Bank for International Cooperation (JBIC) loan for the Philippine National Oil Company-Energy Development Corp.’s (PNOC-EDC) Northern Luzon Wind Power Project Phase 1.

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