The CBK complex, currently operated as a joint venture between J Power and Sumitomo of Japan, is set to undergo a significant change.
The government's operating agreement with the current operators will expire in 2026, and PSALM (Power Sector Assets and Liabilities Management Corp.), the government entity that owns the plant, will privatize it next year through public bidding.
Designed to support BNPP
The government built the Kalayaan plant to support the 600-MW Bataan Nuclear Power Plant. The plant's pumping function would have allowed the BNPP to run continuously at 600MW. Since Napocor (National Power Corp.) expected power demand to fall at night, the BNPP would need to bring its capacity down to 300 MW, an inefficient way of running a nuclear power plant. So, pumping water at that time would allow the efficient running of the BNPP at 600 MW.
Unfortunately, the government did not build the BNPP. So, the smart and creative engineers at Napocor used the facility to help control the system's frequency and voltage. When the frequency exceeded 60 Hz, the Kalayaan would pump water and help bring down the frequency; or if the voltage exceeded the regulated voltage, Napocor used the pumping or generating functions.
In the 1990s, people recommended closing the facility since, as a generating plant, it was losing money—the cost to pump the water up was more expensive than to generate the energy with the water coming from Laguna Lake.
'A giant battery'
Upon closer examination, however, it became evident that the Kalayaan plant was not accurately assessed financially. Its function was not to generate electricity but to provide an 'ancillary' service. Ancillary services support controlling frequency and voltage, as the Kalayaan plant does.
When we "unbundled" the cost of electricity service and correctly accounted for CBK's ancillary service, the complex became profitable. That was why Napocor doubled the capacity so CBK could contribute to the system's growing ancillary needs.
The CBK complex, often likened to a 'giant battery’, is a crucial player in the energy sector. With over 350,000,000 GWh annual production, it is indeed a massive battery, storing and supplying energy as needed. CBK has a unique and critical role in the system.
Valuation a challenge
Valuing this gem is a challenging task. First, the complex will have no pre-contracted ancillary or power purchase agreement. Second, depending on the government's view of its function, it can be classified as a 'load' or a generator. Classifying the complex as a 'load' will fetch a lower price as it must pay transmission charges. On the other hand, its ancillary service will be very valuable.
Someone told me it should get at least $1 billion. It could be, but let's wait for the bidding and see what the market says.
A power industry expert with over 40 years in experience as chief executive officer in firms ranging from banking, power, and advisory services.
