On March 4, 2014, Korea Electric Power Corporation (KEPCO) had the dedication ceremony of a 433MW gas-fired combined cycle power plant in Chihuahua, Mexico in its first power plant project in Latin America. KEPCO has built the Norte II gas-fired combined cycle power plant in a consortium with Samsung C&T from Korea and Techint from Mexico. The dedication ceremony was attended by some 120 officials and business executives, including KEPCO’s President Cho Hwan-eik, the governor of Chihuahua State, ranking officials at the Comision Federal de Electricidad (CFE) of Mexico, Korean ambassador in Mexico and executives at Korea Exim Bank.
The KEPCO-led consortium won the US$430 million project in August 2010 from the CFE, and constructed the natural gas-fired power plant in Chihuahua on BOO (build, own and operate) basis. As the largest shareholder, KEPCO will operate the power plant for 25 years. And the Mexican government will purchase 100% of the electricity produced at the new power plant. KEPCO owns a 56% stake in the power plant, followed by Samsung C&T with 34% and Techint with 10%. For the project, Samsung Engineering and Techint have carried out engineering, procurement and construction (EPC) works, while KESC, the 100% subsidiary of KEPCO, is responsible for operation and management of the plant. KEPCO expects to gain approximately US$210 million over the next 25 years from operating the power plant.
In the bid in 2010, the consortium led by KEPCO beat rival consortiums from Spain and Japan, which had traditionally dominated the Mexican market, such as Iberdrola, Abengoa, Mitsubishi and Mitsui. Currently, the Korea’s state-run utility company is in talks with the Mexican government to win another gas-fired power plant project. With experiences in Mexico and advanced plant operating capabilities, KEPCO will actively participate in bids for power plant projects offered by the Mexican government in the future. As Mexican government did not announce any specific plans for nuclear power projects, the company will focus on winning orders for fossil fuel-fired power plants and renewable energy projects such as wind-power plants for some time. And, based on projects in that country, the company aims to enter other Latin American markets.
In an effort to reduce its reliance on electric power generated by fossil fuel-fired power plants, the Mexican government is seeking to build additional nuclear power plants. Mexico is generating about 73% of its overall electric power through fossil fuel-fired power plants, and its government is considering two options to cut its heavy dependence on such plants; construction of 10 nuclear power plants by 2028 to supply 28% of its total power demand or construction of 8 nuclear plants by 2025 to supply 12% of the power demand. The country currently runs two nuclear power plants which generated 3.4% of its total energy demand in 2012.
The electric power industry in Mexico has great potential for growth. In line with industrial development and economic growth, demand for electric power is expected to grow by 3.3% annually through 2017. In 2012, demand for electricity in the country was 260.5 billion kWh, and it is anticipated to increase to 282TWh by 2017. The electric power market had been virtually monopolized by government organizations, CFE and Luzy Fuerza del Centro (LFC), until October 2009 when LFC was merged by CFE. But as the Mexican government restrictively allowed private companies to take part in electric power market in 1992, independent power producers (IPPs) began to increase. As of the end of 2012, total capacity of power plants in the country reached 53,114MW, and IPPs are operating 27 power plants with total power generation capacity of 12,418MW as of October 2013. Of total electric power capacity, thermal power accounts for 72.6% with 38,550MW and hydroelectric power represents 21.7% 11,544MW. For two decades, CFE has been operating 2 nuclear power plants, Laguna Verde #1 and #2 with capacity of 1,364MW, and it improved their capacity and performance by replacing turbines and generators in early 2013. As for consumption of electric power, business companies, manufacturers and households consume 37%, 22% and 25%, respectively.
KEPCO’s overseas business started off in 1995 with restoration/operation project for Malaya power plant and construction/operation project for Ilijan gas complex thermal power plant in 1997 in the Philippines. It also successfully built power plants in Cebu and Illijan in that country. Since then, KEPCO has expanded its business to China, the United Arab Emirates (UAE), Saudi Arabia and Mexico. In China, KEPCO took part in coal-fired generation business in Shanxi Province in alliance with Shanxi International Energy Group. In the Middle East, KEPCO won the bid to build and operate gas combined-cycle power plant in Al-Katrana (373MW) and IPP3 diesel power plant (573MW) in Jordan, heavy oil thermal power plant in Rabigh, Saudi Arabia (1,204MW), S3 gas combined-cycle power plant in Shuweihat, the UAE (1,600MW). As of 2013, Korea operated 23 nuclear power plants with capacity of 20,716MW, and five more plants are under construction. KEPCO’s world-class operational capability is demonstrated by achieving 0.4 interruption/unit/year and 90.7% in throughput as of 2012, as well as its competitive edge in nuclear power plant construction technologies.