LG-Caltex-Texaco JV to buy two South Korean cogen plants
A joint venture of Texaco Inc. and LG-Caltex has been selected as the preferred bidder to purchase two cogeneration plants from Korea Electric Power Corp. (KEPCO) of South Korea. LG-Caltex is a joint venture of South Korea's LG Group and Caltex Corp., itself a JV of Texaco and Chevron Corp.
TOKYO�A joint venture of Texaco Inc. and LG-Caltex has been selected as the preferred bidder to purchase two natural gas-fired cogeneration plants from Korea Electric Power Corp. (KEPCO) of South Korea. LG-Caltex is a joint venture of South Korea's LG Group and Caltex Corp., itself a JV of Texaco and Chevron Corp.
KEPCO said invitations to bid on the Anyang and Puchon cogen plants had been sent out to 12 companies and consortia. Three eventually submitted bids�joint ventures of Daesung Group and Osaka Gas Co. Ltd., SK Corp. and El Paso Energy Corp., and LG-Caltex and Texaco, which submitted the highest bid.
The selection of LG-Caltex-Texaco in this second round of auctions leaves only final negotiations to be completed. The contract for the sales of the plants in Anyang and Puchon should be drawn up next month, said KEPCO.
The Anyang and Puchon plants are being sold as a unit. The divestiture is part of the government's plan, initiated in July 1998, to privatize South Korea's electric power industry. The first auction was called off at the end of last year in part because bidders attached conditions to their proposals that violated the government's rules regarding the auction. Low bid values were another reason the auction was unsuccessful. As a result of the initial failure, the plan is now being restructured (OGJ Online, May 31, 2000).
KEPCO expects to complete negotiations in mid-June, at which time LG-Caltex and Texaco will pay 10% of the purchase price. Although undisclosed, observers are pegging the price at over 700 billion won.
"There had been concerns that the cogeneration plants will be sold at below the market price, and we can tell you for certain that this has not been the case," an official said.
KEPCO expects to receive the remainder of the payment in mid-August, which will complete the sale of the Anyang and Puchon power plants. Under the basic arrangement, LG Caltex-Texaco will buy the power generation facilities, with KEPCO leasing the land for an initial period of 18 years, after which it will have the option to extend the lease.
The two plants have generating capacities of 478 and 473 Mw. They consume about 600,000 tonnes/year of LNG. They were built in 1993 and have an estimated life span of 25 years.
LG-Caltex's sister company, LG Energy, is constructing a power plant in Chungchongnam-do province's Tangjin-gun, in the southern part of the Korean peninsula. Construction of that unit, which will have a capacity of 500 Mw, began in 1996 and is scheduled to be completed in April 2001.