Taipower’s Natural Gas Procurement
1.Overview of Taipower’s Gas-fired Plants
The location and installed capacity of Taipower’s existing gas-fired power plants are shown as follows:
2.Supply of Natural Gas
As LNG unloading, transmission, and storage facilities in Taiwan are exclusively owned by CPC Taiwan,CPC Taiwan is the only natural gas (for power generation sector) supplier in Taiwan.
3.Contract Type and Pricing
- United Contract
The natural gas supplied to Hsinta, Talin, Nanpu, TungHsiao, and Tatan (except for the quantity supplied under the Tatan Exclusive Contract) is under the United Contract.
Pricing under United Contract is based on the CPC Taiwan’s published price monthly.
- Tatan Exclusive Contract
Pricing under Tatan Exclusive Contract is based on the contract formula and calculated monthly.
4.Taipower’s LNG Independent Procurement Plan
In 2014, Taipower has obtained the government’s approval to procure LNG by itself. In the future, some of new gas-fired projects will use LNG procured by Taipower itself.
Taipower has planned Taichung Project and Hsieh-Ho Project (including both newbuild gas-fired units and LNG terminals). The feasibility studies of these two projects have been approved by Executive Yuan in March 14, 2018 and July 4, 2018, respectively.
Taipower’s LNG Procurement Strategy are listed as follows:
- Mainly long-term contracts, supplemented with Spot purchase.
- Diversification on Types of Suppliers—
Both Portfolio Suppliers and Project Suppliers are taken into consideration during evaluation in order to secure supply and ensure competitiveness.
- Diversification on Price Index—
The contract price is linked to both JCC and Henry Hub ( HH) to avoid the price risk of a single price index.
- Diversification on Supplying Areas—
- Portfolio Suppliers are preferred.
- At least 20% of contract volume is from US.
- Diversification on Suppliers—
With more than one supplier, risk of supply can be diversified, and operational flexibility can be enhanced.
- As Taipower is a new buyer, DES is preferred.
To procure LNG by Taipower itself, Taipower has added the business item of LNG importer in the Articles of Incorporation in June 2017, and has completed the procurement process of the LNG long-term contracts for Taichung and Hsieh-Ho projects before the end of 2019.