Kyushu Electric Power Co., Inc.
Summary of Request for Proposals for
Thermal Power Plant Purchase –
FY2015 Solicitation
Wadomari-cho
China-cho
Shin China Power Station
1G 2G 3G 4G 5G
Declared power(MW)4.5
2.25 4.52.251.16G4.5
Overview of Okinoerabu Island 0
【 Okinoerabu Island 】
The numbers published by
China-cho and Wadomari-cho
(as of July 1,2015)
Remarks
13,220
(6,422)
Numbers
Population
(Households)
Project scale:
Declared power
4,200〜4,500kW
Koshikijima
Tanegashima
Mishimamura
Toshimamura
Kikaijima
Amamioshima
Tokunoshima
Yoronjima
1. Timeline
2. Power Plant for Which Proposals Are Being Requested
3. Proposal Requirements
4. Method for Calculating the Bid Price
5. Evaluation and Determination of Successful Bidders
6. Major Contract Terms
7. Other1Contents21. Timeline
* The schedule above is subject to alteration. In this case, changes will be posted immediately on
Kyushu Electric Power’s website.2015March 27
June 9
• Public announcement of the implementation of bidding
• Determination of successful bidder candidates
• Determination of successful bidders
• Preliminary briefing session
• Publication of request for proposals (draft)
• Thermal Power Plant Bidding WG (examination of draft request for proposals)
• Briefing session for potential bidders
• Announcement of request for proposals (start of submission)
• Thermal Power Plant Bidding WG (examination of draft evaluation reports)
• Deadline for proposals2016Around January
• Deadline for RFC
Submission of proposals
August 31
December 15
3 months
Around February
August 10
About 6
months
(2 months)
September 16 3* Bids may consist of existing facilities and/or parts of generated power, and they may
aggregate multiple power plants to be treated as a single source for the purpose of the bid.
* Kyushu Electric Power (the company that is soliciting bids) will also submit its own bid.
2. Power Plant for Which Proposals Are Being Requested
Project area Okinoerabu Island (a remote island)
Project scale 4,200 kW to 4,500 kW (receiving end)
Start of power
delivery
By June 2020
Delivery term
In general, 15 years
(selectable by bidder from 10 to 30 years)
Power plant type
Power plant capable of producing 50% to 70% of
annual load factor
However, fluctuations are possible due to expanded
use of renewable energy.4Bid price*1 Cost of CO2 countermeasures*2
Appraisal price =
(1 - business tax rate*3)
*1 For Kyushu Electric Power, equal to the cost for the bid power plant.
*2 When Kyushu Electric Power adjusts the final CO2 emission coefficient.
*3 The business tax rate is 1.2888%.
(2) Technical reliability
The bidder must have either experience generating power using the same generating
method as utilized by the power plant described in the bid or technical support from
an operator with such experience.
(1) Maximum appraisal price
The appraisal price must not exceed Kyushu Electric Power’s own appraisal price
(which constitutes the maximum price). (The maximum price will not be publicized.)
3. Proposal Requirements 5(3) Flexibility in fluctuation of load factor
Annual load factor must be adjustable within 10% of the annual notified load factor.
(4) Compliance with laws, ordinances, and other standards
Generating equipment must comply with all laws and regulations related to the electric
power generating business.
(5) Connection to the grid
The following procedures must be completed in advance of bid submission:
1. Application for connection (in general, the study period is 3 months or less)
2. Connection and delivery application after receiving response to (1) above (required
construction time, share of construction costs, etc.)
(6) Contracted maximum power
The maximum power output that can be supplied continuously throughout the contracted
delivery period shall be at least 4,200 kW and not greater than 4,500 kW.
3. Proposal Requirements6• Governor-free operation
The power plant must have governor-free operation based on frequency fluctuation.
• Automatic frequency control (AFC) function
The power plant must detect the grid frequency or generator RPM based on instructions from Kyushu
Electric Power and vary power output from minimum power to declared power (load fluctuation speed
= at least 3% of declared power per minute).
Voltage regulation function
Start characteristics
Minimum power output
(7) Supply and demand control
The bidder must provide the following supply and demand control in order to ensure the quality
of power supplied on the island:
Frequency control function
• The power plant must be able to operate continuously under 50% of declared power output.
• The power plant must start from cold in the following time based on instructions from Kyushu Electric
Power:
From operation conditions complete to parallel operation with mains: Within 10 minutes
From parallel operation to full power: Within 30 minutes
• The power plant must control the generator bus voltage or generator reactive power based on instructions
from Kyushu Electric Power.
3. Proposal Requirements 74. Method for Calculating the Bid Price
The bid price must be a flat price calculated by averaging total costs for each year over
the contracted delivery term.
The bidder must estimate costs for each year, including capital costs, operating and
maintenance costs, fuel costs (CIF price-linked portion), and other fuel-related costs (non
CIF price-linked portion). In calculating the bid price, the bidder must allocate variable
and fixed costs so as to approximate actual costs as closely as possible.
An approximation of the portion of grid connection costs to be borne by Kyushu Electric
Power as construction costs (capped burden) should be included in the bid price.
The bidder should adjust the CO2 emission coefficient to match the base emission
coefficient specified in advance by Kyushu Electric Power.
*Base emission coefficient: 0.000551t-CO2/kWh8Escalation applied to operating and maintenance costs and variable costs (fuel costs and
fuel-related costs) should be 0%.
* Escalation correction will be applied to delivery charges separately for operating and
maintenance costs and variable costs after the start of delivery.
The bid price should include costs necessary in order to provide plant power while the
power plant is shut down.
4. Method for Calculating the Bid Price 9Evaluation price
(yen per kWh)
If proposals submitted by two or more bidders receive the same evaluation price, the
proposals will be ranked based on a consideration of the following non-evaluation
factors:
Itemswillbe
consideredinthis
order.
5. Evaluation and Determination of Successful Bidders
(1) Selection of successful bidder candidates
An evaluation price will be calculated for each proposal that satisfies the conditions
outlined in "Proposal Requirements" based on the following formula, and the proposals will
be ranked based on price. (bidders submitting lower prices will receive a higher rank)
= Appraisal price + Construction costs other than connection costs
(to be borne by Kyushu Electric Power)
(1) Proposals for which smoke and other emissions do not exceed allowable levels or conform to existing
agreements with local government
(2) Proposals that will start operation sooner
(3) Proposals for which both the fixed and variable cost components of the appraisal price are less than
the fixed and variable cost components of the maximum price
(4) In the event that proposals cannot be ranked based on items (1) through (3), they will be subject to an
overall decision based on factors such as the reliability of the plan.
Bidders receiving the No. 1 rank will be considered successful bidder candidates.10(2) Determination of Successful Bidders
After the selection of successful bidder candidates, Kyushu Electric Power will submit
a draft evaluation report to the Thermal Power Plant Bidding WG. If the WG concurs
that the evaluation has been carried out in accordance with the request for proposals, the
successful bidder candidates will be chosen as successful bidders.
Kyushu Electric Power will enter into discussions with the successful bidders based on
a standard contract, and once those discussions have been completed, Kyushu Electric
Power will conclude a contract with the successful bidders.
Once this contract has been concluded, Kyushu Electric Power will announce the
following information at an appropriate time:
Name of operator offering wholesale supply
Location (address) at which wholesale supply will be offered
Contracted maximum power (summer power output)
Year in which delivery will begin
Type of fuel
5. Evaluation and Determination of Successful Bidders 11(1) Delivery charges (two components: capacity charge and energy charge)
1. Capacity charge: Total of capital costs and operating and maintenance costs
• Capital costs: Capital costs are treated as fixed costs for the year in which the bid was
submitted.However, the following corrections will be made before starting commercial operation:
• Approximation of construction cost burden (capped burden)
• Civil engineering and construction costs
• Operating and maintenance costs: Adjusted for annual rise in actual prices based on the Compensation
of Employees Index (CEI), Corporate Goods Price Index (CGPI), and Consumer Price Index (CPI)
2. Energy charge: Calculated by multiplying actual energy delivered by the following variable unit prices
• Basic portion unit price: Variable cost unit price (applied to contracted capacity)
• Excess capacity portion unit price: Basic portion unit price 0.50
* Bandwidth: Fluctuations within 3% of contracted capacity are considered part of the basic portion.
* Fuel cost adjustment will apply to the CIF-linked portion of variable costs, while price adjustment will
apply to the non-CIF-linked portion of variable costs.
(2) Treatment of failure to deliver contracted capacity, etc.
1.If the generation output provided by the successful bidder fails to reach the contracted capacity by a margin
greater than the bandwidth, charges for the undelivered capacity will be deducted from the capacity charges.
2.If the annual total contracted capacity following a change notification fails to reach the total before the
change by more than the allowable amount, successful bidders will compensate Kyushu Electric Power at the
end of the fiscal year.
*Allowable amount: Amount of power equivalent to 10% of the value calculated by multiplying the contracted
maximum power output by 8,760 hours
6. Major Contract Terms12(3) Trial operation power
In principle, trial operation power will be purchased at the basic portion power charge
unit price.
(4) Notice operation
Kyushu Electric Power will set the annual generation output (notified annual generation
output) of which successful bidders are notified using the annual available generation
output reported to Kyushu Electric Power by each successful bidder as an upper limit.
As a general rule, by the end of December every year, Kyushu Electric Power will
notify successful bidders of the notified annual generation output for the following year
as well as a notification plan outlining planned notifications and an outlook for the
notified annual generation output for the two-year period starting the year after that.
In order to accommodate power supply and demand conditions on the island and
provide inexpensive electricity, Kyushu Electric Power may set the notified annual
generation output so that it is less than the annual available generation output. In this
case, Kyushu Electric Power will provide an explanation of its reason for doing so and
correct charges to reflect the decrease in planned generating efficiency (correction for
decreased utilization). The specific terms of correction will be determined in
consultation with successful bidders.
6. Major Contract Terms 13(5) Change notifications
Kyushu Electric Power may change the notice provided at the beginning of the year to
modify the notified annual generation output in response to conditions such as conditions of
power supply and demand. Such changes will not exceed the addition or reduction of
generation output equivalent to 10% of the value obtained by multiplying the contracted
maximum power output by 8,760 hours.
(6) Utilization of surplus generation capacity
In the event Kyushu Electric Power sets notified generation output that is less than the
generation output corresponding to the contracted maximum power output, successful
bidders may utilize the resulting difference in generation output as surplus capacity (for
example, by selling the electricity in question to other power producers and sellers).
(7) Contract deposit
Successful bidders must provide a deposit of 5,000円 per kilowatt of contracted maximum
power output as a guarantee of their intention to execute their obligations under the contract.
* Once operation under the contract has begun, Kyushu Electric Power will return the deposit
with interest equivalent to interest paid on bank deposits.
A written guarantee issued by a bank or other equivalent instrument may be substituted for
the contract deposit.
6. Major Contract Terms
(8) Changes in the delivery start date
In the event that start of delivery is delayed, the delaying party must provide written
notice to the other party in advance and pay compensation of 13円.70 per kilowatt of
contracted maximum power output per day of delay.
* In general, delays may not exceed one year.
Exceptions
• If both parties are forced to delay the delivery start date, for example due to force
majeure
• If construction of the power plant is delayed for reasons beyond the control of the
successful bidder, for example due to regional circumstances, and the successful
bidder provides notice within one year and six months of the conclusion of the
contract
• If construction of grid connection facilities is delayed for reasons beyond the control
of Kyushu Electric Power, for example for site-related reasons, and Kyushu Electric
Power provides notice within one year and six months of the conclusion of the
contract (or within one year and six months of agreement by the local parties)146. Major Contract Terms
(9) Dissolution of the contract
If either party is forced to dissolve the contract for unavoidable reasons, it must provide
written notice in advance as well as compensation as outlined below once agreement has
been reached:
1. Dissolution before the start of commercial operation
• If the bidder gives notice, it must provide compensation as follows:
a. Amount equivalent to the contract deposit (if a contract deposit has been received,
Kyushu Electric Power will keep that deposit as a penalty for breach of contract)
b. Actual amount spent on grid connection construction
• If Kyushu Electric Power gives notice, it will provide compensation as follows:
c. Amount equivalent to contract deposit and interest (only if a contract deposit has
been received)
d. Amount equivalent to contract deposit, amount spent by the bidder on construction
of generating equipment, and cost of removing that equipment (if it is to be
removed)
e. If connection equipment (transmission lines) is being built by the bidder, actual
amount spent on that construction and cost of removing those facilities (if they are
to be removed)156. Major Contract Terms
2. Dissolution after the start of commercial operation (in general, notice must be
given 5 years in advance)
• If the bidder gives notice, it must provide compensation as follows:
a. Difference between the delivery price and bid price (price averaged over the contracted
delivery term) from the start of delivery to the time of dissolution
b. Remaining book value of grid connection equipment and cost of removing that equipment
c. Amount equivalent to the difference between the maximum appraisal price and the appraisal
price (both averaged over the contracted delivery term) for the remaining contract term
• If Kyushu Electric Power gives notice, it will provide compensation as follows:
d. Amount equivalent to the capacity charge for the remaining contract term
* If the remaining contract term is greater than five years, the maximum compensation will be for
five years (c and d).
* Compensation need not be provided if dissolution is due to an act of God or other unavoidable
reason (c and d).
* Amounts will be adjusted to reflect value at the time of dissolution (a, c, and d).
(10) Cancelation of the contract
In the event that either party fails markedly to satisfy its obligations under the contract, the other
party may demand execution of those obligations in writing. If the offending party fails to perform
its obligations within 30 days of receiving this demand, the other party may cancel the contract for
reasons attributable to the offending party. In this case, the offending party must provide
compensation as described under "Dissolution of the contract."166. Major Contract Terms
(11) After the end of the contracted delivery term
If either party requests to extend the term no later than 5 years before the final date of the
contracted delivery term, the other party must accede to the contract extension unless there is a
special reason to do otherwise.
* After the end of the contracted delivery term, in addition to selling power to Kyushu Electric
Power, the bidder may sell the contracted power, either in whole or in part, to another
company.176. Major Contract Terms18(1) Meters and other equipment
In general, Kyushu Electric Power will own and install metering equipment and other
communications equipment necessary in order to handle load-dispatch instructions.
Kyushu Electric Power will seek reimbursement from the bidder for its share of
associated construction costs.
(2) Treatment of subsidiaries, joint ventures, and similar entities
Shareholders of subsidiaries, joint ventures, and similar entities will be required to
submit a letter of joint guarantee. Requests to submit a joint guarantee covering
certain shareholders or to use an alternative method of assuring financial soundness
will be subject to discussion.
(3) Bid submission method
Enclose the documentation for each bid in a sealed envelope bearing your company’s
seal and hand-deliver it to Kyushu Electric Power by the deadline.
7. Other