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EDC reaches $32 million settlement damaged turbine at Bac-Man plant

Bacon-Manito geothermal power plant, Philippines (source: First Gen Corp.)
Alexander Richter 15 Aug 2016

EDC reaches a $32 million insurance settlement over an incident and subsequent damage to a turbine at its Bac-Man geothermal power plant.

Energy Development Corp. (EDC) and its wholly owned subsidiary Bac-Man Geothermal Inc. (“BGI”) announce having “entered into a settlement agreement with their Insurers in relation to BGI’s claims in respect of an incident involving Unit 2 at the BacMan I Plant in Palayan Bayan, Manito, Albay of BGI’s Bacon-Manito geothermal power plant, which occurred on February 26, 2013, under three insurance policies written by the Insurers.

In order to return BacMan I Unit 2 to operation in the shortest possible time, EDC and BGI elected to pursue a twin track approach of simultaneously attempting to repair the damaged steam turbine rotor (since it was not clear at that time whether this would be possible) and obtaining a brand new replacement steam turbine rotor. With regards to the repair approach, on June 7, 2013 the decision was taken to ship the original rehabilitated Ansaldo steam turbine rotor that was damaged in the incident to Indonesia and then contracted with PT Sulzer Turbo Services in Indonesia to repair it. As for the replacement approach, on June 28, 2013, the decision was taken to order a new replacement steam turbine rotor from Toshiba as an appropriate long term solution.

The repaired Alstom steam turbine rotor of BacMan I Unit 2 was returned to operation on June 3, 2014, approximately 15 months after the incident. During that 15 month period following the incident, BacMan I Unit 2 was unable to produce any electricity for sale and thus generated no revenue. After BacMan I Unit 2 was returned to service following PT Sulzer’s successful repairs, it operated normally until July 15, 2014, when it was removed from service in order for the new steam turbine rotor from Toshiba to be installed.

On August 29, 2014, EDC, had submitted claims under the insurance policies, for and on behalf of BGI, for an indemnity for all loss, damage and costs incurred by BGI as a result of the incident, including, but not limited to, material damage, business interruption and claims preparation costs.

Under the terms of the settlement agreement the Insurers, namely Pioneer Insurance and Surety Corp., Mapfre Insular Insurance Corporation, Malayan Insurance Company, Inc., QBE Seaboard Insurance Philippines, Inc., New India Assurance Co., Ltd., PNB General Insurers Co., Inc., and UCPB General Insurance Co., Inc., are required to pay BGI the total sum of Php1,525,000,000.00 (Php 1.5 billion or around $32 million) by September 2, 2016 in full and final settlement of the claims submitted by EDC on its behalf.

As previously disclosed, and as stated above, since the time of the incident, the original rehabilitated Ansaldo steam turbine rotor (on which the incident occurred) which was previously installed in Unit 2 of the BacMan I Plant was replaced by a brand new Toshiba steam turbine rotor in September 2014. Similarly, the original rehabilitated Ansaldo steam turbine rotor which was previously installed in Unit 1 of the BacMan I Plant was replaced by a brand new Toshiba steam turbine rotor in February 2015.

As of today’s date, all 3 Units of the BacMan Plant are operational and the facility is producing a gross output of approximately 140MW.

Source: Company release to the Philippine’s Stock Exchange