26th June 2007. The news that Augsburg-based MAN Diesel SE and the Pakistani Atlas Group are to cooperate in the development, design, construction and maintenance of four turnkey, high capacity diesel power plants in northern Pakistan underlines the continuing importance of large diesel and heavy fuel engines in covering the World’s growing demand for electrical power generation (EPG).

Diesel Benefits
First and foremost, the diesel engine is the most fuel efficient combustion engine available -with efficiencies approaching 50%, they offer excellent fuel economy and hence favourable emissions levels. The potential also exists to further increase total energy usage to 90% or more when there is a use for the waste heat from the engines. For example, where the power plant is situated near to an industrial complex, cold store, an office block, residential area, shopping centre, swimming pool or spa, waste heat from the engine coolant, lubricant, charge air coolers and exhaust gases can be used to provide industrial process heat, space heating, district heating , absorption cooling for air conditioning or refrigeration and hot or warm water. Alternatively, the waste heat can be directed to a boiler to create steam to drive a steam turbine which, typically, can augment engine power output by as much as 10%.

The construction time of such power plants can also be extremely rapid – experience shows that, if needed, the first engine of a project can be feeding power to the local grid in a matter of a few months. In addition, by using a liquid fuel stored in a tank farm on site, diesel power plants are not dependent on a fixed infrastructure like natural gas pipelines and hence not subject to possible supply fluctuations. Looking at economic aspects, the residual fuels commonly used in diesel engine power plants are competitively priced compared with distillate fuels and natural gas.

Case Study Choloma
Large, modern power plants based on medium speed diesel and heavy fuel oil (HFO) engines from MAN Diesel, like the four plants with outputs from 120 to 225 MW planned in Pakistan, are already operating in many parts of the World. A prominent example is the Choloma Power Plant in Honduras, the largest ever supplied by the Power Plant Business Unit of MAN Diesel.

PPA Paradigm
In addition to its advanced engine and EPG technology and very short construction time, the Choloma plant is also a paradigm for the highly entrepreneurial forms of project financing possible in economies with a deregulated power generation sector, where power purchase agreements (PPAs) can be operated. In a PPA a government or state organisation contracts an independent power producer (IPP) to supply electricity to the national or regional grid at a contracted  price per kilowatt hour (kWh). On the basis of foreseeable revenue, the IPP can then arrange financing of a suitable power generation facility.

The Honduran government had identified impending power shortages, in part due to low rainfall and hence low water levels at the country’s major hydro-electric facility. To counter the immediate shortfall, to meet longer term demand and to reduce dependence on imported electrical power and the widespread use of smaller, less efficient emergency generator sets, the Honduran national energy agency ENEE concluded a PPA with ENERSA /EMCE (Energie Renovable SA / Empresa de Mantenimento, Construccio Y Electricidad SA), a strong  player in energy and telecommunications in Central America.

Fast Track Project
Meeting the PPA obligations involved the construction of a 230 megawatts electrical (MWe) power station at Choloma in northern Honduras, of which the first 90 MWe was required to go on line within six months of the agreement coming into effect. To emphasise the urgency of the project, the PPA was awarded under an emergency Presidential decree, and was one of the first instances of independent power production in Honduras.

In turn, ENERSA placed a turnkey contract for realisation of its project with a consortium led by MAN Diesel. To guarantee the installation of generating capacity at the rapid rate needed, ENERSA and MAN B&W Diesel devised a fast-track solution based on 13 generator sets powered by MAN Diesel’s 18 cylinder, vee configuration type 18V 48/60 residual fuel engines. With an electrical rating of 17,78 MW at 514 rpm each, the generator sets were installed in two phases. The first phase comprised five generator sets with a total electrical output of 89 MWe and the second phase a further 8 units with a total output of 142 MWe.

Interim Financing
As part of the fast track approach, and emphasising MAN Diesel’s long experience and expertise in all aspects of turnkey projects, ENERSA and MAN Diesel cooperated in an interim financing arrangement which ensured that the power plant went on line in time. On the one hand electrical power was urgently required in Honduras while on the other hand arranging financing for the 230 MWe project with CABEI, (Central American Bank for Economic Integration) was expected to take up a great part of, or longer than,  the six months lead time available to ENERSA under the PPA. Thus, on the basis of the guaranteed income from the Honduran government under the PPA, a bridging loan was arranged which allowed work on site to begin promptly.

The temporary loan covered 50% of the project's 90MWe first phase until long-term financing of the complete project was in place, with remaining 50% of the cost financed by ENERSA out of its own resources. The bridging finance was covered by a guarantee from Germany's export credit agency Euler-Hermes, with whom MAN Diesel cooperates on a regular basis in its extensive export business. By the completion of the first phase, long term finance for the complete project (to which ENERSA contributed a further 24% for the second phase) had become available and  the bridging loan was reimbursed.

Consortia with Reliable Partners
To execute the project MAN Diesel recruited reliable, proven consortium partners and subcontractors. Emphasising Central American content, the complete civil works including the construction of buildings and mechanical and electrical erection was covered by the PRINEL Proyectos de Ingeneria Electromecanica S.A, El Salvador civil, mechanical/electrical engineering contractor, while the tank farm for the residual fuel supplies were supplied and installed by the Chicago Bridge & Iron Company.

The electrical portion of the contract (medium voltage, low voltage, control and monitoring systems)  was handled by German specialist Alfred Kuhse of Winsen/Luhe, near Hamburg. Generators for the MAN Diesel gen-sets and step-up transformers were supplied by ABB and heat exchangers for the engine and generator cooling systems came from Finncoil. Separators for the residual fuel oil and lubricant conditioning were supplied by Alfa Laval.

ENERSA Growth, Plant Expansion
With the commissioning of the Choloma project, ENERSA became the largest private supplier of electrical power to the Honduran Government. Moreover, emphasizing how readily such a power plant can be extended, the group has installed a 14th generator set powered by an 18V 48/60 engine. The additional generator is operated on a “merchant” basis outside the PPA, and covers demand peaks with the aim of further alleviating Honduras' electrical power shortages - as well as increasing ENERSA’s revenues from the plant.

Finally, the operator is currently further increasing the efficiency of the Choloma power plant by installing a combined cycle system in which a steam generator exploits the exhaust heat of the engines to power an 8 MW steam turbine.