Gardenia Bakeries Case Study Essay

This is a strategic marketing plan for Gardenia Bakeries (KL) Sdn Bhd to sell their product â€Å"Auntie Rosie’s Natural Pandan Kaya† to the country â€Å"Australia† in the state of â€Å"Sydney†. 2.0 Overview of Gardenia Bakeries Sdn Bhd 2.1 General Information of Gardenia Bakeries (KL) Sdn Bhd In 1969, an American named Horatio Sye Slocumm was sent by International Executive Service Corporation (IESC) to East Malaysia to start a bakery. Gardenia was then born. Gardenia Bakeries (KL) Sdn Bhd rolled the first loaf of bread off its line in 1986. Within four short years, it became the bread market leader with an astounding 99 percent brand recall rate and 80 percent top-of-mind recall. Gardenia’s range of products grew and evolved through the years, becoming better and better with each step. Leveraging on its brand strength, Gardenia now produces a variety of baked products to satisfy consumers’ demands. 2.2 Products of Gardenia Bakeries (KL) Sdn Bhd There are 11 types of product that Gardenia Bakeries produce, 10 types of it are all breads and the specific one is the coconut jam called â€Å"Auntie Rosie’s Natural Pandan Kaya†. We are only focusing on the product â€Å"Auntie Rosie’s Natural Pandan Kaya† which is very popular in Malaysia. â€Å"Auntie Rosie’s Natural Pandan Kaya† is a coconut jam made from coconut milk, egg, caramel, pandan leaf extract, food conditioner, salt and sweetened with sugar. 2.3 Pricing The pricing strategy for Gardenia Bakeries (KL) Sdn Bhd that is used upon â€Å"Auntie Rosie’s Natural Pandan Kaya† is the Market oriented pricing strategy. Market oriented pricing strategy is setting a price based upon analysis and research compiled from the target market. This means that marketers will set prices depending on the results from the research. The price that Gardenia set for â€Å"Auntie Rosie’s Natural Pandan Kaya† is RM2.50, but there is also competitive rival that throw prices such is RM1.80 and RM2.00. Gardenia would stay firm with this price due to its quality and well known brand over all these years. 2.4 Place/Distribution Gardenia Bakeries (KL) Sdn Bhd doesn’t have its own outlets but it depend on grocery stall, hypermarket and mini markets to distribute its products. Gardenia Bakeries (KL) Sdn Bhd provides their product to places like big hypermarkets and mini markets along the street. As long there is stalls or outlet selling Gardenia bread products, there are sure â€Å"Auntie Rosie’s Natural Pandan Kaya† for sale. 2.5 Promotion Gardenia Bakeries (KL) Sdn Bhd does not do any promotions. 3.0 Overview of Sydney, Australia 3.1 General Information about Sydney, Australia Sydney is the state capital of New South Wales and the most populous city in Australia. It is on Australia’s south-east coast, on the Tasman Sea. In June 2010 the greater metropolitan area had an approximate population of 4.6 million people. Inhabitants of Sydney are called Sydneysiders, comprising a cosmopolitan and international population. 3.2 State of the economy The economy of Australia is one of the largest capitalist economies in the world with a GDP of US$1.57 trillion. Australia’s total wealth is 6.4 trillion dollars. In 2011, it was the 13th largest national economy by nominal GDP and the 17th-largest measured by â€Å"PPP adjusted GDP†, about 1.7% of the world economy. Australia is the 19th-largest importer and 19th-largest exporter. Economy of Australia is quarterly forecasted by the Reserve Bank of Australia. Australian National University in Canberra also supplements Probabilistic interest rate setting project for the Australian Economy, which is compiled by Shadow board members from the ANU academic staff. 3.3 Reasons for selection Australia is one of the richest countries to fulfill purchasing needs. I would target Sydney is because it is one of the largest city in Australia. In Sydney, there is a big population of people there and it includes a lot of overseas student from Malaysia too. The main reason I target Sydney Australia is because the coconut jam would be easier to spread and sell for a head start because there is a lot of Malaysian and Singapore students studying there. 4.0 Pestel Analysis Pestle Analysis of Australia Factors Facts Findings Political Australia is a political stable country. Legally is not a problem to sell â€Å"Auntie Rosie’s Natural Pandan Kaya† there. Selling â€Å"Auntie Rosie’s Natural Pandan Kaya† is not a problem. However Gardenia Bakeries (KL) Sdn Bhd must expect competition in this industry Economic Australia’s economy is doing very well. GDP growth is 3.4% and the per capital income is one of the highest in the world. The economy is generating opportunity for Gardenia Bakeries (KL) Sdn Bhd to sell â€Å"Auntie Rosie’s Natural Pandan Kaya† Social & Culture New Entrants/ Potential Competitors: It is predicted to have more competitions entering into the market 5 Consumer Bargaining Power 6.0 Entry Strategy The proposed entry strategy for Gardenia Bakeries (KL) Sdn Bhd to enter Sydney, Australia should be â€Å"Indirect Exporting† because Gardenia Bakeries (KL) Sdn Bhd could use a middleman to carry out the responsibility for the selling job to sell it to all the hypermarket and mini market. There are a lot of advantages for doing so. First is the risk would be very low for Gardenia Bakeries (KL) Sdn Bhd and it would be safe to let the local middleman get contacts and to apply all the selling. Secondly because that Gardenia Bakeries (KL) Sdn Bhd is a small firm which limits their export business and it focus more on its own country Malaysia, it could be an advantage for them to expose themselves to the Australian. 7.0 Marketing Mix Proposal 7.1 Product The product’s name â€Å"Auntie Rosie’s Natural Pandan Kaya† should be changed due to the culture there don’t understand what is â€Å"Pandan† and â€Å"Kaya† and I find â€Å"Auntie Rosie† is nobody therefore it should be change. It should be changed to â€Å"Gardenia’s Coconut Jam† which it will suit the environment of Australia directly. 7.2 Pricing The price strategy would be using the Market Penetration Strategy which is to sell it cheaper in the first three to five months and then raise the price to the normal price. I would suggest that the price that we should allocate in Australia is $2.0 Aussie Dollars for each coconut jam and after that it should be raised back to $2.5 Aussie Dollars. 7.3 Place/Distribution We would be having a distributor as middle men to sell to all the hypermarkets, mini markets and even groceries store. We are targeting Sydney as our targeted location to start with first. 7.4 Promotion I would want to sell it with a promotion just for the first month. By purchasing one â€Å"Gardenia’s Coconut Jam† we would free one more for the consumers. So it is a buy one free one promotion. This promotion will only valid for one month. 8.0 Conclusion We look forward to help you implement the plan.

A Study of the Conversion Options for the Bataan

T. S. undertook a study of the options for converting the Bataan Nuclear Power Station to fossil fuel (coal or natural gas) combustion. One aim of the study was to find another market for Philippine and Australian coal or natural gas (LNG). The essential question regarding the Bataan Reactor is: how to obtain a financial return from a very expensive power station that * has never produced electricity; * is costing the Philippinec State a sizeable sum in interest; and * has environmental, safety and social concerns over its use as a nuclear power station. The retrofitting of the turbine generator with a fossil fuel fired steam raising system was suggested as a means of utilising part of the plant, and obtaining some return for past and future expenditure. The report/proposal examined some options for fossil fuel firing, and compared those options with nuclear operation. Background The Bataan Nuclear Power Plant was completed in 1984, whilst construction commenced in 1976. It is a Westinghouse light water reactor, that uses pressurised water as it heat exchange medium between the reactor and the steam generators. Its design thermal capacity is 1876MW(t), whilst its rated power output is 621MW(e)1. The technology that is incorporated into the plant is essentially early seventies, but has been modified to incorporate more recent safety devices, such as those recommended by the US Nuclear Regulatory Commission, after evaluation of the Three Mile Island incident. The plant, which was in the process of commissioning at the time of the EDSA revolution, has not been fired, although nuclear fuel was delivered to it storage facilities. Maintenance has continued, with the integrity of the plant and ancillaries being ensured. Conclusion of Study The Philippine Government has previously stated that the Philippines will have nuclear power, but that power will come from new plant and not the Bataan reactor. President Ramos announced on the 8th October 1994 that the Reactor would be converted to a 1000MW combined cycle gas plant. (Although an announcement for a specific conversion scheme has been made, it is still considered that there is time for other options to be considered. ) We found that conversion is technically possible, but economically unwise. New and dedicated coal or natural gas fired power plants would give much higher efficiencies, and thus would give the Philippines much better value per peso spent on fuel consumed. The M. E. T. T. S. ‘s study concluded that the only way of obtaining a reasonable return from the Bataan ‘machine’ is to use it as a nuclear power plant. Our report specifically came to the following conclusions: * That the use of the present ‘nuclear’ turbine/generator in a fossil fired system would be highly wasteful of energy (fuel), A new pulverised coal power station and/or combined cycle natural gas power stations at other site(s), would be a better investment in terms of fuel efficiency and levellised power costs, * The Bataan site is inappropriate for coal fired plant, due to environmental constraints and materials (coal and ash) handling problems, * More assessable sites could be found for co mbined cycle natural gas fired plants around Manila Bay, and Batangas, * The Bataan reactor has been maintained in a good condition since mothballing, and The reactor is of basically sound design and construction, and could with modest expenditure become one of the most modern and safest light water reactors in East Asia. To fire the plant as a nuclear facility, the sea water intakes to the condensers would need to be cleaned (with some equipment being replaced), some of the reactor monitoring systems would need to be further upgraded, whilst the second power transmission system would need to be reconstructed. Staff would need to be retrained and re-licenced. A description of the study is presented in the attached article by Clarke, Ebeling and Cordero. The article was presenred at The First Philippine International Conference on Energy Efficiency and Demand Side Management, Manila, January 1995. Options for the Conversion of the Bataan Nuclear Power Plant to Fossil Fuel Firing Dr. Michael C. Clarke, Director, M. E. T. T. S. Pty. Ltd. , Sydney, Australia Mr. Douglas R. Ebeling, Associate, M. E. T. T. S. Pty. Ltd. , Sydney, Australia Eng. Donato L. Cordero, Engineering Manager, Bataan Nuclear Power Plant The following Executive Summary of a major report formed the basis of a paper presented at the 1st Philippine Conference on Energy Efficiency and Demand-side Management, Manila, January 1995. ) Capital costs and power generation costs are summarised in Table 1, for one coal conversion option, and the conversion of the plant to natural gas fired, combined cycle operation. For comparison purposes figures are also presented for the refurbishm ent, commissioning and running the plant as a nuclear power station. Electricity costs from nuclear operation are considerably cheaper than for ither the two conversion options. If power costs was the only criteria for operating the plant then nuclear firing would clearly win. Both coal and natural gas conversions will have environmental consequences for the region. By the installation of best available technology and the application of best available practice, the impact will be minimised. The cost of technology and practice however will increase the cost of electricity produced by the plant. Table 1. SUMMARY TABLE, FOSSIL FUEL CONVERSION OPTIONS, BNPP – Revision, March 1995 CONVERSION TO COALCONVERSION TO N. GASNUCLEAR COMPARISON POWER OUTPUT MW(e)8001700 620 ENERGY OUTPUT GWH5,600 (With FGD – 5400)12,2004,613 CAPITAL COST $USm750 (With FGD – 1070)1385380 (UPGRADE) Electricity Cost ? US/kWH4. 82 (With FGD – 5. 94) 5. 24, 4. 34 (FP $230/170)3. 50 Electricity Cost P/kWH1. 21 (With FGD – 1. 49)1. 31, 1. 09 (FP $230/170)0. 88 CAP. COST/POWER OUT0. 94 (With FGD – 1. 34)0. 810. 61 CONSTRUCTION TIME42 MONTHS4218. 24 FGD Flue Gas Desulphurisation (+ Selective Catalytic Reduction) FP Fuel Price, Natural Gas ($US230 /tonne for LNG, $US170 /tonne piped gas) – (Coal $US 55 / tonne) Notes on Table 1 For comparison purposes, the two fossil fuel conversion options and the nuclear comparison have each had the electricity cost based on a pay-back period of twenty years. In each case (for the table) it has been assumed that the full capital cost has been borrowed. When financing packages are being considered, different pay-back periods are likely to be used. The periods are likely to increase with increasing debt. With the natural gas conversion option, an equity contribution would probably be included, since a BOT financing scheme may be used, that ties gas production, reticulation and use into one commercial package. The electricity costs for coal and natural gas conversion are based on a reasonably optimistic scenarios, where no excessive ancillary capital works are charged against the plant. If environmental or other factors require such works, then increase in the electricity cost would occur. It is further considered that the plant required for conversion would be sourced from low cost countries; China, India, Australia, the Philippines etc, as far as possible. The costings for conversion are further premised on the use of the site allocated for construction of PNPP 2, in that it is supplied at no cost, and is geologically stable. If the time required for the construction and commissioning is crucial, then the upgrading of the plant as a nuclear station is clearly the preferred choice. Further, the financial analyses indicate that the nuclear firing of the plant offers the cheapest electricity. Given that the nuclear fuel price is likely to remain stable over the foreseeable future (as against likely rises for coal and natural gas), the nuclear upgrading# and operation offers greater financial certainty to investors. # M. E. T. T. S. ‘s estimate for upgrading the nuclear plant to 1997/8 standards is $US380m. It is backed by further external assessment, and includes new safety features. $US300m is the cost of a basic upgrading based on calculations carried out by the National Power Corporation. SUMMARY – COAL FIRING The conversion of the PNPP I plant to coal firing has some advantages. Coal technology is well proven, and only a small variation in the normal use of that technology is required to convert the plant. The power station will have a capacity similar to the design capacity for the nuclear plant, and will not be the largest plant in the new echelon of Luzon’s power facilities. The plant of 800 MW(e) capacity will be relatively inexpensive at a capital cost of $US505m – without Flue Gas Desulphurisation, Selective Catalytic Reduction, or excessive expenditure on coal or ash handling and ignoring the previous expenditure on the nuclear system. A construction and commissioning period of 42 months is envisaged. The coal option however offers unique co-economic opportunities. The ash waste product would be valuable if used in ancillary industry. By using the Lahar produced by the Pinatubo eruption as an aggregate, with the ash, iron oxide and cement, valuable building materials could be produced. The disadvantages include designing and fitting an environmentally acceptable coal fired power station into the Bataan region. The materials handling alone will create many environmental, management and operational difficulties. The infrastructure requirements for materials handling will also raise engineering and environmental questions that will need to be solved before construction begins. Other environmental questions concerning emission reduction and control must also be answered before work can commence. Another major disadvantage is the requirement for premium fuel, that is expensive in 1994, and in all probability will become relatively more expensive as the demand for ‘clean’ coal increases in the future. SUMMARY – NATURAL GAS FIRING (COMBINED CYCLE, GAS TURBINE) Natural gas provides the cleanest option for the conversion of the Bataan power station to fossil fuel firing. It further offers the most flexible power output to the grid. Options exist for running a part (or whole) of the plant as a single cycle peak load provider, or running the whole plant as a base load facility. The environmental hazard that would be created by such a plant is low compared to coal. Thermal pollution to the sea would be greater than the nuclear option, in that if a 1700MW(e) plant was built with 46% efficiency, the waste heat would be 2000MW(t). This heat would be partially dissipated into the atmosphere (250MW) as against to the sea (1750MW). The additional heat discharge to the sea would be about 500MW(t). NOx emissions can be successfully controlled by modern technology. Steam or water injection, ammonia addition or innovative combustion designs will produce acceptable (but not zero) NOx emissions. At 1700MW(e), the power station would be the largest in the Philippines, and would certainly require a review of the Luzon energy plan. The total consumption of natural gas over a twenty five year period would be 2. 5 TCF; over half the entire Philippine projected resource from Palawan. Over a billion dollars in capital would be needed to build the plant, plus an additional substantial sum to supply the fuel; either as LNG or pipeline gas. The security of a large gas holding area would need to be addressed. Such a holding area and power station would make a relatively easy target when compared to a coal fired plant with coal yards or nuclear facilities. The installation of the gas turbines could be achieved in eighteen months, but the construction of the steam generators and carrying out modifications to the existing plant would take a further twenty four months. From the preliminary financial analysis, the construction of a new combined cycle power station makes better financial sense. A NUCLEAR COMPARISON Under the four headings (Technology, The Environment, Social and Political Concerns, and Economy) that were used to examine the coal-conversion option, a brief summary has been made of the nuclear option for comparison purposes. Technology Light water reactors are a very common type of nuclear reactor. They have good safety records, and most have high capacity factors. There development has been continuous, with technology now being available from Japan, Korea, France, the United Kingdom as well as the United States. They are used in close proximity to the Philippines (Japan, Korea and Taiwan) and have been armarked for use in Indonesia and Malaysia. The Bataan unit is 1970/80’s technology. It is however essentially the same as new units, and could be readily upgraded to 1990’s standards. The Environment The reactor will produce thermal pollution (waste heat) that will be disposed of, off Napot Point to the South China Sea. An environmental impact assessment cleared the plant for its designed heat disposal, and found that localised heating of the sea would not be excessive, given the strong currents that would ensure dispersion of the hot water. No other polluting emissions could be expected from the nuclear power plant. (Accidental emissions of radioactive material, are most unlikely. Once the plant was upgraded to 1997 standards, one accident in a million years could be expected. ) Social and Political Concerns The perceived problems at the Bataan power plant are its greatest liability. These problems include seismic instability, claims of faulty workmanship and the lack of experience of the operators. Many geological and seismic inspections have been carried out on the site, with the result being that no significant risk is apparent. To convince Philippine Society of the seismic safety of the plant, an educational programme would need to be carried out that emphasised the sites stability, and the high seismic safety factor of the plant (0. 4g). Part of the process of refurbishment and upgrading, would be quality assurance on all systems and components of the plant. Modern QA techniques would need to be used to provide the certainty that all significant parts of the plant meet the highest safety and operational standards. Initially foreign experts would be needed to run the plant. The retraining of Philippine staff would take considerable time and money, with the retrained staff spending a number of years assisting in operating similar plants in neighbouring countries. Economics By comparison with the costs of conversion to coal or natural gas, the refurbishment and upgrading of the plant for nuclear operation would be significantly cheaper. A maximum price of $US300m (including staff training) is a fair limit, compared to fossil fuel conversion alternatives. The nuclear option should have the shortest lag time in terms of upgrading and commissioning. If foreign staff were used to initially man the plant then a period of eighteen to twenty months would be needed for full operation. This relatively short period, may be valuable in that the some of the expensive, old or temporary oil fired power plant could be retired early. Fuel costs, plus operation and management costs for LWRs should cost no more than ? US 2/kWH (0. 54 Centavos/kWH). If the interest on the $US 300m was 12%, with a pay-back period of twenty years for the capital, then a further 0. 9? US/kWH would be added to the power cost. The total power cost would be 2. 9? US/kWH (0. 78 Centavos/kWH). If consideration was given to running the Bataan power station as a nuclear plant, then the environmental and economic benefits (as well as safety) should be emphasised, to overcome social and political opposition. THE PHILIPPINES AND THE NUCLEAR CYCLE The Philippines would be an importer of nuclear fuel and an exporter of spent fuel. The fuel that the reactor would use would be lightly enriched. As the uranium 235 is consumed, some plutonium is formed, part of which is also used up as fuel. The spent fuel rods contain a depleted amount of uranium 235, a little plutonium but mostly non-fissile uranium 238. These fuel rods can be reused in heavy water type reactors (CANDU) that are running in Japan, Korea and Taiwan, as primary fuel. All the wastes would be processed by those countries, whilst the Philippines would receive a financial return for its used nuclear fuel. This is a win-win situation. The sale of the used fuel rods could bring the net production cost of electricity (fuel plus operations and management) to under ? US 1. 5/kWH. PLANT SECURITY AND THE NUCLEAR OPTION Unfortunately there is an ongoing insurgency situation in the Philippines. The insurgency problems are no longer major, and in all probability will recede. All major plant however does need a security system. The Bataan plant was constructed with good external, perimeter and internal security systems. There are commonly perceived notions that Nuclear Plants are susceptible to terrorist attack. These notions are based on a lack of understanding of the compact nature of nuclear plants, and the presence of very considerable containment structures for the reactor and fuel stores – especially American designed LWRs. The plant is easy to guard, and would be able to resist attack with light weapons, including rocket propelled grenades etc. The damage from such an attack would be limited to the knocking out of ancillary plant and structures, including the transformer yard, the auxiliary fuel tanks and administration building. Notes 1. The above power cost figures are based on 1997 projected fuel prices, 12% interest, 85% availability, and 20 years amortisation.. The price of coal and natural gas are considered to be more liable for major increases, than nuclear fuel. The Asian demand for both coal and gas is expected to outstrip supply in the coming decade. 2. The estimated construction time includes planning and design, equipment construction, site modification, plant erection and commissioning, and staff training (coal and natural gas conversion). If major ancillary works are required (eg. major wharves, ash and coal pipelines, shipping channels etc), then both an increase in the construction time and costs could be expected. A Study of the Conversion Options for the Bataan T. S. undertook a study of the options for converting the Bataan Nuclear Power Station to fossil fuel (coal or natural gas) combustion. One aim of the study was to find another market for Philippine and Australian coal or natural gas (LNG). The essential question regarding the Bataan Reactor is: how to obtain a financial return from a very expensive power station that * has never produced electricity; * is costing the Philippinec State a sizeable sum in interest; and * has environmental, safety and social concerns over its use as a nuclear power station. The retrofitting of the turbine generator with a fossil fuel fired steam raising system was suggested as a means of utilising part of the plant, and obtaining some return for past and future expenditure. The report/proposal examined some options for fossil fuel firing, and compared those options with nuclear operation. Background The Bataan Nuclear Power Plant was completed in 1984, whilst construction commenced in 1976. It is a Westinghouse light water reactor, that uses pressurised water as it heat exchange medium between the reactor and the steam generators. Its design thermal capacity is 1876MW(t), whilst its rated power output is 621MW(e)1. The technology that is incorporated into the plant is essentially early seventies, but has been modified to incorporate more recent safety devices, such as those recommended by the US Nuclear Regulatory Commission, after evaluation of the Three Mile Island incident. The plant, which was in the process of commissioning at the time of the EDSA revolution, has not been fired, although nuclear fuel was delivered to it storage facilities. Maintenance has continued, with the integrity of the plant and ancillaries being ensured. Conclusion of Study The Philippine Government has previously stated that the Philippines will have nuclear power, but that power will come from new plant and not the Bataan reactor. President Ramos announced on the 8th October 1994 that the Reactor would be converted to a 1000MW combined cycle gas plant. (Although an announcement for a specific conversion scheme has been made, it is still considered that there is time for other options to be considered. ) We found that conversion is technically possible, but economically unwise. New and dedicated coal or natural gas fired power plants would give much higher efficiencies, and thus would give the Philippines much better value per peso spent on fuel consumed. The M. E. T. T. S. ‘s study concluded that the only way of obtaining a reasonable return from the Bataan ‘machine’ is to use it as a nuclear power plant. Our report specifically came to the following conclusions: * That the use of the present ‘nuclear’ turbine/generator in a fossil fired system would be highly wasteful of energy (fuel), A new pulverised coal power station and/or combined cycle natural gas power stations at other site(s), would be a better investment in terms of fuel efficiency and levellised power costs, * The Bataan site is inappropriate for coal fired plant, due to environmental constraints and materials (coal and ash) handling problems, * More assessable sites could be found for co mbined cycle natural gas fired plants around Manila Bay, and Batangas, * The Bataan reactor has been maintained in a good condition since mothballing, and The reactor is of basically sound design and construction, and could with modest expenditure become one of the most modern and safest light water reactors in East Asia. To fire the plant as a nuclear facility, the sea water intakes to the condensers would need to be cleaned (with some equipment being replaced), some of the reactor monitoring systems would need to be further upgraded, whilst the second power transmission system would need to be reconstructed. Staff would need to be retrained and re-licenced. A description of the study is presented in the attached article by Clarke, Ebeling and Cordero. The article was presenred at The First Philippine International Conference on Energy Efficiency and Demand Side Management, Manila, January 1995. Options for the Conversion of the Bataan Nuclear Power Plant to Fossil Fuel Firing Dr. Michael C. Clarke, Director, M. E. T. T. S. Pty. Ltd. , Sydney, Australia Mr. Douglas R. Ebeling, Associate, M. E. T. T. S. Pty. Ltd. , Sydney, Australia Eng. Donato L. Cordero, Engineering Manager, Bataan Nuclear Power Plant The following Executive Summary of a major report formed the basis of a paper presented at the 1st Philippine Conference on Energy Efficiency and Demand-side Management, Manila, January 1995. ) Capital costs and power generation costs are summarised in Table 1, for one coal conversion option, and the conversion of the plant to natural gas fired, combined cycle operation. For comparison purposes figures are also presented for the refurbishm ent, commissioning and running the plant as a nuclear power station. Electricity costs from nuclear operation are considerably cheaper than for ither the two conversion options. If power costs was the only criteria for operating the plant then nuclear firing would clearly win. Both coal and natural gas conversions will have environmental consequences for the region. By the installation of best available technology and the application of best available practice, the impact will be minimised. The cost of technology and practice however will increase the cost of electricity produced by the plant. Table 1. SUMMARY TABLE, FOSSIL FUEL CONVERSION OPTIONS, BNPP – Revision, March 1995 CONVERSION TO COALCONVERSION TO N. GASNUCLEAR COMPARISON POWER OUTPUT MW(e)8001700 620 ENERGY OUTPUT GWH5,600 (With FGD – 5400)12,2004,613 CAPITAL COST $USm750 (With FGD – 1070)1385380 (UPGRADE) Electricity Cost ? US/kWH4. 82 (With FGD – 5. 94) 5. 24, 4. 34 (FP $230/170)3. 50 Electricity Cost P/kWH1. 21 (With FGD – 1. 49)1. 31, 1. 09 (FP $230/170)0. 88 CAP. COST/POWER OUT0. 94 (With FGD – 1. 34)0. 810. 61 CONSTRUCTION TIME42 MONTHS4218. 24 FGD Flue Gas Desulphurisation (+ Selective Catalytic Reduction) FP Fuel Price, Natural Gas ($US230 /tonne for LNG, $US170 /tonne piped gas) – (Coal $US 55 / tonne) Notes on Table 1 For comparison purposes, the two fossil fuel conversion options and the nuclear comparison have each had the electricity cost based on a pay-back period of twenty years. In each case (for the table) it has been assumed that the full capital cost has been borrowed. When financing packages are being considered, different pay-back periods are likely to be used. The periods are likely to increase with increasing debt. With the natural gas conversion option, an equity contribution would probably be included, since a BOT financing scheme may be used, that ties gas production, reticulation and use into one commercial package. The electricity costs for coal and natural gas conversion are based on a reasonably optimistic scenarios, where no excessive ancillary capital works are charged against the plant. If environmental or other factors require such works, then increase in the electricity cost would occur. It is further considered that the plant required for conversion would be sourced from low cost countries; China, India, Australia, the Philippines etc, as far as possible. The costings for conversion are further premised on the use of the site allocated for construction of PNPP 2, in that it is supplied at no cost, and is geologically stable. If the time required for the construction and commissioning is crucial, then the upgrading of the plant as a nuclear station is clearly the preferred choice. Further, the financial analyses indicate that the nuclear firing of the plant offers the cheapest electricity. Given that the nuclear fuel price is likely to remain stable over the foreseeable future (as against likely rises for coal and natural gas), the nuclear upgrading# and operation offers greater financial certainty to investors. # M. E. T. T. S. ‘s estimate for upgrading the nuclear plant to 1997/8 standards is $US380m. It is backed by further external assessment, and includes new safety features. $US300m is the cost of a basic upgrading based on calculations carried out by the National Power Corporation. SUMMARY – COAL FIRING The conversion of the PNPP I plant to coal firing has some advantages. Coal technology is well proven, and only a small variation in the normal use of that technology is required to convert the plant. The power station will have a capacity similar to the design capacity for the nuclear plant, and will not be the largest plant in the new echelon of Luzon’s power facilities. The plant of 800 MW(e) capacity will be relatively inexpensive at a capital cost of $US505m – without Flue Gas Desulphurisation, Selective Catalytic Reduction, or excessive expenditure on coal or ash handling and ignoring the previous expenditure on the nuclear system. A construction and commissioning period of 42 months is envisaged. The coal option however offers unique co-economic opportunities. The ash waste product would be valuable if used in ancillary industry. By using the Lahar produced by the Pinatubo eruption as an aggregate, with the ash, iron oxide and cement, valuable building materials could be produced. The disadvantages include designing and fitting an environmentally acceptable coal fired power station into the Bataan region. The materials handling alone will create many environmental, management and operational difficulties. The infrastructure requirements for materials handling will also raise engineering and environmental questions that will need to be solved before construction begins. Other environmental questions concerning emission reduction and control must also be answered before work can commence. Another major disadvantage is the requirement for premium fuel, that is expensive in 1994, and in all probability will become relatively more expensive as the demand for ‘clean’ coal increases in the future. SUMMARY – NATURAL GAS FIRING (COMBINED CYCLE, GAS TURBINE) Natural gas provides the cleanest option for the conversion of the Bataan power station to fossil fuel firing. It further offers the most flexible power output to the grid. Options exist for running a part (or whole) of the plant as a single cycle peak load provider, or running the whole plant as a base load facility. The environmental hazard that would be created by such a plant is low compared to coal. Thermal pollution to the sea would be greater than the nuclear option, in that if a 1700MW(e) plant was built with 46% efficiency, the waste heat would be 2000MW(t). This heat would be partially dissipated into the atmosphere (250MW) as against to the sea (1750MW). The additional heat discharge to the sea would be about 500MW(t). NOx emissions can be successfully controlled by modern technology. Steam or water injection, ammonia addition or innovative combustion designs will produce acceptable (but not zero) NOx emissions. At 1700MW(e), the power station would be the largest in the Philippines, and would certainly require a review of the Luzon energy plan. The total consumption of natural gas over a twenty five year period would be 2. 5 TCF; over half the entire Philippine projected resource from Palawan. Over a billion dollars in capital would be needed to build the plant, plus an additional substantial sum to supply the fuel; either as LNG or pipeline gas. The security of a large gas holding area would need to be addressed. Such a holding area and power station would make a relatively easy target when compared to a coal fired plant with coal yards or nuclear facilities. The installation of the gas turbines could be achieved in eighteen months, but the construction of the steam generators and carrying out modifications to the existing plant would take a further twenty four months. From the preliminary financial analysis, the construction of a new combined cycle power station makes better financial sense. A NUCLEAR COMPARISON Under the four headings (Technology, The Environment, Social and Political Concerns, and Economy) that were used to examine the coal-conversion option, a brief summary has been made of the nuclear option for comparison purposes. Technology Light water reactors are a very common type of nuclear reactor. They have good safety records, and most have high capacity factors. There development has been continuous, with technology now being available from Japan, Korea, France, the United Kingdom as well as the United States. They are used in close proximity to the Philippines (Japan, Korea and Taiwan) and have been armarked for use in Indonesia and Malaysia. The Bataan unit is 1970/80’s technology. It is however essentially the same as new units, and could be readily upgraded to 1990’s standards. The Environment The reactor will produce thermal pollution (waste heat) that will be disposed of, off Napot Point to the South China Sea. An environmental impact assessment cleared the plant for its designed heat disposal, and found that localised heating of the sea would not be excessive, given the strong currents that would ensure dispersion of the hot water. No other polluting emissions could be expected from the nuclear power plant. (Accidental emissions of radioactive material, are most unlikely. Once the plant was upgraded to 1997 standards, one accident in a million years could be expected. ) Social and Political Concerns The perceived problems at the Bataan power plant are its greatest liability. These problems include seismic instability, claims of faulty workmanship and the lack of experience of the operators. Many geological and seismic inspections have been carried out on the site, with the result being that no significant risk is apparent. To convince Philippine Society of the seismic safety of the plant, an educational programme would need to be carried out that emphasised the sites stability, and the high seismic safety factor of the plant (0. 4g). Part of the process of refurbishment and upgrading, would be quality assurance on all systems and components of the plant. Modern QA techniques would need to be used to provide the certainty that all significant parts of the plant meet the highest safety and operational standards. Initially foreign experts would be needed to run the plant. The retraining of Philippine staff would take considerable time and money, with the retrained staff spending a number of years assisting in operating similar plants in neighbouring countries. Economics By comparison with the costs of conversion to coal or natural gas, the refurbishment and upgrading of the plant for nuclear operation would be significantly cheaper. A maximum price of $US300m (including staff training) is a fair limit, compared to fossil fuel conversion alternatives. The nuclear option should have the shortest lag time in terms of upgrading and commissioning. If foreign staff were used to initially man the plant then a period of eighteen to twenty months would be needed for full operation. This relatively short period, may be valuable in that the some of the expensive, old or temporary oil fired power plant could be retired early. Fuel costs, plus operation and management costs for LWRs should cost no more than ? US 2/kWH (0. 54 Centavos/kWH). If the interest on the $US 300m was 12%, with a pay-back period of twenty years for the capital, then a further 0. 9? US/kWH would be added to the power cost. The total power cost would be 2. 9? US/kWH (0. 78 Centavos/kWH). If consideration was given to running the Bataan power station as a nuclear plant, then the environmental and economic benefits (as well as safety) should be emphasised, to overcome social and political opposition. THE PHILIPPINES AND THE NUCLEAR CYCLE The Philippines would be an importer of nuclear fuel and an exporter of spent fuel. The fuel that the reactor would use would be lightly enriched. As the uranium 235 is consumed, some plutonium is formed, part of which is also used up as fuel. The spent fuel rods contain a depleted amount of uranium 235, a little plutonium but mostly non-fissile uranium 238. These fuel rods can be reused in heavy water type reactors (CANDU) that are running in Japan, Korea and Taiwan, as primary fuel. All the wastes would be processed by those countries, whilst the Philippines would receive a financial return for its used nuclear fuel. This is a win-win situation. The sale of the used fuel rods could bring the net production cost of electricity (fuel plus operations and management) to under ? US 1. 5/kWH. PLANT SECURITY AND THE NUCLEAR OPTION Unfortunately there is an ongoing insurgency situation in the Philippines. The insurgency problems are no longer major, and in all probability will recede. All major plant however does need a security system. The Bataan plant was constructed with good external, perimeter and internal security systems. There are commonly perceived notions that Nuclear Plants are susceptible to terrorist attack. These notions are based on a lack of understanding of the compact nature of nuclear plants, and the presence of very considerable containment structures for the reactor and fuel stores – especially American designed LWRs. The plant is easy to guard, and would be able to resist attack with light weapons, including rocket propelled grenades etc. The damage from such an attack would be limited to the knocking out of ancillary plant and structures, including the transformer yard, the auxiliary fuel tanks and administration building. Notes 1. The above power cost figures are based on 1997 projected fuel prices, 12% interest, 85% availability, and 20 years amortisation.. The price of coal and natural gas are considered to be more liable for major increases, than nuclear fuel. The Asian demand for both coal and gas is expected to outstrip supply in the coming decade. 2. The estimated construction time includes planning and design, equipment construction, site modification, plant erection and commissioning, and staff training (coal and natural gas conversion). If major ancillary works are required (eg. major wharves, ash and coal pipelines, shipping channels etc), then both an increase in the construction time and costs could be expected.

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