Caribbean nickel A HIDDEN ASSET

Falcondo’s power plant serves an obvious utility function, but it may also be seen as a hidden asset with a considerable value. Not only does it generate a prof it; its replacement value could well offset the entire long-term debt of the cor poration. The power plant is associated with a topping unit. The Falcondo operations have to sustain their own power, so a 200-mw, oil-fired power plant was built during the project construction at a cost of $25 million, advanced by the World Bank.

In terms of flowsheet, the reconstituted crude oil received at the port of Haina is pumped through a 75-km, unheated pipeline to the process plant in Bono. The fuel is then fractioned, in a topping plant, into a distillate and also into a residual fuel oil for the power plant boilers. The distillate is desulphurized and burned in gasification reactors that generate the gases for the shaft furnaces for the reduction process.

Oil consumption at the site is substantial, to the tune of 2.5-3 million barrels for Falcondo’s operations annually. However, over the years, Falcondo has gen erated sufficient excess power to sell to the national grid, thanks partly to th e ability to utilize one furnace (instead of three) and general stand-by capacit y. The Dominican Republic’s electricity- generating ability has a capacity of 800 mw, yet it cannot sustain the demand of 500 mw on a continuous basis. Falcondo has been successful in selling power to the national utility (Corporacion Dominicana de Electricidad) at a rate of 60 mw, which consumes about another 800,000 barrels of oil a year. Falcondo’s power- generating ability is far more secure a nd efficient and at a lower cost than the average for the national grid. It is also a secure source of supply (10%- 12% of the daily needs) for the national utility.

The power plant can be classified as a hidden asset for Falcondo because of its low capital cost (completed back in the 1970s) and also because of its profit ability for the overall operations. The plant’s capital cost of $25 million for a 200-mw capacity reflects a $125/kw nameplate cost. That compares to a cost of $800-$1,000 per kw of installed capacity for recent and newer units. That values the plant at a minimum of $150 million in replacement value.

Falcondo’s sales of surplus electricity generated gross revenues of $8.5 million for 1986 and represent 30%- 40% of Falcondo’s output of electricity. Those sales are an important reason for the ongoing financial viability of the nickel project.