DoE names IFC advisor
Friday, October 29, 2004
By MYRNA M. VELASCO
The International Finance Corporation (IFC) of the World Bank group has finally sealed a deal with the Philippine Department of Energy (DoE), in coordination with the Power Sector Assets and Liabilities Management Corporation (PSALM), for its foray as transaction advisor for the privatization of the National Power Corporation Small Power Utilities Group.
IFC executive vice president Peter L. Woicke said the lending firm is looking closely into opportunities at the Philippine power market; especially in the development of renewable energy sources.
For this particular undertaking, however, he noted that they have been striking a balance in their role as transaction advisor and in its potential bid for project financing.
"We are so careful that conflict of interest will not set in…we have been setting a firewall between our function as advisor and as potential investor in projects," Woicke stressed.
The completion of advisory deal with IFC was simultaneous with the signing of agreement with three electric cooperatives- Marinduque Electric Cooperative, Inc. (MARELC); Tablas Electric Cooperative, Inc. (TIELCO); and Romblon Electric Cooperative, Inc. (ROMELCO)- that are targeted for first batch of private sector participation (PSP) in the delivery of more efficient power service in missionary areas.
These electric cooperatives are targeted to kick off the scheduled disposal of some 14 NPC-SPUG facilities, out of the 74 missionary areas under its control.
The SPUG facilities with an aggregate capacity of 93.7 megawatts would cover eight generation assets in Luzon; three in Visayas and three in Mindanao. These are located in Catanduanes, Marinduque, Masbate, Occidental Mindoro, Oriental Mindoro, Palawan, Romblon and Tablas Island; Bantayan Island, Camotes Island and Siquijor in the Visayas; and Basilan, Sulu and Tawi-tawi in Mindanao.
"Of the 14 areas declared as first wave areas or considered the most attractive to new players, Marinduque, Tablas and Romblon emerged as pilot projects," said Energy secretary Vincent S. Perez.
Based on records, the energy department noted that electricity requirements in these areas have been steadily growing.
In Marinduque, the recorded current peak demand is at 9.4 megawatts (MW); Tablas, 3.2 MW; and Romblon, 1 MW.
The signing of the agreement, according to Perez, formalizes the assistance of the government to the electric cooperatives through the IFC as the transaction advisor.
As a transaction advisor, IFC is expected to develop a best practice model for greater private sector participation that will protect and advance the interests of EC and its members. It will provide technical, financial and legal assistance to ensure the success of the project.
Perez noted that the privatization of the NPC-SPUG areas will reduce the incremental burden of the missionary electrification component of the universal charge that is being passed on to electricity consumers.
This will be realized, he explained, by ensuring that avoidable missionary costs are eliminated.
At present, NPC-SPUG operations are funded by the revenues from electricity sales in missionary areas and from the universal charge, a component of the power bill charged to all electricity consumers.
The energy chief pointed out that the entry of new players will address the increasing power requirements of growing island provinces and cut down the mounting losses of state-owned NPC.
It could be culled that the energy department recently issued Circular 2004-01-001 setting the rules and procedures for the inflow of private capital in missionary electrification.
As a matter of policy, private sector participation could take the form of a take-over of the supply of electricity to any existing NPC-SPUG areas, either through outright purchase or lease of existing NPCSPUG assets.
The private sector could also install new power generating facilities including associated power delivery systems.
Perez further emphasized that a competitive bidding process will be done in the selection of new companies to ensure that prospective players have the financial and technical capability to supply electricity.
In particular, new players are expected to pursue projects that would address the lowest long-term cost of power and services, environmental compatibility with the local area and the most advantageous implementation schedule.
Upon entry of a new player, NPC-SPUG would cease operations in the area. NPC-SPUG is then ordered to dispose the particular assets in the area through competitive bidding process or redeploy them. (MMV)
posted by philpower @ 10:19 AM,
