PSALM to save additional $28.6M from contract renegotiations
Saturday, December 10, 2005
By Donnabelle L. GatdulaThe Philippine Star 12/10/2005
The state-run Power Sector Assets and Liabilities Management Corp. (PSALM) said it would raise an additional $28.63 million in savings from the remaining contracts that are being renegotiated with National Power Corp. (Napocor)’s independent power producers (IPPs).
PSALM, created under the Electric Power Industry Reform Act (EPIRA) is tasked to handle all finances and privatization of Napocor’s assets and IPP contracts. According to PSALM, the renegotiations with the IPPs are likely to be finalized by the end of the year or by the first quarter 2006, at the latest. "PSALM estimates an additional savings of $28.63 million based on initial discussions with the concerned IPP sponsors," it said.
Official data showed that of the 35 contracts under review, 20 have been resolved, nine are still under renegotiations and six have expired. Previous renegotiations of IPP contracts have resulted in about $1-billion savings for the government.
PSALM said the renegotiations of the IPP contracts would be beneficial to the government, the electricity end-users and the IPPs. Energy Secretary Raphael P.M. Lotilla earlier said the IPP renegotiations provided Napocor "tangible savings that can be passed on to end users or retained for its benefit to reduce future funding needs."
Lotilla said for the IPPs, the renegotiations should put a closure to issues and public criticisms that have put doubts on the "legality and enforceability" of the contracts. But the IPPs have strongly opposed the proposed second round of renegotiations of their contracts, noting these may create uncertainties in the market.
Philippine Independent Power Producers Association (PIPPA) president Ernesto B. Pantangco said IPPs are concerned about regulatory stability, especially when government is in the middle of privatizing its generation and transmission assets.
Sen. Juan Ponce Enrile has filed an amendment to the EPIRA that may pave the way for a new round of renegotiation of all IPP contracts. "We strongly objected to this as this has caused major concerns for investors and you’re doing this at a time when you’re trying to get investors to participate in the PSALM privatization," Pantangco said.
The PIPPA official said most of the stakeholders and creditors in the country’s major power plants are wary about the renewed call to revise the IPP contracts anew. "Owing to the 75 to 25 debt-equity ratio, where 75 percent of our plant is owned by creditors, these are the same creditors that extend loans to the country. So when you start tinkering around with the sanctity of the contract, the creditors will automatically call a default on the loans," Pantangco said.
posted by philpower @ 1:13 PM,
