Government sweetens Calaca power plant sale with supply deal
Tuesday, April 11, 2006
By DOLLY AGLAY
MANILA, Apr. 10 (Reuters) — The Philippines added a small supply contract to the April 27 auction of a 600-megawatt power plant on Monday, sweetening its prospects after failing to attract a sufficient number of bids last year.
Calaca, in Batangas province south of Manila, is among 10 plants owned by state-run National Power Corp. (Napocor) that the government plans to auction this year in what is viewed as a litmus test of investor confidence in the country.
The government initially bid out the Calaca power plant in June, but two of the three bidders withdrew before bids had to be submitted, partly due to the absence of power supply contracts with electricity distributors.
Four groups submitted letters of interest to participate in the second public bidding for Calaca, the government has said.
The plant will be the first major asset put on sale since President Gloria Macapagal Arroyo ended a week of emergency rule on March 3 after the military uncovered an alleged coup plot.
The privatization of the power plants is part of efforts to cut the government’s debt and lure investors to develop the energy sector.
"While we are selling Calaca mainly as a merchant plant, PSALM has attached to it a supply contract equivalent to 83 megawatts," Froilan Tampinco, vice president at Power Sector Assets and Liabilities Management Corp. or PSALM, said in a statement.
"The new owner will only have to look for additional markets and negotiate for its own bilateral contracts with either distributors or big electricity consumers," he added.
Under the law, power distributors are required to source at least 10 percent of their electricity requirements from the spot market.
But the proposed wholesale electricity spot market has yet to open as the government regulatory body is still working out its pricing system.
Officials have said they expected the spot market to open in May or June.
The Philippines failed to sell any plants last year as it struggled with political instability over allegations that Arroyo cheated in the 2004 elections and with investor doubts about the profitability in the decrepit energy sector.
Originally, Manila had aimed to sell 70 percent of the total rated capacity of some 31 power plants by the end of last year.
The plants, with rated capacity of 4,335 megawatts, account for about one-third of total Philippine generating capacity.
But the government has sold just six power plants, or 11 percent of the targetted generating capacity for privatization.
Napocor is banking on raising $ 4-5 billion from the sale of its plants and by leasing its electricity grid to cut its debts, which are equivalent to about a third of the country’s annual gross domestic product.
Napocor is the single biggest drain on the state’s finances with debts of around $ 10.8 billion, but the state firm said this month that it posted a net profit of 16 million pesos ($ 313,700) in 2005, ending seven years of losses.
posted by philpower @ 9:27 AM,
