PSALM waits for rehab of Tiwi-MakBan facilities as pre-condition to sale
Tuesday, June 27, 2006
By MYRNA M. VELASCO
The Power Sector Assets and Liabilities Management Corporation (PSALM) noted that it is just waiting for the final report on completion of rehabilitation of the 70-megawatt Tiwi-Makiling Banahaw power plants; noting that this is crucial precondition for setting the final schedule of its privatization.
PSALM president Nieves L. Osorio noted that she has officially written NPC president Cyril C. del Callar to furnish them status report on such specific undertaking.
The NPC chief, on the other hand, noted that he has already responded to PSALM’s correspondence; thus, the expectations that the bidding date for the facilities shall be set soon.
Osorio noted that for the geothermal resource sales contract (GRSC) to be rendered effective, the rehab of the generation units shall first be accomplished. Such particular development on meeting preconditions for the GSRC is also being watched carefully by prospective investors.
"The GRSC has to be effective and one of the conditions is the rehabilitation of the units.
Napocor-PSALM has to show it can deliver its CPs (condition precedents)," Osorio stressed.
The Tiwi-MakBan geothermal assets should have been auctioned to interested buyers early this year, but due to some outstanding issues, the target has been skidding.
For the Tiwi-MakBan assets, an existing GRSC is held by steam supplier US firm Chevron Geothermal (Philippines); but since it is a foreign company, it was mandated to tap a local partner to assume 60 percent of company shareholdings. This has been among the conditions prescribed upon settlement deal of its contract row with NPC.
The 1987 Philippine Constitution limits the participation of foreign investors in the development and utilization of indigenous resources; and geothermal steam is included.
The new steam supply arrangement, stretching until year 2021, shifts all development and market risks as a burden for the US firm.
The rehabilitation of the Tiwi-MakBan assets was pursued in view of the dwindling capacity of its generation units.
NPC has secured P3.5 billion funding from the Japan Bank for International Cooperation (JBIC) for the project; with the cost simulation based on a "partial rehabilitation" of the assets.
Additional loan has also been applied for by NPC in its bid for undertake "full rehabilitation of the facilities; noting that when privatized, this will bring in better proceeds for the government.
There is also an assurance that the US firm’s right to explore, develop and manage the geothermal resources in the Tiwi and MakBan sites, will continue to be unchallenged during the transition period, which is set during the power plants’ rehabilitation schedule, which was originally scheduled to lapse on January 1, 2005.
With the rehabilitation of the power plants, Chevron Geothermal (formerly PGI) has also lined up new drilling projects to beef up the volume of steam it would supply to the power firm, especially after the rehabilitation of the assets.
The company previously bared investments of $ 12 million for the drilling of three wells to enhance steam supply for the MakBan plant to at least 310 megawatts.
posted by philpower @ 9:10 AM,
