IFC to sort out contractual issues on SPUG privatization
Tuesday, September 19, 2006
By MYRNA M. VELASCO
The International Finance Corporation (IFC), engaged as transaction adviser for the privatization of the Small Power Utilities Group (SPUG) of the National Power Corporation, bared that it needs to sort out some legal and contractual issues relating to the plan of privatizing and shoring up power capacity investments for Masbate.
"There are legal and contractual issues that need to be resolved. IFC will submit its formal recommendations to address these issues," it noted in a report submitted to Energy Secretary Raphael P.M. Lotilla.
It added that at least 12 investors have submitted expressions of interest (EOI) for Masbate, of which project blueprint sets the construction of a 25-megawatt capacity that shall meet demand growth within the franchise area of the Masbate Electric Cooperative.
The participation of private sector investors in installing power generators in what used to be considered as "less viable areas" was structured through a concession-type contract between the winning bidder and local electric cooperatives that take the power on these islands.
The framework of this concession does not require the private supplier to buy existing generation assets of the state-owned power firm, thereby, allowing those assets to be deployed to other unserved areas in the country.
IFC is now undertaking second wave of privatization of the SPUG facilities, which will also include Occidental Mindoro. The first phase covered priority areas in Tablas, Romblon and Marinduque.
It has apprised both the energy department and NPC that it launched privatization initiatives for Masbate last July 25, and request for proposals was set end-August. The submission of bids is expected by mid-October this year.
The multilateral lending firm, which is the private sector arm of the World Bank group, indicated that it could proceed as scheduled on the third batch of scheduled privatization for the islands of Sulu, Basilan and Tawi-Tawi in Mindanao; and will wind up until the identified 14 areas are turned over to private investors.
For its commitment as transaction adviser, IFC has to structure and firm up the agreements; and aid in pushing for a regulatory framework that would help attract private sector capital and expertise to power generation in remote islands.
Last year, it successfully concluded a deal with the consortium of Coastal Power Development Corporation and Applied Research Technologies for the provision and improvement of power supply reliability in areas served by the Marinduque, Tablas and Romblon electric cooperatives.
By NPC’s estimate, the privatization of the SPUG areas will bring in an estimated annual operating cost savings of P1.5 billion; which the government reckons to be better allotted for electrification initiatives.
The state-run power firm emphasized further that this would "enable government to deliver on its commitment to continue bringing electricity and progress to more remote areas without increasing the burden on the missionary electrification charge on electric consumers nationwide."
posted by philpower @ 9:20 AM,
