Tiwi-Makban still 100% owned by Napocor, says DOE chief

The Tiwi-Makiling Banahaw (Tiwi-MakBan) geothermal power complex has not been sold and remains in the hands of the Philippine government Federico E. Puno, president of the National Power Corp. (Napocor), said yesterday.

"The entire Tiwi-Mak-Ban geothermal power complex, including the steamfields, remains 100 percent owned by the Napocor," Puno said.

He said Power and Renewable Energy Corp. (PowerCorp) is simply planning to file for a service contract with the Department of Energy (DOE) for the right to develop and exploit the steamfields.

According to Puno, PowerCorp must join the public bidding for the right to buy the power plant. The auction will be implemented upon the passage of the Comprehensive Energy Reform Bill being deliberated by Congress.

The bill will also implement a series of actions which will privatize Napocor including all its generation companies (gencos), one of which is the Tiwi Mak-Ban power project.

The public auction of the power plant will be directly supervised by the Committee on Privatization (COP).

"We have not sold anything to Mr. Eusebio Tanco, president of PowerCorp. What we have arrived at with (Mr.) Tanco is a compromise agreement to finally settle a formal litigation filed with the International Chamber of Commerce (ICC) by the Philippine Geothermal Inc. (PGI)," the Napocor president explained.

The PGH has a 40-percent stake in PowerCorp while Tanco holds the remaining 60 percent.

Puno explained that PGI was forced to enter into a joint venture with Tanco since the 1987 Philippine Constitution clearly stipulates that only a Filipino corporation (60 percent Filipino, 40 percent foreign) can exploit the country's natural resources.

Napocor had decided to enter into a compromise settlement with PGI for the steamfields while opening the power plants for public auction. Part of their settlement was to hire a third party consultant to make another valuation.

Navigant Consulting Inc., (formerly known as RMI INC) undertook the valuation. Ironically, it was also RMI which made a valuation of both the steamfields and power plant worth over $300 million nearly four years ago.

Navigant later placed a value of $225 million for the power plant and steamfields but it was later placed at $290 million by Napocor. The latest offer price represents $200 million for the power plant and approximately $90 million for the steamfields.

The controversy-ridden Tiwi Mak-Ban power project is being jointly operated by the PGI, a subsidiary of the Union Oil Corp. California, USA (Unocol), and Napocor under a service contract renewable yearly.

A new service contract between PowerCorp and the energy department will be governed by Presidential Decree (PD) 1442, under which the government will be entitled to at least 50 percent of the earnings derived from the exploration and utilization of the steamfields.

"Once approved by the DOF, this contract will result in a win-win situation for the two parties," Puno added.

The Tiwi Mak-Ban geothermal power plants have a maximum capacity of 756 megawatts (MW) although they are now running at less than 450 MW due to damages in the power units. The plants have reportedly, deteriorated due to typhoons and misuse with losses of up to 55 megawatts (MW) yearly.

The PGI had a 25-year service contract which started in October 1971 to operate the two power plants but encountered technical and legal problems with Napocor as the former wanted to renew the contract in 1994.

PGI is now operating the power project plants provisional agreements to avoid a disruption of operation and power supplies to the Luzon Grid.