Napocor defers review of deals with IPPs

Energy Secretary Jose Isidro Camacho has decided to postpone the review of contracts between the National Power Corp. (Napocor), and independent power producers (IPPs).

Camacho said the postponement takes into consideration the likelihood of a similar review once the Power Reform bill is passed.

"We decided to defer the review because there is a possible inclusion of a provision in the bill that would also require a review. There might be a duplication," he said.

The energy chief expressed optimism that the Power bill will be enacted soon or before the May elections. "We hope it would be passed as soon as possible," he said.

The review of the IPP contracts was proposed by Napocor president Jesus Alcordo in an effort to look for ways to cut the company’s huge losses.

Based on initial studies, there are some areas in the IPP contracts that will allow Napocor to recover some of its losses.

The power firm is looking at the possibility of restructuring its IPP contracts by lengthening the period for debt payments from 10 years to a maximum of 25 years.

Napocor will also review the operations and maintenance fees being paid by the state-run power firm to the IPPs.

A huge portion of Napocor’s debt is comprised of obligations to the IPPs which are mostly foreign-denominated. As of December 2000, Napocor had debts amounting to P900 billion, of which $10 billion or P480 billion were obligations with IPPs.

Napocor’s direct debts and obligations to the IPPs became twice as costly last year as they were in 1996 when the exchange rate was P26 to a dollar.