Napocor faces big problem in sale of geothermal assets

Some officials of the National Power Corp. anticipate that the government will face a major problem in the disposal of some Napocor assets under Republic Act (RA) 9136, or the Electricity Power Industry Reform Act of 2001.

Chapter V, Section 27 of RA 9136 states that "the steamfield assets and generating plants of each geothermal complex shall not be sold separately. The geothermal complexes covered by this requirement include, Tiwi-Makban, Leyte A&B (Tongonan), Palinponan, and Mt. Apo."

That section of the law has created a marketing problem for the government, said a Napocor official who asked not to be identified. By combining the generation facilities and the steamfields of Tiwi-Makban, the prospective bidder must not only acquire the complex but must also contend with the existing rights holder of the steamfields, the official said.

The Philippine Geothermal Inc. (PGI) holds the rights over the steamfields by virtue of a service contract which is being contested by Napocor and PGI. The two parties were in the process of arriving at an amicable settlement when RA 9136 was signed into law.

Napocor operates the power generation facilities which convert the steam into electricity.

According to the same Napocor official, that provision of the power reform law allows for several scenarios in the disposition of the Tiwi-Makban power complex.

One scenario is that the buyer will shoulder whatever legal and financial settlements Napocor faces versus PGI.

Industry sources said another possible scenario is that PGI will acquire the entire power complex to save government from a long legal battle. At the same time, no bidder is willing to have to deal with PGI and inherit all the legal and financial complications.

A third scenario is that of a status quo wherein government will continue to operate the generation assets while PGI will continue to hold the rights over the steamfields. This will mean that the legal tussles will drag on.