The listed power generation firm informed the Philippine Stock Exchange (PSE) that while it has requested Napocor for a meeting to discuss the issue and determine the options open to the parties on how to resolve the matter, it has nonetheless considered other possible projects in place of the Eight Islands Project.
SPC undertook an initial public offering (IPO) last February for 20 percent of its outstanding capital stock, raising P511 million in net proceeds, part of which will be used to partially finance the Eight Islands Project.
The project involves the development of a bunker-fired diesel generating set with an aggregate capacity of 50 megawatts on a build-own-operate (BOO) scheme in eight designated islands in the country: Palawan, Masbate, Marinduque, Catanduanes, Jolo, Bantayan (Cebu), Tablas (Romblon) and Tawi-Tawi.
In June 2001, SPC formed a wholly-owned subsidiary Salcon Island Power Corp. to implement the project over a 15-year contract period, having completed negotiations with Napocor on the PPAs for each of the islands.
But last April, SPC said Napocor wrote them that due to the implementing rules and regulations (IRR) of the Electric Power Industry Reform Act of 2001, the state-owned power firm is now prohibited from incurring new obligations to purchase power through bilateral contracts with generation companies or other suppliers.
SPC said the cancellation of the Eight Islands Project will free up P387 million in funds intended for the project which could be re-channeled to other projects. Likewise, SPC will no longer incur debt in the amount of P903 million and, therefore, will not be burdened with interest payments of approximately P50.6 million average annually for five years, substantially improving the current and debt-to-equity ratios of SPC.
But as a consequence of the project’s shelving, SPC will gradually lose estimated revenues and income equivalent to five percent of total profit by fiscal year 2003, increasing to 18.3 percent of total income by the fifth year or a cumulative amount of P484 million in foregone profit by the end of FY 2006.