Government to renegotiate 22 IPP contracts next week

The Power Sector Assets and Liabilities Management Corp. (PSALM) and the Department of Energy (DOE) are expected to start renegotiating the contracts of 22 independent power producers (IPPs) next week.

PSALM president Edgardo Del Fonso, in an interview, said they are now talking individually with the 22 IPPs and the "official negotiations will kick off by next week".

"We have to talk to them one by one. After that, we will start scheduling the individual negotiation," Del Fonso said, adding that they have to assess each contract to determine which of these 22 IPPs should be given priority.

"By talking to them individually now, we will know what contract to be prioritized or who will go first," he said.

Last week, Energy Secretary Vincent S. Perez said the DOE and the PSALM would handle the review of the 22 contracts. He said they would try to finish the review in three months as per order of President Arroyo.

But Perez admitted that it would be impossible to meet the deadline given the intricacies of the contracts.

Based on the order of Malacañang, 22 of the 35 IPP contracts will be reviewed by DOE and PSALM. The rest will be handled by the Department of Justice (DOJ).

Perez said the contracts that are classified as having "financial issues" could be re-negotiated particularly their financial terms while those with "remedial financial issues" involved questions on the terms of the construction and operations of the concerned power plants.

These 22 contracts are on top of the five IPP contracts that were earlier recommended for renegotaition namely, the Binga hydro-electric plant, the Covanta diesel plant, the Sual Coal plant, the Casecnan and the San Roque Multi-Purpose projects.

According to Del Fonso, they continue to negotiate with Enron Power Corp. and San Pascual Cogeneration Ltd. These two IPPs were among the first IPPs that are being considered as one of the possible ways to reduce the stranded costs of the National Power Corp. (Napocor).

Enron has indicated its willingness for a possible buyout by Napocor of its contract as its mother firm in the US, Enron Corp., suffered a financial debacle early this year. The San Pascual project, which was supposed to generate 300 megawatts power using gas from the Malampaya, did not push through when some of its proponents decided to back out of the project.

The 11 contracts that were found to have financial issues are the: Navotas gas turbine plants Units 1-3, Mindanao Power Barges, Ormat Binary Cycle Geothermal Plant, Bunker C-fired diesel generating plant 1 Iligan, Bunker fired Iligan 2, Subic bunker fired plant, Bauang diesel plant, Bataan EPZA plant, San Pascual Co-generation facility, Ilijan natural gas plant, and Mindanao geothermal plant.

On the other hand, the contracts that were found to be with "remedial financial issues" are the: Pagbilao coal-fired plant, Pinamucan diesel plant, Leyte-Cebu geothermal plant, Naga Coal plant complex, Leyte-Luzon geothermal plant, Mindanao 1 geothermal, Malaya thermal plant, Zamboanga buner-C fired diesel plant, Bankun hydro plant and Mindanao coal-fired plant.