Aboitiz unit to assume P5-B Napocor debts

Luzon Hydro Corp., a subsidiary of Aboitiz Equity Ventures Inc., has offered to assume the obligations of the state-owned National Power Corp.as part of its recently-concuded independent power producer (IPP) renegotiations for the operation of the 70-megawatt Bakun hydro electric power plant in the Benguet province.

Bakun, located in the Cordilleras, is the first single purpose build-operate transfer hydro power plant in the Philippines. It is a joint venture between AEV and Pacific Hydro Ltd. of Australia.

Under the letter-agreement, which still has to be approved by the creditors of the Bakun project, the Philippine government will save P22 million per year in real property taxes and one-time savings of P16 million for the construction of the Alilem-Sudipen bridge in Ilocos Sur and the condonation of about P5 billion of accounts receivable.

LHC has also agreed not to increase the nominated capacity of the power plant which it is entitled to do in its power purchase agreement with Napocor.

AEV assistant corporate secretary Elsa Divinagracia said all other terms in LHC’s contract with Napocor remains in effect and will not be changed.

The Bakun project is expected to significantly contribute to the consolidated operations of AEV this year.

AEV has made significant investments in the Bakun project in the past three years, as the company is convinced that a sure way to sustained profitable growth is concentrating on its core business of power generation and distribution.

Aboitiz Power Corp. is the holding company of all electric power resources of AEV. Other electric distribution facilities of APC include Davao Light & Power Corp., Cotabato Light & Power and Visayan Electric.

The Bakun contract is one of the 29 IPP contracts under review by the government and is among the first to be concluded.

The IPP contracts entered into by both the Napocor and the distribution utilities like Meralco allegedly contained undue guarantees to private power suppliers. The most controversial of these is the take-or-pay agreement, which provides that Napocor, and the distribution utilities, pay up to 85 percent of the electricity supposedly generated by the IPPs even when only 10 percent to 40 percent of the power is utilized. The contracts also provide for other burdensome expenses, such as fuel and foreign exchange rate guarantees.

The IPP Interagency Review Committee earlier said only six out of the 35 contracts that the government signed with IPPs are legally and financially accurate.

The six IPPs with no questionable contracts are the Limay Bataan Combined Cycle Gas Turbine A, Navotas Gas Turbine Plant Unit 4, Limay Bataan Combined Cycle Gas Turbine B, Ambuklao Hydroelectric Plant, Toledo Thermal Plant and Paragua Diesel Plant.

Eleven other contracts, while passing the review, have some remedial financial problems that need to be addressed, according to the IPP review committee.

Malacañang had asked the Department of Justice and the Power Sector Assets and Liabilities Management (PSALM) to work together for possible renegotiation or legal action.