Government to save P5B from new CBK deal

The National Government expects to realize total savings of $96 million (P5 billion) from its renegotiated contract with CBK Power Company Ltd.

Energy Secretary Vincent S. Perez announced over the weekend that the Department of Energy (DOE) and the Power Sector Assets and Liabilities and Management Corp. (PSALM) have reached a mutually acceptable agreement with CBK Power in resolving all outstanding issues on the power contract entered into by the National Power Corp. (Napocor).

Perez said the government through the DOE and PSALM will now proceed with the second phase of the review of Napocor’s power contracts with the independent power producers (IPPs).

CBK Power, a joint venture partnership between IMPSA of Argentina and Edison Mission Energy of California, is currently rehabilitating, upgrading and expanding the Caliraya-Botocan-Kalayaan hydropower complex in Laguna.

The agreement with CBK Power brings to 18 the number of IPP agreements that have been settled by both the PSALM and the DOE.

Perez said there are seven other contracts which either have no pending issues or have minor issues which have been clarified and resolved.

So far, 25 out of 35 IPP contracts have been settled or resolved, leaving 10 contracts still under negotiations.

Resolution of the IPP contracts, Perez said, is consistent with the Electric Power Industry Reform Act of 2001 to help reduce electricity costs while preserving the sanctity of contracts.

"Negotiations with several IPPs have been fairly successful, generating substantial savings of $832 million in net present value (NPV) to the government without undermining the viability of the firms to earn fair and reasonable returns," Perez said.

For his part, PSALM president Edgardo M. del Fonso said the global settlement with CBK Power will yield savings of approximately $95 million in nominal terms. This includes CBK Power’s concession to waive its right to collect from Napocor the last four installments, amounting to $26 million, due on the security deposit.

The $70-million security deposit was an interest-free loan which CBK Power extended to Napocor.

Del Fonso said under the agreement, CBK Power agreed to waive part of its claims for capital recovery fees as well as the operation and maintenance (O & M) fees on Kalayaan Stage II until December 2003.

CBK Power, on the other hand, agreed to provide Napocor free of charge any electricity delivered above the minimum guaranteed power for a period of 30 months. The agreement is subject to consent of CBK Power’s lenders.