PSALM settles another deal with IPP

The Power Sector Assets and Liabilities Management Corp. (PSALM) has settled another deal with an independent power producer (IPP) of the National Power Corp. (Napocor), PSALM president Edgardo del Fonso said over the weekend.

"We have completed another deal. We already have a verbal agreement," Del Fonso said, although he declined to divulge the identity of the IPP.

"We cannot reveal yet the identity of the company since we have to come up with a written formal agreement first," he said.

Del Fonso said they are continuing discussions with other IPPs to be able to finish all 35 IPP contracts within the year.

"That was an optimistic target. We hope to finish everything within the year. But there are a lot of things to be threshed out with the IPPs," Del Fonso said.

Some of the IPPs, he said, do not want the contracts to be "abrogated," making the discussions a lot more difficult.

"We will be able to know if we can finish everything before the end of the year," he said, when asked if they can finish all the negotiations this year.

The resolution of the IPP contracts is consistent with the Electric Power Industry Reform Act of 2001 as it seeks to help reduce electricity costs while preserving the sanctity of contracts.

The Department of Energy and PSALM have recently renegotiated the contract with CBK Power Company Ltd., resulting to a savings of $96 million or approximately P5 billion.

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 PSALM and the DOE.

Other contracts that are being worked out by PSALM with 18 firms/consortia include: Calenergy; Aboitiz (Benguet, Bakun); Alsons/Tomen (Iligan City 1 & 2, Zamboanga, General Santos); Alstom (Limay Bataan A & B); Bauang Private Power Corp. (Bauang La Union); Covanta (Cavite EPZA, Bataan EPZA); Enron (Pinamucan, Subic Zambales); Kepco ( Malaya, Ilijan Gas); Marubeni Sithe ( San Roque); Mirant (Navotas I-III, IV, Pagbilao, Sual); Mitsui (Mindanao Barges); NIA (Casecnan); Ormat (Makban Binary); PNOC-EDC (Leyte A & B), Mt. Apo I and II; Salcon Power (Naga Complex); State Power (Mindanao Coal); Chevron-Texaco (San Pascual Co-generation); and BHEPI (Binga).

The review of the IPP contracts is one of the ways the government may reduce the stranded contract costs that will be absorbed by PSALM, which will eventually pass the cost to the consumers through a universal charge.

PSALM has a pending proposal to charge some 40 centavos per kilowatthour to recover stranded costs of Napocor amounting to P900 billion for a period of 25 years.