Gov’t wraps up contract talks with IPPs; hefty savings seen

The government has concluded the renegotiations of all the power supply contracts of the National Power Corp. (Napocor) with its independent power producers (IPPs), resulting to a nominal and present value savings of $2.9 billion and $1.03 billion, respectively, Energy Secretary Vincent S. Perez said.

Perez made this announcement during a joint press conference yesterday with visiting US Energy Secretary Spencer Abraham.

Perez said the completion of the negotiations with the IPPs reflects the Philippine government and the private power companies’ resolve in coming up with a mutually-beneficial agreement while at the same time preserving the sanctity of the contracts.

"We have successfully negotiated and amendments were made in such a way that both parties will benefit from the new agreement," Perez said.

The renegotiation of the IPP contracts is consistent with the Electric Power Industry Reform Act of 2001, which aims to help reduce electricity costs while preserving the sanctity of contracts. Reviewing the IPP contracts is one of the ways of reducing the stranded contract costs that will be absorbed by PSALM (Power Sector Assets and Liabilities Management Corp.) which will eventually be passed on to the power consumers through a universal charge.

Abraham came for a one-day working visit to renew strong ties in the area of energy security and efficiency in the Philippines as part of the commitment of US President George W. Bush during his state visit to the Philippines last October.

For his part, the US official affirmed continued the confidence and interest of US power firms in investing in the Philippines.

"My impression is that the interest level is still very high. They are still very interested and dedicated and are willing to continue to expand their businesses in the Philippines for the long-term," Abraham said.

The two energy officials are expected to come up with an agreement following the bilateral talks held yesterday at the Malacanang Palace.

The United States has an extensive exposure in the Philippines’ energy industry. Investments poured in by US firms in the country’s upstream petroleum industry reached as much as $305 million in the last two years.

Support of US companies (California Energy, San Roque Power Corp. and Mirant Philippines Inc.) in the Arroyo administration’s rural electrification program has totaled to $33.67 million (approximately P1.85 billion).

"US companies are active in developing geothermal energy. We hope to collaborate together in developing our country’s geothermal resources," he said.

"The US and the Philippines are the world’s largest and second largest geothermal producer, respectively, accounting for 49 percent of the world’s total installed geothermal capacity of 8,091 megawatts (MW)," Perez said.