DOJ opinion sought on transfer of PPA contract

The transfer of the purchased power agreement (PPA) contract of the San Pascual co-generation plant to the Sucat power facility is still awaiting confirmation from the Department of Justice (DOJ).

"A DOJ opinion is still pending. We are working closely with the DOJ. The resolution (of the PPA transfer), we hope, is very imminent," Energy Secretary Vincent Perez said.

Perez said this proposal is crucial in providing a "sweetener" to the sale of decommissioned 850-megawatt (MW) Sucat power facility.

Power Sector Assets and Liabilities Management Corp. (PSALM) vice president Froilan Tampinco, on the other hand, said in case they will not be able to resolve the legal impediments in the proposed PPA transfer, they can sell Sucat on a transition supply contract (TSC).

"We will have to settle with a TSC. It would be our alternative if we will not be allowed to transfer the PPA of San Pascual to Sucat,"Tampinco said.

The San Pascual project was supposed to take up the remaining 300-MW capacity from the 3,000-MW Malampaya deep water gas-to-power project. The 2,700-MW supply output were distributed as follows: 1,200-MW for the Ilijan power plant of Korea Electric Co. (Kepco) and National Power Corp. (Napocor); 1,000-MW for Sta. Rita; and 500-MW for San Lorenzo, both controlled by the Lopez group.

However, the construction of the San Pascual plant failed to push through due to the existing excess capacity in the power system during that time. But the proponents of San Pascual have already signed a PPA with Napocor, thus, making it part of the renegotiations of PPA contracts among independent power producers (IPRs).

Based on the plan, PSALM will buy out the 25-year PPA contract of Napocor with San Pascual and assign the contract to Sucat.

PSALM was created under the Electric Power Industry Reform Act (EPIRA) to absorb all the assets and liabilities of Napocor. It is also in-charge of the privatization and sale of IPP contracts of the state-run power firm.

Tampinco said that they have to work out the proposed transfer of the PPA contract before they can proceed with the sale of Sucat. "Under Sucat’s present status, it is not saleable. The strategy is to sell it with San Pascual’s PPA," he added.

The PSALM official said the transfer of the PPA is one of the reasons in moving the scheduled sale of Sucat from late 2004 to early 2005.

Other factors that delayed Sucat’s privatization were the resolution of the issue on gas sale purchase agreement (GSPA) and the signing of the agreement on the gas pipeline project.

The Sucat diesel-fired power plant was decommissioned several years ago. With the advent of natural gas industry in the country, Sucat was set to be converted into a gas-fired facility and become the anchor load that would justify the construction of a $100-milllion Batangas-Manila (Batman I) gas pipeline.