Napocor loses P1B in first month of WESM

National Power Corp. (Napocor) has incurred close to P1-billion losses in its first month of participation in the wholesale electricity spot market (WESM), a ranking company official said.

Napocor president Cyril Del Callar, however, pointed out that the losses could still be recovered in the succeeding trading of the power firm in the WESM, thus will not result to higher power costs to its customers.

"We cannot judge it purely on the basis of one month’s thing. As I’ve said, we will continue to monitor closely the impact on Napocor. All the data are still inconclusive. Theoretically, a peso lost this week will or could be recovered next week," Del Callar said.

Philippine Electricity Market Corp. (PEMC) president Lasse A. Holopainen warned that though the market would maintain its fair performance in the next few months, reserves may be a threat to prices as demand picks up.

He said there are also several power plants that would be decommissioned like Sual Unit 2 which will be shut down over the next six to eight months.

"Supply is still safe until 2010 for Luzon but the reserve capacity would be a concern to be dealt with," Holopainen said, admitting that WESM may encounter some price spikes due to low reserves.

"A tight demand and supply situation was seen during the first half of the month where total offered capacity was not always sufficient to meet electricity demand, particularly during the peak hours," he said.

But it would be noted that the rainy season had helped in the improvement of the reserves in the second half as more hydropower plants were up and running.

As this developed, President Arroyo has cited Napocor’s 2005 performance as proof of the effectiveness of the various reforms being undertaken by the government to provide better basic services as well as bring government-owned and controlled corporations (GOCCs) back to profitability.

In a one-on-one interview with veteran journalist Antonio Lopez, editor and publisher of BizNewsAsia Magazine, Mrs. Arroyo expressed satisfaction on Napocor’s performance, as well as those of other GOCCs that posted positive returns in the past year.

They (GOCCs) have undergone reforms also. The National Power Corp. is now in the black. The only GOCC we subsidize now is the National Food Authority (NFA). What we did for Napocor is what we would like to do with the NFA," the President said.

After suffering huge losses and revenue deficits for almost a decade, Napocor posted a net income of almost P85 billion in 2005 and is optimistic it will remain in the black in 2006 and the succeeding years.

"We will continue implementing various programs that are time-tested and proven to be effective, to further improve our profitability and operational efficiency. Likewise, we are continuously looking for various ways and means to not only improve our financial performance and maintain our current profitability, but also further optimize plant operations to enhance our reliability and efficiency," Del Callar said.

He said some of the strategies that have been proven effective, especially in reducing the cost of generation, include optimizing the use of power plants that utilize cheaper fuel such as geothermal, natural gas and hydro; and implementing other cost-cutting measures such as effective use of corporate resources, among others.

For the first quarter of 2006, Napocor posted a significant 25- percent increase in sales in the main grid, and almost three percent in the off-island grids, compared to the same period last year.

In a report, the state-owned power firm’s Sales and Services Group said the Luzon grid accounted for the lion’s share of the first-quarter revenues at P28.17 billion, up 25.89 percent from the year-ago level of P22.38 billion.

Visayas and Mindanao contributed P3.83 billion and P4.48 billion, respectively, up from last year’s P3.16 billion and P3.59 billion.

Napocor attributed the higher revenues to a more than six-percent growth in the generation company’s sales volume, and to the Energy Regulatory Commission’s approval in April 2005 of a power rate adjustment based on the power firm’s return-on-rate-base with time-of-use (RORB-TOU) application.