PSALM optimistic on asset disposition timetable

The Power Sector Assets and Liabilities Management Corp. (PSALM) has expressed optimism that it would be able to gain momentum on its privatization efforts following a strong indication from the National Power Corp. (Napocor) and the Manila Electric Co. (Meralco) that they are nearing agreement on a transition supply contract (TSC), a ranking energy official said.

In a speech before a Financial Executives Institute of the Philippines (FINEX) forum, PSALM president Nieves Osorio said a recent agreement between Napocor and Meralco will allow them to sell 60 to 65 percent of Napocor assets in Luzon and Visayas by mid-2007.

"This new timetable is encouraged by Meralco’s move to write Napocor indicating its keen interest to sign an agreement for a supply contract," Osorio said.

With this, she said PSALM may be able to fast track the privatization of the 70 percent of assets of Napocor by yearend 2007. Napocor has signed a TSC with almost all the distribution utilities except for Meralco, its largest customer.

Earlier, PSALM estimated that it would be able to complete the privatization of Napocor’s generating assets no earlier than 2009 if the government will not be able to work out sufficient power supply contracts to go with  power plants to be sold.

The Electric Power Industry Reform Act (EPIRA) that Napocor should enter into supply contract agreement with distribution utilities (DUs) to ensure the prospective buyers of Napocor power facilities that they would have ready market once they purchase the said plants.

It will be recalled that lack of TSC was the main reason for the failure of the bidding of one of the big power plants of Napocor. PSALM was able to auction off the 600-megawatt (MW) Masinloc power plant without a supply contract but the sale was not consummated as YNN Pacific Consortium, the winning bidder, did not deliver the supposed 20-percent downpayment due to apparent inability to contract supply agreements with the Meralco, the country’s largest power distributor.

The bidding of 600-MW Calaca coal-fired power plant also failed as investors would want higher supply contract or at least half of its existing capacity or 300 MW.  When Calaca was bidded out, it carried only about 75 MW supply contract.