PSALM adds sweetener to power plants’ sale

The Power Sector Assets and Liabilities Management Corp. (PSALM) will attach supply contracts to the 600-megawatt Masinloc and 600-MW Calaca coal-fired power plants before rebidding them in second half of this year.

PSALM vice president for asset management and electricity trading Froilan Tampinco said they would see to it that the auction of a power facility comes with a supply contract to make the asset more palatable to investors.

Tampinco said PSALM would try to work out a supply allocation agreement with the National Power Corp. (Napocor) within this month.

"We need to check the supply allocation with Napocor, which we expect to accomplish this month, so most likely by March we will send out the invitation to bid for Masinloc," he said.

He said they expect to stir more interests from prospective bidders with the move to assign a supply contract to the two power facilities.

"We remain hopeful that there will be a lot of bidders. We have yet to know how many bidders will be participating in the second round of bidding for the Masinloc. During the first time there were around 23 bidders that expressed interest and attended the pre-bidding conference," he said.

"A lot were discouraged to bid due to the absence of a supply contract, but now we will not proceed with any unless we have a supply contract. There is already an arrangement in the contract for the assignment supply contract; it’s just a matter of agreeing with Napocor what kind of assignment will be allotted," he added.

The bidding for the Zambales-based Masinloc, he said, is expected by mid-2007 or early second semester while the bidding for Calaca located in Batangas will follow two months after the Masinloc auction.

"Within the month, we will have a special planning with the Department of Energy and Napocor to discuss among others, the supply contract allocation. The reserve price will depend on the (PSALM) board," he said.

Previous bidding for the two power facilities failed several times mainly due to the lack of supply contracts.

Last month, Napocor and Manila Electric Co. (Meralco) sealed a five-year transition supply contract (TSC) which, however, will be automatically terminated one year after the introduction of the open access scheme.

The TSC would help in the privatization of Napocor generating assets as this would ensure the buyers of a ready market for their electricity.

It would be recalled that the two prospective bidders for Calaca backed out at the last minute last April, citing the absence of a TSC.

In the case of Masinloc, the winning consortium failed to deliver the upfront payment for the plant though it tried, yet unsuccessfully, to negotiate with Meralco for a TSC.

Tampinco said the signing of the TSC with Napocor and Meralco will ensure a ready market for Masinloc and Calaca, thus making them more attractive to bidders.