A group of big power producers is urging the Power Sector Assets and Liabilities Management Corp. (PSALM) to consider some of their inputs for the bidding of the independent power producer (IPP) contracts of the National Power Corp. (Napocor).
In a press briefing, Philippine Independent Power Producers Association (PIPPA) president Ernesto B. Pantangco said most of their members want to privatize the Napocor-IPP contracts on an individual basis.
This, however, runs counter to one of the approaches being explored by PSALM allowing the sale of the IPP contracts in bulk or in three batches at 2,000 megawatts each batch.
He said based on the rule of thumb, if PSALM sells the IPP contracts in bulk, the 2,000-nw batch will fetch an investment of $4 billion per portfolio.
“Bidding out this huge portfolio will be very complicated,” he said.
PSALM wants to cluster the IPP contracts to enable it to sell the less attractive IPP contracts with that of the attractive ones.
Another important parameter that the PIPPA wants PSALM to consider is the transfer of ownership to IPP administrators (IPPAs) at the end of the build-operate-transfer (BOT) contract period.
Based on the proposed approach of the World Bank and the Asian Development Bank (ADB), there is no mention of ownership transfer and the IPPAs will just serve as traders of the energy output/contracts of the power plant they will acquire.
The group, however, is supportive of the idea that the winning IPPAs will have full control over cost components such as the fuel procurement function of Napocor.
They are also proposing to allocate transition supply contracts (TSCs) or bilateral contracts level to assure stable load operations of baseload power plants or mitigate market risks.
According to the group, they also want full access to due diligence documents and data of the IPP contracts.
Pantangco said the main concept that the PIPPA is pushing is the signing of a memorandum of agreement (MOA) between Napocor and IPPAs on the supply of fuel, purchase of power and energy under existing BOT contract terms and transfer of plant ownership at the end of the BOT contract period.
On the part of the BOT contractors, he said they want a status quo on the existing BOT contractual obligations.
“These include Napocor contracting party, capacity, fixed O & M fees (dollar and peso denominated), energy fees, government performance guarantees and downtime allowances,” he said.
The IPPA official noted that investors’ view on this landmark bidding scheme should be considered. Formulation of an IPPA structure should take into account investors’ preferences.”
“The privatization of Napocor-IPP contracts shall be in accordance with the Electric Power Industry Reform Act (EPIRA) provisions and should attract investor interest,” he added.
He also noted that “privatization of Napocor-IPP contracts in Luzon and the Visayas shall be in accordance with EPIRA provisions on cross ownership, market abuse and anti-competitive behavior.
Under the EPIRA, PSALM is required to appoint IPP administrators to manage and control Napocor-IPP plants until such time that the contracts have expired.
Based on earlier proposals, the IPPAs will handle the contracts of Napocor with a total 4,221-mw capacity.
The IPPAs will be tapped through a competitive bidding and those targeted are international power industry players and traders to be engaged as IPP administrators.
As proposed, the IPPAs will primarily bid out the IPPs energy output into the wholesale electricity spot market in a manner which optimizes its running hours and net revenues. They would also negotiate bilateral contracts with customers and/or sell options, including financial instruments or insurance capacity.