PSALM mulls negotiated sale for Calaca coal power plant

MANILA, Philippines - The state-run Power Sector Assets and Liabilities Management Corp. (PSALM) may pursue a negotiated sale for the 600-megawatt (MW) Calaca coal-fired power plant, the agency’s top official said yesterday.

At the sidelines of a congressional hearing on Calaca’s failed biddings, PSALM president Jose Ibazeta told reporters that since Calaca already had two failed auctions, they now have the option to negotiate the sale of the power facility.

“We will try to re-bid Calaca this year despite the financial market uncertainties. It will be up to the bidders if they participate or not,” he said. “But since we have failed biddings twice, under the rules, we are free to negotiate with interested buyers. We will write to those who have expressed interest in the previous biddings.”

Ibazeta, however, noted that PSALM may not be able to fetch the same $787- million offer from Emerald Energy Corp. (EEC), the vehicle used by French power group Suez Energy to bid for Calaca.

The PSALM chief admitted that different sets of bidders may have different sets of factors to consider in buying a power plant.

“It is hard to figure out what’s going to be the mindset of the new set of bidders for Calaca.  But with the global financial crisis, it may be difficult to raise the same bid price as that of Suez Energy,” he said.

At the same time, Ibazeta disclosed that the government had already forfeited the performance bond amounting to nearly $15 million or two percent of the bid price of the Suez group. PSALM sources said the performance bond was forfeited in favor of the government last Feb. 2.

During the same Congressional hearing, Ibazeta said the targeted level of privatization of power assets has been affected by the failed sale of Calaca.

From the supposed previous level of 70 percent, the privatization level went down to 54 percent. Calacas’ 600-MW capacity represents 16 percent of the privatization goal.

The Congressional inquiry was also focused on why Calaca’s sale failed. Nueva Ecija Rep. Rodolfo W. Antonino zeroed in on the increased utilization of local coal from Semirara Mining Corp. as one of the possible reasons why the Calaca power plant failed to reach the condition stipulated under the sales agreement with Suez Energy.

PSALM earlier announced that EEC “will terminate its purchase of the asset due to the deterioration of the power plant since its bidding date on Oct. 16, 2007.”

EEC submitted the highest bid of $787 million and was supposed to make a 40- percent upfront payment to PSALM by Nov. 9, 2008.

But due to some unresolved issues, EEC did not pay the upfront cash and finally decided last Jan. 23, 2009 to inform PSALM of the sale termination.

EEC’s main reason for the sale termination was that the government was not able to deliver the plant based on the sales agreement.

It would be noted that one of the conditions for the turnover of the power plant is that it should be delivered to the winning bidder on an “as is, where is”, or in the same condition as it was during the bidding date.

Antonino stressed that the use of 100 percent blend of local coal on Calaca’s power units affected its performance over the years.