PSALM mulls sale in tranches of IPP deals for Ilijan

MANILA, Philippines - The Power Sector Assets and Liabilities Management Corp. (PSALM) is contemplating on selling the contracted capacity of the 1,200-megawatt (MW) Ilijan natural gas power plant in tranches.

PSALM president Jose Ibazeta told reporters that the plan, however, will depend on how the investors will respond to the proposal.

“We are still studying the proposal because we think it’s (contracted capacity) too big,” he said. “It will depend on the feedback on the potential bidders. We want to know if they are open to the idea.”

According to Ibazeta, this proposal will prevent market dominance of the winning bidder of the Ilijan package.

He said another reason is to make the Ilijan bidding financially viable to bidders since the amount would be huge if sold in one lump.

He said they would conduct an investors’ forum before the end of the year to get the feel of the investors on the proposal.

“Before we launch a sale, we conduct a forum. We may be able to complete the studies in the next few weeks to present it to the investors before the end of the year,” he said.

The PSALM official also said they hope to come up with the decision on the proposed staggered privatization of the Ilijan power plant’s independent power producer (IPP) contracts within the year.

PSALM intends to put on the auction block the third round of bidding for IPP administrators (IPPA) which includes the Unified Leyte, Malaya and Ilijan plants. The Ilijan natural gas plant has a take-or-pay contract with its gas suppliers.

The success of the IPPA biddings would likewise usher the era of open access, wherein bulk power users will be given an option to choose where to buy their requirements.

Under the law, PSALM should be able to privatize 70 percent of Napocor’s generating assets in Luzon and Visayas and 70 percent of Napocor contracts through IPPAs before it could proceed with open access.

The winning IPPAs will now manage the contracted capacities of Napocor in the Sual and Pagbilao power plants. Both power facilities are being operated by Japanese firm TeaM Energy under a build-operate-transfer agreement.

The 1,700-MW aggregate contracted capacities of the two power plants represent around 34.7 percent of the contracted capacity of the IPP contracts for Luzon and the Visayas. This is 35.3 percentage points short of the 70 percent requirement to privatize the contracted capacities under the IPP contracts to meet the last precondition for open access and retail competition as stipulated in the Electric Power Industry Reform Act.

PSALM emphasized that a bidder could only win one IPP contract to check concerns regarding market dominance.

PSALM expects to generate an estimated P13 billion for the IPP privatization.– Donnabelle Gatdula