Investors want to buy Agus, Pulangi power plants

MANILA, Philippines - The Philippine Independent Power Producers Association (PIPPA) is urging regulators to privatize the Agus and Pulangi hydropower plants, instead of the proposed operate and maintain (O&M) or rehabilitate, operate and maintain (ROM) schemes.

“What we are proposing is that they execute for Agus-Pulangi long-term contracts with escalated tariffs approaching the market level of coal,” PIPPA president Ernesto Pantangco said.

The PIPPA proposal still remains a privatization call that makes it more attractive to domestic and foreign investors. Businesses and residents in Mindanao would rather deal with escalating costs of power rather than not have power at all, it argued. Presently, some of the hydropower plants are under repair, thus not producing electricity.

The Agus complex has seven facilities with a total capacity of over 700 megawatts (MW). The first Agus plant, Agus 6, was erected in 1953. The newest of the Agus power plant is Agus 1, which went online in 1992.

The Pulangi facility, located in Bukidnon, has a 255-MW capacity and commenced operations in 1985.

The group argued that O&M will not work as the investor will be operating and maintaining a plant that is dilapidated. For ROM, the period to recover investments is deemed too short compared with the very high costs of rehabilitation.

“There is just no incentive to make investments in improving the power plant,” PIPPA said.

The proposal is to privatize it and implement a step-up tariff program to allow a reasonable return on investments over several years. It will also prepare businesses to be ready a programmed escalation in power costs, also over a programmed period of time.

“Businessmen can project the price of projected power price and adjust their cost of goods sold accordingly,” it added.

Earlier, Sarangani Energy Corp. suggested that the future output of the hydropower plants be sold instead of privatizing the assets.

“Perhaps they (Power Sector Assets and Liablities Management Corp. or PSALM) could look at alternative forms of privatization. Maybe we should look at privatizing not the asset, but the future output that will come out of these plants,” Joseph Nocos, Sarangi Energy vice president, said.

Selling future output rather than privatize the hydropower plant addresses other concerns of Mindanaoans in preserving vital natural resource, he added.

The utilization factor of the Agus-Pulangi plants can be forecast and the total kilowatthours (kwh) available from the assets over the long-term can be sold to interested parties.

While Sarangani Energy is reviewing the privatization of the Agus-Pulangi plants, it is building a 200-MW coal plant in Sarangani and a 100-MW coal plant in Zamboanga.

Nonetheless, the Agus-Pulangi hydro resources are considered a competitive and critical generating source.

Aside from these issues, political and security issues involving the hydro power plants need to be addressed. The patrimony issue is strong among natives of Mindanao while the Moro Islamic Liberation Army (MILF) declared the Agus system as part of their ancestral domain.