No take-or-pay deal with PEZA — Covanta

The country manager of Covanta Energy has assured the House committee on energy that its power supply contract for the two economic zones in Cavite and Bataan is not covered by a take-or-pay provision.

"The Philippine Economic Zone Authority (PEZA) pays only for electricity that it sells to its locators and is, in fact, given an eight percent discount from the National Power Corp. (Napocor) grid rate," Oliver Cruz said.

Covanta, he said, assumes the market risk as PEZA pays for only what it uses, and this risk is even magnified when the company extends an eight-percent discount to PEZA which adds its distribution margin, then resells to locators.

Covanta owns Magellan Cogeneration Inc. (MCI) which supplies power to the Cavite Economic Zone, and the Edison Bataan Cogeneration (EBC) which supplies the Bataan Export Processing Zone.

In the same hearing, Napocor president Rolando Quilala said that as a cogeneration facility, the main bulk of Covanta’s output goes to the ecozones as contracted, while the surplus is nominated to Napocor as part of the state power firm’s insurance capacity, as contrasted from Napocor’s baseload plants.

In other words, that capacity is only called on or used in times of critical short supply or during peak loads.

The Napocor contract with Covanta, Quilala said, is an "energy conversion agreement," where Napocor supplies the fuel and pays only for the portion of capacity not used for PEZA. This capacity is nominated monthly and is currently 15 megawatts.