Napocor to wrap up new deals with IPPs

The Power Sector Assets and Liabilities Management Corp. (PSALM) is optimistic it can finish the renegotiations of all the contracts of the National Power Corp. (Napocor) with its independent power producers (IPPs).

"There is a good chance we will finish everything within the year. This is our target," PSALM president Edgardo del Fonso said.

Del Fonso said PSALM hopes to resolve some of the IPP contracts within the next few weeks. "By mid-October, we will be able to successfully renegotiate some more IPP contracts," he said.

PSALM was created under the Electric Power Industry Reform Act (EPIRA) to handle all the assets and liabilities of Napocor. The agency is also tasked to negotiate the IPP contracts of the state-run power firm.

The renegotiation of the IPP contracts is seen to help reduce electricity costs while preserving the sanctity of these contracts.

The last contract that was renegotiated by the Department of Energy (DOE) and PSALM was that of the CBK Power Co. Ltd., which resulted to a savings of $96 million or approximately P5 billion.

CBK Power, a joint venture partnership between IMPSA of Argentina and Edison Mission Energy of California, is currently rehabilitating, upgrading and expanding the Caliraya-Botocan-Kalayaan hydropower complex in Laguna.

The agreement with CBK Power brings to 18 the number of IPP agreements that have been settled by both the PSALM and the DOE.

Energy Secretary Vincent S. Perez said the negotiations with several IPPs have been fairly successful, generating substantial savings of $832 million in net present value (NPV) to the government without undermining the viability of the firms to earn fair and reasonable returns.

Other contracts that are being worked out by PSALM with 18 firms/consortia include: Calenergy; Aboitiz (Benguet, Bakun); Alsons/Tomen (Iligan City 1 & 2, Zamboanga, General Santos); Alstom (Limay Bataan A & B); Bauang Private Power Corp. (Bauang La Union); Covanta (Cavite EPZA, Bataan EPZA); Enron (Pinamucan, Subic Zambales); Kepco ( Malaya, Ilijan Gas); Marubeni Sithe ( San Roque); Mirant (Navotas I-III, IV, Pagbilao, Sual); Mitsui (Mindanao Barges); NIA (Casecnan); Ormat (Makban Binary); PNOC-EDC (Leyte A & B), Mt. Apo I and II; Salcon Power (Naga Complex); State Power (Mindanao Coal); Chevron-Texaco (San Pascual co-generation); and BHEPI (Binga).

The review of the IPP contracts is one way of reducing the stranded contract costs that will be absorbed by PSALM which will eventually pass the cost to the consumers through a universal charge.

PSALM has a pending proposal to charge some 40 centavos per kilowatthour to recover stranded costs of the Napocor amounting to a total of P900 billion for a period of 25 years.

If PSALM and the DOE will be able to renegotiate these contracts with IPPs, the proposed 40 centavos universal fee will likely be reduced.