Napocor offers supply deal to sweeten Masinloc plant sale

The National Power Corp. (Napocor) said it is willing to allocate 137.5 megawatts (MW) worth of transition supply contract (TSC) to the 600-MW Masinloc coal-fired power plant, a ranking company official said.

"We have submitted our recommendation with the Power Sector Assets and Liabilities Management Corp. (PSALM). We have proposed for at least 25 percent average daily load of the dependable capacity of Masinloc," Napocor president Cyril del Callar said.

The allotment of the TSC is crucial to the bidding of the Zambales-based power facility scheduled in July. A TSC assures the winning bidder a ready market for the plant’s output.

Del Callar said the dependable capacity of Masinloc currently stands at 550 MW. If computed, the TSC that Napocor is proposing to attach to the sale of the power plant will be at 137.5 MW.

But Del Callar pointed out that the proposal is still subject to the approval of PSALM, the state-run entity handling the privatization of Napocor’s generating assets.

"We will abide to whatever PSALM wants," the Napocor official said.

Del Callar also pointed out that the level of TSC they are proposing is consistent with the objective of ensuring the reliability of the system.

He noted that PSALM has so far only attached the equivalent of 25 percent dependable capacity of TSC to the power facilities that were previously disposed.

PSALM president Jose Ibazeta earlier said that they hope to sell all the power plants of Napocor with TSC to make them more palatable to investors.

PSALM vice president for asset management and electricity trading Froilan Tampinco said the number of investor groups that have expressed interest to join the bidding for the Zambales-based coal-fired facility continues to grow.

As of last count, there are already 23 interested investor groups that have expressed interest to join the Masinloc bidding. Masinloc is one of the crown jewels of Napocor, being one of the newest and biggest power plants in the country.

Out of the 23 interested groups, 15 are foreign entities and the rest are local investors. Of the 15 foreign groups that have signified interest to join the July 26 bidding of Masinloc, four are US-based, seven are Asian firms and four are from Europe.

He said the interest to join the bidding was heightened by PSALM’s pronouncement that it would attach a supply contract to the Masinloc plant. 

Tampinco added they expect to come up with a working framework with Napocor as soon as possible. 

"We are holding a session with the Department of Energy and we hope to firm up the TSC level to be attached to Masinloc," he said. 

Tampinco said he is optimistic that more investors would participate in the bidding. "The asset by itself is an attractive investment.  We are adding value to it by way of supply contracts." 

Tampinco said PSALM is also set to review the technical and financial pre-qualification criteria in the power plant’s sale schedule to ensure that the government’s interest in the auction is adequately protected.

The bidders are currently conducting their respective due diligence studies in time for the pre-bid conference on May 8. But prospective bidders are allowed to have their due diligence activities up to July 19, a week before the actual bidding for the power plant.

The sale of Masinloc to the Australia-led YNN Pacific consortium in 2006 did not materialize because of the consortium’s failure to deliver the $227-million upfront payment on the deadline set by PSALM.

YNN decided not to pay the upfront downpayment due to the uncertainty of securing a TSC.

With YNN’s failure to push through with the purchase of Masinloc, the asset management firm was compelled to forfeit the $14-million performance bond posted by YNN.

Masinloc is among the big-ticket items lined up to be sold by PSALM this year.