PSALM to lower minimum bid for Malaya plant

MANILA, Philippines — The Power Sector Assets and Liabilities Management Corp. (PSALM) is working on lowering the price of the 650-megawatt (MW) Malaya thermal power plant (TPP) in Rizal after two rounds of failed bidding.

The state-run firm will ask the Commission on Audit (COA) to allow it to reduce the minimum bid price (MBP) for the Malaya TPP of P4.48 billion, PSALM president and chief executive officer Irene Besido-Garcia said in an interview.

“The next step for us is to go to COA and get a discounting process, a mechanism for discounting the minimum bid price,” she said.

The current MBP is too expensive for interested bidders since the power plant is already old and “way past its commercial life,” Besido-Garcia said.

The Malaya TPP currently has two units, but only unit 2 is working.

“Unfortunately, that is quite high for the perspective of the private sector who will be bidding. Because if I cannot bring down the price, it is useless to do another bidding,” Besido-Garcia said.

The MBP is based on COA guidelines that’s why the agency cannot unilaterally lower the price.

“In terms of book value, it is really low, but if you look at COA guidelines and valuation of government assets you want to sell off, they have a lot of regulations.

For example, just to demonstrate, if an equipment is still operating, you cannot go below 15 percent condition factor, it has to be at least 15 to 25 percent, if you go below that, you can get into trouble,” she said.

Last month, PSALM declared the second round of bidding for the Malaya TPP another failure since no bidder met the MBP for the power plant and its underlying land in Pililia, Rizal despite having four qualified bidders.

These bidders were Panasia Energy Inc., AC Energy Philippines Inc., Fort Pilar Enegy Inc. and D.M. Wenceslao and Associates Inc.

“It is important for us to go in the process of bidding because that will tell you if the market is really willing to pay that amount,” Besido-Garcia said.

In lowering the Malaya plant’s MBP, PSALM will propose to consider the cost of running the plant as discounting factor.

“Right now, we pay for the fuel and the real property tax, so the cost of operating it is P400 million to 500 million,” she said.

The plant, which currently runs on diesel, was designated as a must-run unit (MRU) to address supply deficiency when operating power plants in the grid suddenly bog down or become unavailable.

It will operate as an MRU until the DOE finalizes its privatization schedule.

Located in Pililia, Rizal, the plant consists of a 300-MW unit with a once-through type boiler and a 350-MW unit fitted with a conventional boiler.

It was last rehabilitated in 1995 by Korea Electric Power Corp. under a 15-year rehabilitate-operate-manage-maintain agreement.