PSALM to study privatization options for hydro plants
Danessa Rivera (The Philippine Star) - December 9, 2019 - 12:00am

MANILA, Philippines — State-run Power Sector Assets and Liabilities Management Corp. (PSALM) is targeting to complete the study on the privatization options for the hydropower plants under Independent Power Producer (IPP) contracts next year.

PSALM president and CEO Irene Joy Besido-Garcia said the agency aims to be able to decide on the privatization structure of the Caliraya-Botocan-Kalayaan (CBK) hydroelectric power plant (HEPP) and the Casecnan HEPP next year.

 “We’re going to start studying the two because as you know, the power plants, they have different structures. It’s important to structure it well, whatever is the current scenario,” she said.

The agency is tapping the Asian Development Bank (ADB) to do the study on both power plants, as directed by the Department of Finance (DOF) earlier this year.

“We are seeking the assistance of ADB to look at the technicalities of that. Hopefully by next year, we will be able to decide on the privatization structure,” Besido-Garcia said.

The CBK-HEPP is currently under an IPP administrator (IPPA) contract with CBK Power Co. Ltd. until Feb. 7, 2026.

The Casecnan plant is under CE Casecnan Water and Energy Company Inc. until April 5, 2022, while the Mindanao coal plant is under the IPPA contract with STEAG State Power Inc. until Nov. 15, 2031.

PSALM is finalizing the coverage of the study to be conducted by ADB, which includes setting the minimum bid price and the timeline of the study.

 “We are fine tuning the scope of the coverage of the study of ADB so that by next year they can start the study,” Besido-Garcia said.

“Once there is a list of recommendations, we will plot that into the privatization structure,” she said.

In terms of chronology, the state-run firm wants to privatize CBK HEPP first before Casecnan HEPP, which has a more complicated ownership structure.

PSALM, through the National Power Corp. (Napocor), only owns 60 percent of the Casecnan HEPP, while the remaining 40 percent is under the National Irrigation Administration (NIA).

Besido-Garcia said the agreement between Napocor and NIA does not have implementing provisions on exactly how to divide the 60-40 ownership between the two once Casecnan HEPP is privatized.

 “That’s precisely why there is a need to study. That arrangement, it’s not a carbon copy of any earlier arrangement. We need to see how do we best structure the privatization,” she said.

 “Obviously, we need to carve out that 60 percent. So how do you carve it out, how do you divide the assets? Is it going to be an identification of what are the irrigation assets and what are the power assets?…So that’s what we need to work on,” the PSALM chief said.

Meanwhile, PSALM is also targeting to start the feasibility study on the privatization of its Quezon City property within the month.

It recently conducted a bidding for the feasibility study where PricewaterhouseCoopers (PwC) Philippines submitted the “most responsive bid,” Besido-Garcia said.

 “We’re doing post qualification activities. After the post qualification, if everything is okay, hopefully by Dec. 13, thereabouts, we’ll be able to proceed NTP (notice to proceed) to PwC. After that, they can start the process,” she said.

The feasibility study has a contract cost of P5.98 million and a period of 120 days for completion.

The Diliman property is one of PSALM’s most valuable properties given the development surrounding the land assets. It is where the Napocor and National Transmission Corp. (TransCo) are currently housed.

It is a 5.1-hectare property located at the heart of Quezon City’s Central Business District. Due to its strategic location and ongoing high-rise development in adjacent properties, it is considered a prime property with high potential for residential, commercial and mixed-use development.

The privatization programs aim to generate additional income for the payment of PSALM’s assumed liabilities.

PSALM is the agency mandated by Electric Power Industry Reform Act of 2001 to handle the sale of the remaining state-power assets and the financial obligations of Napocor. 

As of end-June, the state-run firm still has P428.9-billion remaining payables. PSALM has seven years left in its corporate life ending in 2026.

HYDROPOWER PLANTS POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORP.
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