13 Apr 2005
The Power Sector Assets and Liabilities Management Corporation’s (PSALM Corp.) privatization continues to gain momentum as nine local and foreign companies have expressed interest in bidding for the Calaca coal-fired thermal power plant.
The 600 MW power plant located at San Rafael, Calaca, Batangas is the first major asset in PSALM’s bidding line-up for this year. Interested bidders started sending their letters of interest (LOI) last March 21 after PSALM issued a public notice in major broadsheets.
Mr. Froilan A. Tampinco, PSALM Vice President for Asset Management and Electricity Trading Group, said they are pleased with the turnout of possible bidders, saying that “the number of companies who have expressed their interest to participate in the bidding of Calaca, although not yet final, only goes to show that our assets still have an appeal to investors. It also indicates that the government’s privatization plans are moving, contrary to what many critics are claiming.”
A global credit research company—Moody’s Investor Service—earlier released a ratings report saying that the Philippine power industry’s “pace of reform remains slow more than 3 years after the introduction of the Electric Power Industry Reform Act (“EPIRA”) IN 2001,” and that “the sector’s weaknesses continue to outweigh some of the progress achieved in restructuring.”
Citing the same report by Moody’s, Tampinco said the Philippines’ privatization efforts are faring better compared to those of some Asian countries which have even slowed down.
Moody’s report stated, “Specifically in Malaysia, restructuring of the electricity sector has stalled as the government reviews the need for and scope of reform. The current structure is highly unlikely to change in the next few years.”
The report then added, “And in Korea, government plants to privatize the gencos and liberalize the power market have slowed. The government’s decision to delay spinning off KEPCO’s distribution subsidiaries implies a deferment of its plan to introduce a two-way bidding system for power, providing further comfort that competition will remain well contained in the near to medium term.”
Tampinco further said that “PSALM’s privatization schedule has been carefully mapped out such that any factor which may cause delay or hindrance to the privatization plans is buffered.”
Tampinco also added that despite the rigid requirements set by the Asian Development Bank, World Bank and Japan Bank for International Cooperation, “We are confident that these three major creditors will eventually give the consents we are seeking.”
The said creditors’ consent is required, under the various loan and financial agreements that NPC entered into with its creditors, before the power plants could be turned over to the winning bidder. Earlier into the privatization process, the creditors already gave their full consent to the sale and transfer of the small hydroelectric power plants. PSALM still continues to secure the creditors’ consent for every asset that it plans to privatize, including the Masinloc power plant and the Batangas power plant.
PSALM will hold a pre-bid conference for the Batangas power plant on April 14 in its office at the 2nd floor of SGV II Building in Makati City. Deadline for the receipt of bids for the Calaca plant is on May 18.
In 2004, PSALM was able to successfully bid-out six of its generation assets, which amounted to a total of US$566.95 million or PhP 31.75 billion proceeds for the Philippine Government.
PSALM also announced its new privatization strategy to investors in an Investors’ Forum held last February 16. The new privatization strategy includes arranging its assets in schedules composed of plants of different fuel types to maximize bidder universe.
PSALM’s new privatization strategy also involves the Investor Preliminary Asset Review Process (IPARP), which is designed to accelerate the overall sale process of the generation assets. The IPARP “allows the investors to conduct a preliminary review of the assets, which is hoped to reduce the time between individual sales and conclude the sale process more rapidly than envisaged.”
“With the implementation of our new privatization strategy, PSALM expects to meet its targeted 70% privatized assets at the end of 2005,” Mr. Tampinco added.
The 70% targeted privatized assets is required of PSALM by section 47 of EPIRA, in preparation for open access. The Wholesale Electricity Spot Market (WESM), on the other hand, is to be established, as mandated in section 30 of the EPIRA, to create a competitive market that would help bring cost-effective electricity to consumers.
In line with WESM, the government has also been rigorously working on the spot market’s groundwork through the Trial Operation Program (TOP), which shall serve both as a training program for possible market players, as well as a gauging period for the probability of the actual spot market.
“In all of these privatization efforts, PSALM continues to strive for improvements in the privatization plan, as we recognize our crucial role in the realization of a reformed power industry. We have carefully enhanced our procedures, and we continuously seek the most efficient means of disposing NPC’s assets, without compromising optimal benefit to the Government and the public, of course. Let’s put out a strong message to our investors that we are dead serious with our reforms,” Mr. Tampinco stressed out.
Strategic Communications and Partnership Division |