Calaca reserve price to be reviewed, announced before bidding

14 Jun 2006

To ensure that only interested parties who can meet the reserve price will participate in the third round of bidding for the 600-megawatt Calaca coal-fired plant in Batangas, the Power Sector Assets and Liabilities Management Corporation (PSALM), the agency tasked to privatize the National Power Corporation's generation assets, will announce the reserve price prior to the bidding date.

"PSALM management is now reevaluating the reserve price for Calaca. It would be recalled that during the previous bidding, the submitted price proposals were way below the reserve price," said Mr. Froilan Tampinco, vice president for Asset Management and Electricity Trading.

"We wanted to allow interested parties, under terms to be included in the bidding procedures, a period within which to discuss with PSALM the factors or criteria in arriving at a reserve price," he added.

PSALM is now considering whether to conduct a sealed bidding or an "open negotiations" similar to what was done last April 27.

The second round of bidding last April 27 was declared a failure after one of the bidders showed up at the wrong venue. After a marathon meeting to ensure that all parties agreed with the procedures, the Privatization Bids and Awards Committee proceeded with the open negotiations wherein both DMCI Holdings Inc. and First Generation Luzon Power Corp. were given three chances to present price proposals. However, the price proposals of both bidders were below the reserve price.

Instead of submitting sealed bids during the next bidding, the participants may be allowed to submit price offers for a pre-determined number of rounds. The price offers will be made known to all participating parties. Each bidder will then be allowed to revise its price offer in the succeeding rounds. The party that submits the highest price offer while meeting the reserve price will be awarded the generating asset.

"Noting the sustained investor interest, we believe we ought to offer the option which will be most responsive to the investor market. At the same time, we are mindful of our mandate which is to maximize the proceeds from the sale of these assets for the government," Mr. Tampinco said.

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