Calaca Bidding Set This Month

07 Apr 2006

Prospective bidders of the 600-megawatt Calaca Coal-Fired Thermal Power Plant have until 12 noon of 27 April 2006 to submit their financial bids for the power facility located at Calaca, Batangas.
"PSALM has released the final transaction documents to the bidders so they can now start submitting their proposals for Calaca," said Mr. Froilan Tampinco, vice president for Asset Management and Electricity Trading of the Power Sector Assets and Liabilities Management Corporation (PSALM). PSALM is the government's arm privatizing the generation assets of the National Power Corporation.
The final transaction documents, which contain the land lease and asset purchase agreement (APA) for the Calaca power plant, are required as part of the legal component that bidders have to submit together with their financial bids. PSALM issued its invitation to bid for Calaca in August 2005, with four investor groups submitting letters of interest to participate in the public bidding.
"While we are selling Calaca mainly as a merchant plant, PSALM has attached to it a supply contract equivalent to 83 megawatts," Mr. Tampinco said. "The new owner will only have to look for additional markets and negotiate for its own bilateral contracts with either distributors or big electricity consumers."
Under the Electric Power Industry Reform Act (EPIRA), distributors are required to source at least 10% of their electricity requirements from the spot market. The commercial operation of the WESM will provide operators of the power plants a venue for real market competition to flourish.
PSALM initially bid out the Calaca power plant in June 2005, but two of the three bidders withdrew before the deadline of submission of the bids. One of the reasons cited was the absence of a transition supply contract (TSC). A TSC with electric distributors and other offtakers attached to a generating plant being sold will ensure the winning bidder that the plant will be dispatched.
PSALM and National Power have concluded TSCs and bilateral supply contracts with 118 electric distributors and cooperatives. "But these represent only 28% of the market and will not be sufficient to cover all the generating assets we are offering," Tampinco pointed out.
Recently, though, the government received and accepted Meralco's offer to institute open access, which would allow large industrial and commercial customers to choose their own power suppliers. Open access would enable power generators to directly market their electricity by closing their own deals or contracts with large power users. This development, in turn, would allow Calaca, Masinloc and the other power plants being sold by the government to compete with each other in securing their own market once they are privatized.
"In proceeding with the privatization of these assets, we should not lose sight of the bigger objective - that goes beyond privatization itself - and that is a restructured power industry whose benefits will redound on consumers in terms of more affordable electricity rates," Mr. Tampinco said.

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