Supply contract boosts PSALM's confidence of selling Tiwi-MakBan package

28 Apr 2008

The Power Sector Assets and Liabilities Management Corporation (PSALM) is confident of gaining the full support and participation of the prospective investor groups in the upcoming bidding exercise for the 747-megawatt (MW) Tiwi-MakBan geothermal power complex to be held by June this year.

PSALM's confidence was bolstered after it successfully worked with the National Power Corporation in attaching a substantial power supply contract to the Tiwi-MakBan package.

The geothermal complex was allocated more than 400 MW of power supply contracts (PSC), providing the new owner a ready market for the electricity that the power facility will generate. The PSC, which is part of PSALM's commitment to accelerate the power privatization program of the government, is expected to optimize the value of the Tiwi-MakBan power plants.

PSALM made the announcement during the second pre-bid conference held last 17 April to provide the bidders another opportunity to discuss the PSC allocation and issues on the geothermal resources sales contract (GRSC).

All of the nine investor groups interested in bidding for the Tiwi-MakBan geothermal plant attended the second pre-bid conference.

PSALM presented to the bidders the privatization framework covering the transition period until the effectivity of the GRSC. The major provisions of the GRSC, such as the scope and pricing, were also discussed to provide the bidders more insights on the intricacies of the contract. Since the steam field assets and generating plants will be sold as one package, Chevron Geothermal Philippines Holdings, Inc. (CGPHI), the entity which operates and maintains the Tiwi-MakBan geothermal facilities, also made a presentation on the generation and steam production history and the current production and future opportunities on the Tiwi-MakBan geothermal fields.

PSALM also explained the underlying relationship between and among the major stakeholders that include PSALM, National Power, CGPHI and the buyer under the existing Transition Agreement.

Due to the flurry of questions and concerns raised by the bidders, particularly on the restoration of MakBan Units 5 and 6 which is an important requirement under the Asset Purchase Agreement and the GRSC, PSALM told the prospective bidders that it might hold another consultation to thresh out these critical issues.

With the sale of the Tiwi-MakBan geothermal complex, PSALM expects to reach a significant output that will bring it closer to the 70% privatization target for the generating assets of National Power in Luzon and the Visayas to fulfill one of the preconditions for implementing open access and retail competition in the Philippine electricity industry.

Strategic Communications and Partnership Division
Tel. No. (632) 9029067