PPA cut won’t affect PSE-listed firms

The reduction of the power purchase agreement (PPA) charges being levied by the National Power Corp. (Napocor) has no material impact on the operations of energy companies listed at the Philippine Stock Exchange (PSE).

In separate statements, the power firms said the suspension of the PPA collection would have no immediate bearing on their operations and revenues for various reasons.

Salcon Power Corp. (SPC), the local energy unit of the Singapore-based industrial conglomerate Salcon Ltd., said its billings to Napocor, representing fees for exclusively generating and delivering electricity, are based on pre-established rates which are fixed for the duration of the contract period (up to year 2009) as set forth in the rehabilitation, operation, maintenance and management (ROMM) agreement with Napocor.

"Although a component of the fees charged to Napocor is entitled to a monthly inflationary factor adjustment based on a formula prescribed in the ROMM agreement, we believe that such adjustment does not fall within the context of the PPA in question and could not be unilaterally and arbitrarily suspended," SPC senior vice president Alfredo Ballesteros said.

Last week, F&J Prince Holdings said its revenues will likewise not be affected since its power affiliate Magellan Utilities has closed down the operations of its power generating plant while Manila Electric Co., the largest electricity distributor in the country, said its PPA billings are just pass-on charges from Napocor and hence, are not directly part of their operating revenues.

President Arroyo last week ordered the suspension of the collection of an 85-centavo per kilowatt-hour PPA charges pending a thorough review of the state-owned power firm’s contracts entered with independent power producers (IPPs) during the height of the power crisis in the early 80s.

Meanwhile, on the part of SPC, its Eight Islands Diesel Project faces rough sailing and may not push through with it after all due to a prohibition against NPC from incurring new obligation to purchase power through bilateral contracts with generation companies of other suppliers.

Although Napocor had issued a letter of provisional award to SPC in Feb. 2000 for the P1.4-billion, 50-MW project, the PPAs for each of the eight islands are currently with the National Economic Development Authority (NEDA) for the required review and clearance which SPC had hoped to sign within this semester.