Government hopes to rework two more IPP contracts this year

At least two more contracts with independent power producers (IPPs) are expected to be negotiated by the government in the remaining months of the year.

Power Sector Assets and Liabilities Management Corp. (PSALM) president Edgardo del Fonso said he is optimistic that they could finish the negotiations for the pre-termination of the power purchased agreement (PPA) of the National Power Corp. (Napocor) with San Pascual Co-generation plant. "It (San Pascual contract negotiation) should be (finished) within the year," Del Fonso said. PSALM is mandated by the Electric Power Industry Reform Act of 2001 to handle the assets and liabilities of Napocor, including the bilateral contracts with IPPs.

Del Fonso said they are just threshing out some remaining issues in the deal. "We are still discussing. There are still some questions that should be answered like if the government will pay termination fee and how much," he said.

Another contract being worked out, according to Del Fonso, is the one entered into by Napocor with Enron Power Corp. A few months ago, US-based Edison Mission Energy said they also expect the pre-termination of the San Pascual contract to be firmed up before the year ends.

"We are already in the final stage of our negotiation with Napocor. Hopefully, before the end of the year, we will be able to come up with an agreement," Edison Mission director for Business Development Asia Pacific Tony C. Hsun said, in an interview.

Hsun said they have been talking with Napocor and PSALM officials since late last year. "Napocor approached us in December 2001. And early this year, we have finally agreed to terminate," he said. Aside from Edison, the other member of the consortium for the San Pascual project is Chevron Texaco of US.

The San Pascual project was supposed to take up the remaining 300 megawatt (MW) from the 3,000 MW Malampaya Deep water Gas to Power project. The 2,700 MW were distributed to Ilijan Power Plant of Napocor and Korea Electric Co. (Kepco), 1,200 MW; Lopez-owned Sta. Rita, 1,000 MW and San Lorenzo, 500 MW.

The negotiation for the possible buyout of the Enron power plants, on the other hand, started early this year when Enron Corp. of the US declared bankruptcy. "No definite terms yet on Enron, but we are still studying it," the PSALM chief said.

The government earlier proposed to buy out two BOT power plants of Enron Power – the 105-megawatt (MW) Pinamucan-Enron oil-based power plant in Batangas and 108-MW Subic-Enron 2 Unit 1-8 in Olongapo, Zambales – but at a discount.

The two power plants have an estimated cost of $250 million. The contract for the Batangas plant started in July 1993 and expires in July 2003 while the Zambales contract has a 15-year tenure and will lapse in March 2009.