7 more IPP deals restructured soon

At least seven more independent power producer (IPP) contracts of the National Power Corp. (Napocor) are expected to be restructured within the next two to three weeks, a government official said yesterday.

Power Sector Assets and Liabilities Management Corp. (PSALM) president Edgardo del Fonso said PSALM and the Department of Energy (DOE) have already "agreed in principle" on some renegotiations to be done on the IPP contracts of Napocor.

"PSALM and DOE have reached an agreement with at least seven IPPs of Napocor," Del Fonso said, but declined to reveal the identities of the IPPs until they have already signed a formal contract.

"Some of them or some of the investors of these IPPs are public-listed companies here and abroad. We have to be careful about announcing some developments. We need to have the signing of the contracts first before making announcements, " Del Fonso said.

He said they are now in the process of completing the documents needed for the negotiation.

The last contract being negotiated by PSALM and DOE was that of Philippine Geothermal Inc. (PGI), a subsidiary of US-based Unocal.

The agreement with PGI will result in a savings of more than $200 million for the government during the life of the contract up to 2021.

Aside from PGI, the government has also sealed an agreement with Mirant Philippines Inc. and Kepco Ilijan Co. which has resulted in millions of of dollars savings.

The review of the IPP contracts is one of the ways of the government to reduce the stranded contract costs that will be absorbed by PSALM which will eventually pass the cost to the consumers through a universal charge.

PSALM has a pending proposal to charge some 40 centavos per kilowatthour to recover stranded costs of the Napocor amounting to a total of P900 billion for a period of 25 years. If PSALM and DOE will be able to renegotiate these contracts with IPPs which oftentimes result to realizing savings, the proposed 40 centavos universal fee will likely go down.