PSALM sets 15-day due diligence prior to sale of Napocor plants

The Power Sector Assets and Liabilities Management Corp. (PSALM) will prescribe a 15-day due diligence period for the next batch of power generating assets to be put on the auction block to avoid delays in the privatization schedule.

PSALM vice-president Froilan Tampinco said that by strictly imposing a 15-day due diligence period, the entire privatization schedule will remain on track.

He noted that the due diligence process conducted by the prospective bidders for the 3.5-megawatt (MW) Talomo hydroelectric power plant was extended for nearly three months. Aboitiz Equity Ventures (AEV) topped two other interested bidders – Harty Inc. Philippines and Echo Tech Industrial Supply Corp. – and acquired the power facility for $1.3 million.

The next batch of generating assets include the two-MW Barit and four-MW Cawayan power plants, which will be sold as one package, while the 1.6-MW Agusan power plant will be sold on a stand-alone basis.

So far, seven local companies have expresed interest in the bidding scheduled in mid-May.

"We should start with Barit-Cawayan as we have already gotten a board approval for the sale. We are eyeing mid-May until June," Tampinco said.

Barit is located in Camarines Sur while Cawayan is situated in Sorsogon.

On the other hand, the second batch of generating assets up for privatization next month was put at bay because PSALM has to get approval from the Commission on Audit (COA) before it formally issues an invitation to bid.

"We first have to file with COA. Then there is a 20-day period before we can issue the public notice on the assets that need to be sold. After which, due diligence will take place. That is why we should strictly limit it within 15 days. The delay is not because of the coming national election but because the law mandates us to follow the requirements," Tampinco said.

PSALM will auction a total of 35 power plants. Eight groups made up of 17 plants will be sold as one facility, while 18 power facilities will be sold individually.

Previously, PSALM said about 48 firms wanted to participate in the privatization of the generating assets of the National Power Corp.

PSALM was created under the Electric Power Industry Reform Act (EPIRA) to absorb all the assets and liabilities of Napocor. It is also tasked to carry out the privatization and sale of IPP (independent power producers) contracts of the state-run power firm.

Proceeds from the privatization of the government’s transmission and generation assets will be used to pay Napocor’s outstanding obligations. This will significantly reduce the government’s borrowing requirements and supposedly result in lower electricity rates.

Tampinco said government can generate $2 billion from the sale of these assets, which would be sold with a land lease agreement of 25 years to resolve the issue of foreign ownership law wherein foreign entities are not allowed to own more than 40 percent of the resources of the country.