Kepco to bid for Masinloc power plant

Korea Electric Power Corp. (Kepco) will bid for the 600-megawatt (MW) Masinloc coal-fired power plant set to be auctioned off by October this year, a company official said.

The official, who requested anonymity, said they would start the due diligence on the power facility next week.

He said Kepco is eyeing Masinloc because it is relatively "new" and coal-fired power facilities have competitive or cheap rates.

The plant, which started commercial operation in 1998, is located in Zambales province. The project is being operated by the National Power Corp. (Napocor) and J-Power of Japan. It was financed by the Japan International Cooperation Agency (JICA).

The Masinloc coal-fired power plant is a baseload plant that supplies the Luzon grid, where consumption of electricity in the Philippines is highest.

Though the company can bid for the power plant on its own, the official said "it would be strategic for us to get a partner to share the risk".

The official added the government should ensure that Masinloc would be sold with a transition supply contract (TSC). A TSC, provided for under the Electric Power Industry Reform Act of 2001 enables buyers of Napocor’s power plants with a ready market.

"We are interested in Masinloc because we expect that it will have a TSC not because it will be sold on a deferred payment basis," he said. "However, prospective bidders like us would want to know how long the TSC will last."

Aside from Kepco, eight more groups, including Aboitiz Equity Ventures Inc. and First Generation Holdings Inc., that have also expressed interest in bidding for the Masinloc coal-fired power station.

Kepco, one of the largest power firms in Korea, first made its – presence in the Philippines with the rehabilitation, operation, maintenance & management (ROMM) contract for the 650-MW Malaya thermal power plant in 1995.

It also operates the 1,200-MW Ilijan natural gas-fired power plant in Batangas commissioned in 2002.

The government said it is willing to accept bids for the 600-MW Masinloc coal-fired station that would be paid in installments.

Energy Secretary Vincent Perez said the winning bidder for the Masinloc power plant will be determined on the basis of the highest upfront cash offer.

He said the government is willing to accept tenders that could see the winning bidder paying as much as half of the purchase price on a deferred basis. The deferred payment will have to be completed within five to seven years.

Froilan Tampinco, vice president of the Power Sector Assets & Liabilities Management Corp. (PSALM) said the government will even accept installment payments on up to 60 percent of the winning bid if the winner will build an additional power station within the Masinloc complex that could generate at least 100 megawatts of power.

PSALM is the state company overseeing the privatization of Napocor’s 35 power generation plants. Napocor’s transmission assets, valued at $2 billion, have been spun off to the National Transmission Corp.(Transco).

Napocor has already sold a number of small power stations, mostly hydroelectric plants, to local investors.