The pullout of the facility, which is serving the power requirement of the Cavite Export Processing Zone, is reportedly part of a global downsizing strategy to be carried out by the American firm starting end-June this year to trim down losses.
Despite this, National Power Corp. (Napocor) president Cyril del Callar has assured there would be no power interruption in the affected area.
"We won’t allow any disruption in their supply of power because ecozones are a critical component of our economy," Del Callar said.
Napocor and the Philippine Economic Zone Authority (PEZA) have a supply contract with the Magellan power plant. But two years ago, PEZA had already signified its intention to terminate its power purchase agreement (PPA) with Covanta, claiming that the power firm has apparently been unreliable. It was also noted that the US firm has been sourcing its power from Napocor’s one-day power sales (ODPS) to serve the locators in the economic zone instead of running its co-generation facility.
It was learned that an earlier Chapter 11 or Bankruptcy Protection Filing in the United States reportedly covered Covanta’s bid for the financial rehabilitation of its Cavite project.
It was further learned that the company’s lenders may take over the operations of the diesel-fired power facility.
Covanta acquired the facility from CMS Generation and Magellan Capital Holdings in February 1999. The contractual arrangement on its electricity output with PEZA-Napocor is scheduled to lapse in 2009.
Power sold to the export processing zone has been pegged at a discounted price as referenced to the grid rate of Napocor. Based on the 10-year supply agreement, any generation in excess of the ecozone’s requirement shall be sold back to Napocor.
Aside from the Cavite plant, Covanta has another supply deal for another 65-megawatt capacity for the Bataan Export Processing Zone but this already expired years back.
With its pullout of the Magellan plant, Covanta’s only remaining involvement in the Philippine power industry is its stake in the 460-megawatt Quezon Power Philippines Ltd. coal-fired power facility.