Napocor mulls new penalties on Mirant Phils

The National Power Corp. (Napocor) is looking at the possibility of slapping new pe-nalties on Mirant Philippines Inc. for the possible power delivery shortfall of its 1,200-megawatt (MW) Sual power plant.

The Sual power facility is reportedly being scheduled to be down for the next six to eight months or until April 2007 as one of its engines was damaged and needs to be repaired.

Napocor sources said that Mirant had already informed them of the plant shutdown.

Starting last Aug. 7, the Sual plant went on a forced outage or 600 MW would be taken out of the grid for nearly a year. Napocor president Cyril del Callar said Mirant’s move to close down Sual would entail appropriate penalties.

"There would be corresponding charges for power that they cannot deliver," Del Callar said. Mirant and Napocor have an existing power supply contract or the energy conversion agreement (ECA). Should Mirant fail to deliver power of the prescribed level under the contract, it would have to pay the corresponding charges for the reduction of its capacity.

The sources said the prospective investors of Mirant have been looking at these issues as this may affect the valuation of the Mirant assets. It was learned that these apparent issues may lower the expected sale proceeds from $2.8 billion to only $1.2 billion.

Napocor already had earlier claims with Mirant to refund some P1.35 billion worth of excess fees paid for the operation and maintenance of Sual.

Of the P1.35-billion claim, P629.916-million overpayments were recorded under the Mirant’s share in the operations and maintenance (O&M) expenses in the electricity sold from volumes above the net contracted capacity from the Sual plant.

Another P602.447 million was incurred due to back-up power charges for excess energy sales during planned and unplanned outages of one of the units of Sual.

About P118.427 million in overpayment, on the other hand, was accounted from September 2001 to December 2004 as Mirant’s share in a power sharing agreement for Republic Cement Corp.

On the back-up power charges, Napocor said when one of the generating units is under maintenance shutdown, whether planned or unplanned, Sual is clearly not in a position to supply the 1,000 MW because the remaining unit cannot provide the net contracted capacity on its own.

On the power sharing for RCC, Napocor said it was discovered that additional charges were due from Mirant as a result of the recomputation of Mirant’s share in the energy requirements of RCC.

Mirant to pay P5-B taxes next month

Mirant Phils paid P251 million in documentary stamp taxes on loans last week and will pay more than P5 billion next month in withholding taxes on dividends to its parent company, the company’s chief executive said.

Mirant Phils chairman and president, Jose Leviste Jr., said the parent firm, Mirant Corp., has decided to focus on its US business and to sell all its non-US assets, including its interests in the Philippines, Jamaica, Trinidad, Curacao and Grand Bahama.

As part of its divestment from the Philippines, Mirant Corp. proposes to sell the same Hong Kong-based holding company that it bought in 1999 from Hopewell Holdings and through which Mirant Corp. holds all its Philippine interests, including the Sual and Pagbilao power plants and its investment in the Ilijan power plant.

"When Mirant bought the off-shore parent company, the local operating companies did not incur additional tax liabilities. This will also be the case when Mirant sells the same off-shore parent company," he said.

The divestment plan has attracted more than 30 strong power players and is expected to be completed by the end of this year.

Leviste said the number of interested buyers is a vote of confidence for the Philippines and Mirant Phils.

"We will have strong and worthy investors and we believe they would also be interested to put up additional power plants to address the country’s rising demand in the future," he said.