Napocor inks sales pact with Lanao Hydropower

National Power Corp. (Napocor) has entered into a joint sales agreement (JSA) with Lanao Hydropower Development Corp. (LHDC) to ensure reliable and reasonably-priced electricity in the Mindanao grid.

"The JSA is similar to what we have signed with the Korean Electric Power Corp. (Philippines) and Salcon Power Corp., which will jointly undertake the construction of a new 200-megawatt coal-fired power plant in Naga, Cebu. This plant will likewise help augment the power supply in the Cebu-Negros-Panay grid," Napocor president Cyril C. Del Callar said.

Del Callar said LHDC, on its own, will put up the 225-MW Agus 3 hydroelectric power plant in Lanao to help augment the Mindanao grid’s electricity supply.

These JSAs, Del Callar said, are non-exclusive and are open to other parties interested in building merchant plants in Visayas and Mindanao where there is a need for new power generation capacities to address the growth in demand.

Under the JSA, LHDC will commit, at its own cost, the construction and operation of the new Agus 3 hydroelectric power plant in Lanao province.

Commercial operations of the power plant is scheduled in March 2011, and will supply the power requirements of customers in the Mindanao grid such as distribution utilities and bulk power consumers.

"The JSA is one way of assuring the continuous supply of electricity for Mindanao," Del Callar said.

Under the Electric Power Industry Reform Act (EPIRA), Napocor may undertake, given certain conditions, the construction and operation of a new power plant in Agus 3 under a build-operate-transfer (BOT) Scheme. However, with the undertaking by the LHDC under the JSA, there will be no need for Napocor to take this obligation.

"Napocor likewise does not have to assume any liabilities or obligations that are usually associated with BOT contracts. The construction of the Agus 3 hydropower plant is purely a private undertaking by LHDC," he said.

He added the construction of the new power plant will be at no cost to Napocor, will not require any guarantee from the government and that Napocor will not have any obligation to take or pay for the energy that will be generated by the new plant. Likewise, Napocor will not have any ownership stake, directly or indirectly, on the new power plant.

"The construction of Agus 3 by LHDC is conditioned on the execution by customers of power supply contracts on the power that will be generated by the new plant, and on the approval by the ERC of these contracts. Without any of these conditions, the power plant will not be built," Del Callar said.

"The power supply contracts for Agus 3 will be exclusively between LHDC and the customers. These contracts will not entail any obligations or liabilities from Napocor or the government," he stressed.