ADB energy specialist bats for privatization of IPP contracts

The government should push through with the privatization of the IPP (independent power producers) contracts to help reduce prices of electricity in the future, an energy expert said.

Asian Development Bank (ADB) principal energy specialist Yongping Zhai told reporters that the state-owned Power Sector Assets and Liabilities Management Corp. (PSALM) should first proceed with the selection of the IPP administrators to be able to bid out the IPP contracts.

Zhai noted that the privatization of the IPP contracts will ensure competitiveness at the wholesale electricity spot market (WESM), the country’s trading floor for electricity.

“WESM is largely dominated by PSALM owned and operated IPPs which comprise about 70 percent of trades,” Zhai said.

“PSALM should continue to implement its privatization program to sell as early as possible at least 70 percent of Napocor’s generating assets and transfer of at least 70 percent of its IPPs to IPPAs,” he said.

PSALM president Jose Ibazeta earlier said they are ready to auction the IPP contracts by September this year while the selection of IPPAs will be held within the first quarter of 2008.

Under the Electric Power Industry Reform Act (EPIRA) of 2001, PSALM has the power to take title to and possession of the Napocor IPP contracts and to appoint, after public bidding, qualified independent entities who shall act as IPP administrators.

Under the EPIRA, before retail competition and open access can be implemented, it shall be “subject to the transfer of the management and control of at least 70 percent of the total energy output of power plants under contract with Napocor to the IPP administrators.”

Among the IPP contracts include the 1,200-mw Sual coal facility and the 1,200-megawatt (mw) Kepco Ilijan natural gas facility.

Other power plants are the Limay combined cycle (655 mw), Pagbilao coal facility (735 mw), Subic Power Corp. (116 mw), Hedcor Bacun (29 mw), Luzon Hydro Corp. (75 mw), CBK Botocan (21 mw), CBK Kalayaan (739 mw), Casecnan (150 mw), San Roque (411 mw), Malaya (650 mw) and Bauang Private Power Corp. (226 mw).

The IPPAs will sell the Napocor-IPP contracts through the wholesale electricity spot market or through bilateral contracts.

Being one of Philippines ’ largest multilateral lenders, ADB has been an active participant the Philippine power sector.

ADB has provided over 20 loans worth $1.6 billion and a partial credit guarantee of ¥12 billion to Napocor for power generation and transmission projects.

The bank has also provided two program loans to the government for the power sector restructuring and debt liabilities management totaling $750 million.