Foreign traders urge gov’t to let IPPAs source own fuel

A group of foreign businessmen has urged the government to allow the new owners of the National Power Corp.’s contracts under the independent power producer administrators (IPPAs) to source their own fuel requirement.

In an open letter to Power Sector Assets and Liabilities Management Corp. (PSALM) president Jose C. Ibazeta, the Joint Foreign Chambers of the Philippines (JFC) said they “have long held the view that the procurement of fuel by Napocor both for the plants it owns and for the plants it is contractually obligated to provide for should be driven by market forces.”

If it cannot be done, the JFC said Napocor should hire a reputable fuel consultant who will recommend and implement a transparent fuel procurement strategy for all of the plants Napocor is currently supplying with fuel.

“It is exceedingly clear that, as a country, the Philippines must have short term or spot market strategy, a medium term strategy, and ultimately a long term strategy for the procurement of fuel in order to optimize the impact of rising fuel costs on energy prices,” the JFC said.

The letter, signed by the respective heads of seven leading foreign groups, also noted that the continuation of the current practice adds unnecessarily to the cost of power and accordingly harms national competitiveness and efficiency.

The foreign business chambers are represented by Rick Santos (American Chamber of Commerce of the Philippines Inc.), Richard Barclay (Australian-New Zealand Chamber of Commerce of the Philippines Inc.), Stewart Hall (Canadian Chamber of Commerce and Industry of the Philippines Inc.), Hubert D’ Aboville (European Chamber of Commerce of the Philippines Inc.), Toshifuma Inami (Japanese Chamber of Commerce and Industry of the Philippines Inc.), Jae Jang (Korean Chamber of Commerce of the Philippines Inc.), and Shameem Qurashi (Philippine Association of Multinational Companies Regional Headquarters Inc.)

The group’s stance is shared by the Philippine Independent Power Producers Association (PIPPA).

PIPPA president Ernesto B. Pantangco earlier said they are supportive of the idea that the winning IPPAs should have full control over cost components such as fuel procurement.

PIPPA is also proposing to allocate transition supply contracts (TSCs) or bilateral contracts level to assure stable load operations of baseload power plants or mitigate market risks.

Pantangco said most of its members want to privatize the Napocor-IPP contracts on an individual basis.

He said based on the rule of thumb, the bulk sale of the IPP contracts totaling 2,000 megawatts will command an investment of $4 billion per portfolio.

“Bidding out this huge portfolio will be very complicated,” he said. PSALM intends to cluster the IPP contracts to enable it to sell the less attractive IPP contracts with that of the attractive ones.