PSALM defers bidding for IPP administrators

Citing unfavorable feedback from potential investors, the Power Sector Assets and Liabilities Management Corp. (PSALM) has deferred anew the bidding schedule for the selection for independent power producer administrators (IPPAs) to February 2009.

This means that the bidding of the IPP contracts of the National Power Corp. (Napocor), which is expected within the year, will not happen as earlier indicated by PSALM.

PSALM said they conducted a series of consultations with prospective investors over the past weeks to ensure the market is ready for the privatization of the IPP contracts.

However, PSALM said the interested parties they have talked with during the fora requested for more time to undertake their respective due diligence activities.

IPPAs are qualified independent entities that will administer and manage the energy output contracted by Napocor with IPPs operating in Luzon and the Visayas.

It would be recalled that the invitation to bid (ITB) for the IPPA selection was originally scheduled on Oct. 22 to 24, 2008 and was moved to the first week of November 2008. This was further moved back to February 2009.

With the issuance of the ITB, PSALM will open its data room to prospective bidders who will have access to pertinent information on the IPPA bidding process.

The investors, however, will have to comply with PSALM’s bidding procedures indicated in the ITB, including submitting a letters of interest, signing confidentiality agreements, and paying the participation fee.

PSALM was trying to accelerate the privatization of the energy contracts of Napocor with IPPs through the selection of IPP administrators as this is one of the preconditions to open access and retail competition, the implementation of which will eventually translate to more reasonable electricity prices for Filipino consumers.

PSALM will use the ownership scheme as a model for the IPP contract sale.

Under the Electric Power Industry Reform Act (EPIRA), PSALM is required to appoint IPPAs to manage and control Napocor-IPP plants until such time the contracts expire.

Based on earlier proposals, the IPPAs will handle the contracts of Napocor with total 4,221 megawatts (MW) capacity.

The IPPAs will be tapped through a competitive bidding, and those targeted are international power industry players and traders.

As proposed, the IPPAs will primarily bid out the IPPs energy output into the wholesale electricity spot market (WESM) in a manner which optimizes its running hours and net revenues.

They would also negotiate bilateral contracts with customers and/or to sell options, including financial instruments or insurance capacity.

Included in the list of IPPs to be transferred to the IPPAs are the1,200-mw Ilijan natural gas combined-cycle owned and operated by Korean Electric Co. (Kepco)-Ilijan Corp. in Batangas; the Pangasinan-based 1,000-MW Sual coal units 1 and 2 and the 700-mw Pagbilao coal units 1 and 2 operated by TeAM Energy, the 215-mw Bauang diesel plant of Bauang Power Corp. in Zambales, Enron Power Corp.’s 116 MW Subic diesel plant and the Casecnan multi-purpose hydro of the National Irrigation Administration in Nueva Ecija.

Two more hydropower facilities, the 340-MW San Roque multi-purpose hydro of Marubeni/Sithe in Pangasinan and the70-MW Bakun Hydro of Aboitiz Equity Ventures in Ilocos Sur will also transferred to the management of the IPPA.

The only geothermal facility that will be handled by the IPPA is the PNOC-Energy Development Corp.’s 440 MW Leyte B geothermal power plant.