4 groups eye Napocor's IPP contracts

At least four groups have expressed interests to participate in the first ever bidding for the National Power Corp.’s independent power producers (IPPs) contracts.

“There are at least four but their names have not been disclosed,” a source from the Power Sector Assets and Liabilities Management Corp. (PSALM) said.

PSALM has started issuing letters of interest last Nov. 21 for the first batch of IPP contracs that would be assigned to IPPAs.

As planned, PSALM will start bidding the 700 megawatt (MW) Pagbilao and 1,000 Sual coal-fired power plants n Feb. 20, 2009.

Sources earlier indicated that those that are running these power plants are likely to join the bidding for the contracts. Pagbilao and Sual are being run by Team Energy.

“As of Nov. 21, these four have shown keen interests by submitting their LOIs to PSALM,” the source said,

Interested parties will be given the time to undetake their due diligence activities from Nov. 11 to Nov. 24.

Under the bidding rules, a bidder must submit a bid for both the Pagbilao IPPA and Sual IPPA.

The said bids are separate and distinct from each other, hence, one bid each must be submitted for the Pagbilao and Sual IPPA. There shall be separate awards  for the Pagbilao IPPA and Sual IPPA.

A bidder can only be declared as the winning bidder for either the Pagbilao IPPA or Sual IPPA.

IPPAs are qualified independent entities that will administer and manage the energy output contracted by the 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 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 letter of interest, signing a confidentiality agreement, and paying a participation fee.

PSALM was trying to accelerate the privatization of the energy contracts of Napocor with IPPs through the selection of IPP administrators because this is one of the preconditions to open access and retail competition.

It was believed that the implementation of open access and retail competition will eventually translate to more reasonable electricity prices for Filipino consumers.

PSALM will use the ownership scheme as a model to 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 that the contracts have expired.

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

The IPPAs will be tapped through a competitive bidding; and those targeted are international power industry players and traders to be engaged as IPP administrators.

As proposed, the IPPAs will primarily bid out the IPPs energy output into the 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 the 1,200 megawatt (MW) Ilijan natural gas combined cycle owned and operated by Korean Electric Co. (Kepco)-Ilijan Corp. located in Batangas; Pangasinan-based 1,000 MW Sual coal units 1 and 2 operated by Mirant Power Corp. Another plant operated by Mirant, 700 MW Pagbilao coal units 1 and 2, will be transferred to the IPPA.

The 215 MW Bauang diesel plant of Bauang Power Corp. in Zambales is also part of the IPPA list. Enron Power Corp.’s 116 MW Subic diesel plant and Casecnan Multi-Purpose Hydro of the National Irrigation Administration in Nueva Ecija are also included in the said list.

Two more hydro power facilities, 340 MW San Roque Multi-Purpose Hydro of Marubeni/Sithe in Pangasinan and 70 MW Bakun Hydro of Aboitiz Equity Ventures in Ilocos Sur will also transferred to the management of the IPPA.