Napocor eyes World Bank funds for SPUG projects

MANILA, Philippines - State-owned National Power Corp. (Napocor) is looking at the possibility of tapping the World Bank to finance some of its small power utilities group (SPUG) projects, a top company official said.

Napocor president Froilan Tampinco told reporters that they have been exploring talks with World Bank and its private sector investment arm, International Finance Corp. (IFC) in case they would need to raise funds to support Napocor’s projects.

“It will depend on the development cost,” Tampinco said, adding that they have private sector partners who are ready to come in with some financing.

Tampinco said Napocor has signed memorandums of agreement (MOAs) with two foreign power firms, namely Clenergen and Enertine. Both are developing biomass power.

The Napocor chief said they are eyeing to generate at least 42 megawatt s of power from these biomass projects.

He said they hope to have concrete details on the projects in the next few months.

“We’re looking at a three-month time frame. We signed it last week so I’ll just have to bring it to the board (Napocor) and the National Renewable Energy (NREB),” he said.

Tampinco noted that because of these SPUG projects, they expect their financing requirements for 2010 to increase to P10 billion from the previously programmed P7 billion.

Ultimately, he said the budgetary requirement of Napocor will be dependent on the decision of the Energy Regulatory Commission (ERC) on how much universal charge for missionary electrification will be granted to the power firm.

SPUG is Napocor’s missionary electrification arm, servicing 78 small islands and eight off-grid areas. It operates 304 generating units with a total rated capacity of 129 megawatts (MW). 

It has 42 customers or off-taker distribution utilities, consisting of 39 electric cooperatives and three local government units.

SPUG rates are higher than main grid rates despite being heavily subsidized. The cost of producing power in off-grid areas is estimated at P10 to P11 per kilowatt-hour.

Revenue from the Universal Charge-Missionary Electrification, which is charged to consumers in the country’s main grid system, is used to help subsidize SPUG areas. For 2008, collections from the missionary subsidies amounted to P1.12 billion.

To augment the various islands transmission capacity, SPUG laid down more than 100 circuit-kilometers of 69-kilovolt transmission lines in 2008. It also energized 107 barangays in Masbate and Ticao under the Philippine Rural Electrification Service Project.

The government is currently privatizing areas covered by SPUG by batches as part of the country’s power sector reform and restructuring program.