PSALM postpones indefinitely bidding for Naga power plant

MANILA, Philippines -  The Power Sector Assets and Liabilities Management Corp. (PSALM) has postponed indefinitely the privatization of the Naga power plant complex in Cebu.

PSALM president Emmanuel R. Ledesma Jr. said the agency’s board of directors decided to grant the request of the Joint Congressional Power Commission (JCPC) for a further review of the alleged unfair and illegal condition known as a “right to top” the highest bid previously granted to SPC Power Corp. (SPC) in the Land Lease Agreement (LLA) among PSALM, National Power Corp. (Napocor) and SPC in 2009.

In July this year, PSALM started the new round of bidding for the appointment of an independent power producer administrator (IPPA) to manage the contracted capacity of the Naga complex in line with its continued efforts to implement its mandate under the Electric Power Industry Reform Act (EPIRA).

The bidding proper for the Naga power plant was scheduled today (October 10).

According to Ledesma, the LLA was executed by and among the parties pursuant to the asset purchase agreement on the Naga land-based gas turbine (LBGT) plant acquired by SPC through a public bidding in 2009.

In the agreement, SPC was granted the right to top the highest bid on the sale or lease of the properties within the vicinity of the LBGT plant in order to give the winning bidder of the LBGT plant the opportunity to expand, subject to the payment of a premium of five percent over the highest bid on the adjacent properties. The Naga complex is located in the vicinity of the LBGT plant.

“The invitation to bid on the Naga Complex published in July 2011 generated interest of 10 bidders, which was eventually reduced to five as the participants were required to comply with certain bid requirements. It is apparent that despite the disclosure made to the bidders of the existence of right to top in favor of SPC, the bidding exercise still resulted in continued interest from existing bidders to win the Naga Complex,” he said.

”PSALM was able to structure the sale of the capacity and the assets of the complex in such a way that PSALM will still be able to secure the most optimal value for the asset despite the existence of said right to top,”he added.

“This notwithstanding, the PSALM board deemed it prudent to defer the bidding and to address all concerns in the interest of transparency and propriety,” Ledesma explained.

The Naga complex consists of the 106.8-megawatt (MW) Naga Coal Thermal Power Plants 1 and 2 and the 39-MW Naga Diesel Power Plant located in Naga, Cebu.

The plants are under a rehabilitate-operate-maintain-and-manage agreement/energy conversion agreement with KEPCO Salcon Philippines Corp. which is set to expire on March 2012.