Privatization hits snag

Government delays bidding for huge hydro plant

MANILA, Philippines — The government’s privatization efforts have encountered a major setback as the bidding for the massive Laguna hydropower complex has been indefinitely postponed, despite strong interest from several potential buyers.

Sources told The STAR that the privatization of the 797-megawatt (MW) Caliraya-Botocan-Kalayaan (CBK) hydroelectric power plant complex will be delayed as the newly published third round of green energy auction (GEA) guidelines effectively lowered the value of the asset.

As the only operating pumped hydro storage in the country, CBK is the major privatization project of state-run Power Sector Assets and Liabilities Management Corp. (PSALM) this year and is a priority source of the government’s non-tax revenues.

Earlier, PSALM said it wanted to start the bidding process for the CBK complex this year and award the asset in 2025.

Last month, the Department of Energy (DOE) released a circular that updated the specific policy and guidelines for pumped storage power hydropower plants.

Under the mechanism, pumped hydro storage would receive green energy tariff based on available capacity and would benefit from priority dispatch for energy and priority for ancillary services procurement.

As such, the DOE said CBK’s Kalayaan Phase 1 and 2 are not eligible under GEA-3 guidelines since there is no planned expansion or upgrading of the legacy renewable energy facilities.

“Why in the world will I buy an asset that has no market security when someone else builds a new one? That’s why the value will drop,” the source said.

The government earlier expected to raise P50 to P100 billion in proceeds from the CBK privatization.

“It’s an attractive asset suddenly rendered unattractive because of the GEA-3. There were a lot of interested bidders already,” another source noted, adding that CBK could be worth so much if it was included in the GEA-3.

According to the source, there are nine pre-qualified bidders for CBK.

Among these are Japan’s Marubeni Corp., Semirara Mining and Power Corp., First Gen Corp., Prime Energy Corp., ACEN Corp.’s Giga Ace 11 Inc. and Thunder Consortium.

Last month, Pangilinan-led Meralco PowerGen Corp. backed out of the bidding, partly influenced by the GEA-3 as well.

For now, there’s no new timeline when the bidding process could start pending the DOE’s decision to include CBK in GEA-3.

Based on PSALM’s latest update, there are no other details on the CBK timetable, even the deadline for the bid submission has yet to be determined.

Some sources are wondering whether the GEA-3 issuance was done on purpose and timed to make CBK’s price fall so that certain industry players can actually get it at a lower price.

Some industry players want CBK badly after losing in the bidding for the 165-megawatt Casecnan Hydroelectric Power Plant, sources also said.