First auction of Napocor’s third-party contracts fails

San Miguel, Aboitiz offers disappoint

The first bidding for independent power producer administrators (IPPA) who would manage the contracted capacities of state-owned National Power Corp. (Napocor) failed after the two participants’ offers fell below the government’s reserve price.

The two bidders—San Miguel Energy Corp. and Therma Luzon Inc.—passed the technical and financial requirements that state-run Power Sector Assets and Liabilities Management Corp. (PSALM) set.

The two companies’ offers for the contracted capacities of the Sual and Pagbilao coal-fired facilities, however, were short of the reserve price, which Psalm did not disclose.

Under the Electric Power Industry Reform Act of 2001 (Epira), the government should privatize both Napocor’s generating assets and its contracted capacities to inaugurate an open-access regime in the state-dominated sector. The government has insisted that the open-access regime would bring down the country’s electricity costs, which rank second-highest in Asia, next to Japan.

During Friday’s auction, San Miguel Energy, a unit of Southeast Asia’s biggest food and beverage concern, offered $1 billion for the IPPA contract of the 1,000-megawatt Sual plant, while Therma Luzon of the Aboitiz Group offered $812.95 million.

For the 700-megawatt Pagbilao facility’s contract, San Miguel Energy offered $590 million, while Therma Luzon offered $648.80 million.

Despite the setback, PSALM said it is confident that IPPAs will be appointed before the year ends as it prepares for a second round of bids.

Luis Miguel Aboitiz, Aboitiz Power Corp. senior vice president said the group has yet to decide whether to participate in the second round of bidding for the Sual and Pagbilao contracts.

“No decision. They have not announced a second round and we do not know if the terms are different,” he said.

TeaM Energy Corp., a consortium of Tokyo Electric and Marubeni Corp., operates the Sual and Pagbilao facilities under a build-operate-transfer agreement.

Napocor’s contract with TeaM Energy will expire in 2024 for the Sual and 2025 for the Pagbilao facilities.

Besides the two plants, PSALM is also set to implement Phase II of its IPPA selection process, which will involve the contracts of the Casecnan, Bakun, and San Roque hydropower facilities. The contracted capacities of these power facilities are 140 megawatts, 70 megawatts, and 95 megawatts, respectively. –Euan Paulo C. Añonuevo, Reporter, Manila Times