Fresh bidding round for Calaca coal plant starts

REPORT FROM BUSINESSWORLD The Power Sector Assets and Liabilities Management Corp., or PSALM, the agency mandated by law to privatize state-owned generation and transmission assets, on Tuesday reopened the third round of bidding for the 600-megawatt (MW) Calaca coal-fired thermal power plant. In its invitation to bid, PSALM said parties interested to buy the Batangas-based generating plant may begin submitting letters of interest to participate in the bidding, the date of which has yet to be set. The deadline for the submission of letters is June 29. Prospective investors will also be made to sign a confidentiality agreement and undertaking with PSALM and pay a nonrefundable participation fee worth $2,000 not later than July 4. The pre-bid conference for the qualified bidders is scheduled for July 18 at PSALM’s main office in Makati. The thermal plant is located in Barangay San Rafael in Calaca, Batangas. It consists of two 300- MW generating units which were commissioned separately on Sept. 11, 1984 and July 15, 1995. The units are designed for plant redundancy, which means that one unit can undergo maintenance without affecting the other’s output. The facility was first offered to investors on May 18, 2004, but the auction failed after two of the three qualified bidders backed out before the deadline for submission of offers. The lack of interest by investors was attributed to the lack of transition supply contract, which would guarantee the winning bidder a ready market for the electricity generated by the plant. Then PSALM President Nieves L. Osorio said potential investors wanted a supply contract for at least half of the plant’s capacity. PSALM tried to sell the plant anew on April 27 last year, but the auction likewise failed because the two bidders — Consunji-led DMCI Holdings Inc. and Lopez-owned First Gen Luzon Power Corp. — submitted offers of $160 million and $176 million, respectively, well below PSALM’s reserved price of $288 million. The selling of state-held power assets is one of the preconditions to achieve open access and retail competition in the energy sector, which in turn is expected to lead to cheaper electricity costs. Under the Republic Act 9136, or the Electric Power Industry Reform Act (EPIRA) of 2001, PSALM must first privatize at least 70% of Napocor’s generating assets before there can be open access and retail competition, which in turn leads to cheaper electricity rates. The agency, to date, has sold just 11%. PSALM targets to sell 50% of Napocor’s generation assets this year, including the 600-MW Masinloc coal-fired plant in Zambales, as well as the 75-MW Ambuk-lao and 100-MW Binga hydro-electric plants in Benguet. The agency aims to meet its 70% privatization target next year. — Alexis Douglas B. Romero/BusinessWorld