POSTSCRIPT / August 7, 2007 / Tuesday


Philippine STAR Columnist

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Masinloc sale augurs well for power sector

CALACA NEXT: Buoyed by the recent sale of the 600-megawatt Masinloc plant in Zambales, the Power Sector Assets and Liabilities Management Corp. (Psalm) has announced that 17 investor groups have expressed interest in the 600-mw Calaca coal power plant.

Psalm President Jose C. Ibazeta did not identify the prospective bidders but gave assurance that an Oct. 16 auction will push through. “We want to show our resolve in getting all these assets sold,” he said.

Psalm made good on its promise to sell Masinloc. It vowed to bring to at least 50 percent the privatization of National Power Corp. assets by yearend.

Reeling from the embarrassment of the Masinloc fiasco last year, Ibazeta is showing his will. He has attracted big ticket investors.

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CONFIDENCE: The first and biggest haul of the government this year, the Masinloc sale may just turn the tide and restore investor confidence in the power sector.

Masinloc Power Partners Co. Ltd., a unit of Singapore-based AES Transpower Pte. Ltd., was the winner in the recent Masinloc bidding. It bested five rivals with its $930-million bid.

The other bidders were Masinloc Consolidated Power Inc., Masinloc Holdco Inc., Anglo Cayman Energy Development Co. Ltd., International Power Masinloc Holdings Inc., and First Gen Luzon Power Corp.

Malaysia’s Ranhill participated minus its local partner YNN (which bid in last year’s controversial auction), but turned in the lowest bid of $588 million.

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GMA PRIORITY: The country’s energy players have commended the government for the privatization of Masinloc, saying the sale shows that the Philippine power industry is once again on the radar screens of major foreign investors.

Ibazeta showed them who is boss when it comes to disposition of power assets. His strong showing came at a time when President Gloria Arroyo was getting impatient with the slow pace of Napocor privatization.

“Our privatization is slow so I am tasking the new Secretary of Energy (Angelo Reyes) to make it his number one priority to speed up privatization,” Ms Arroyo has said.

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ON TRACK: After Masinloc, Psalm and the Department of Energy appear to be right on track with the bidding of the 600-mw coal-fired Calaca plant and the awarding of contract by yearend.

The sale of Masinloc brings to 30 percent the number of Napocor generating assets privatized. The addition of Calaca could raise the score to at least 46 percent by yearend.

Aside from Calaca, which drew a record number of interested bidders, Psalm is also auctioning off the 275-mw Tiwi (Albay) and the 425-mw Makban geothermal plants, and the retired Manila Thermal plant along the Pasig River.

With 20 percent more of power assets up for sale next year, competition could set in. Only then can we begin to enjoy lower rates — unlike today, with Napocor appearing to be manipulating the fuel inventory and causing brownouts.

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FUEL RACKET: The precarious system (demand and supply) is also another reason why we should not entrust the managing of our power system to unscrupulous individuals running Napocor.

Knowing that the economy is growing (and demand for fuel rising) some operators at Napocor maintained the country’s fuel (primarily coal) reserve so thin that a power plant running on coal has only two days to run. That was what happened in Pagbilao and other plants in Luzon.

That is the reason why even the business sector cited outgoing Energy Secretary Raphael P.M. Lotilla and Ibazeta for the successful bidding of the Masinloc plant at an unprecedented price of $930 million or $1.55 million per megawatt.

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YNN FAILURE: The winning bid of the AES group shows the growing confidence of international investors in the Psalm-managed privatization and the transparency of the process.

The winning bidder vowed to upgrade and expand the plant, described as the most valuable among Napocor plants, to address the growing demand for electricity and forestall a power crisis.

Some investment bankers said the earlier sale of the Philippine Mirant assets to the Tepco-Marubeni group at $3.6 billion and the bids submitted for Masinloc indicate investors’ confidence in the local power industry.

The first attempt to sell Masinloc last year failed after the contract was awarded to YNN, a firm that had no technical and financial capability to bid and run a big plant. Psalm voided the contract when YNN did not produce the $227-million down payment.

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WHY AMEND?: Now if the privatization situation has improved, why are some lawmakers convincing the President that the Electric Power Industry Reform Act (Epira) be amended?

The Epira was enacted to reform the ailing power industry not only to prevent a crisis but also to lower or at least stabilize electricity rates.

Somebody should warn President Arroyo that she is being misled by some scheming individuals who only want to maintain the Napocor monopoly in the power sector.

On the contrary, the President should order the Napocor to speed up the privatization of its assets (which she did). This is a key provision of the Epira meant to ensure an open and competitive industry.

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RUINOUS MONOPOLY: It has been shown that the country will never have a well-functioning power market until Napocor’s dominance is reduced, if not eliminated altogether.

The Wholesale Electricity Spot Market is an example of how the Napocor monopoly has ruined the plans of the President.

The WESM has failed to lower rates because its dominant player — the Napocor — has been tagged as behind the price manipulation last year. Napocor and Psalm account for 80 to 90 percent of the volume traded in the power spot market.

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(First published in the Philippine STAR of August 7, 2007)

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