Manila Bulletin
May 14, 2006
To augment financing sources, the Department of Energy (DoE) has added in its list the government-run Postal Bank to provide potential credit window for projects aimed at developing alternative energy resources.
"We need to get as much (financial) assistance to promote the use of alternative fuels," said DoE director Mario Marasigan, further noting that this will somehow address in part the hurdles being encountered by potential investors as far as project financing is concerned.
It was pointed out that the amount to be shelled out by Postal Bank for such projects is still being sorted out.
Marasigan noted that while there are a lot of players who are willing to help in this effort, they "do not have means to do it."
With the financial packages willingly offered by banks, he stressed, that this will bring the government’s resolve to develop these energy sources notches ahead.
Prior to the Postal Bank funding offer, the Development Bank of the Philippines (DBP) has already been allotting considerable amount that can be extended as loans to those participating in the program.
In fact, the latest mandate of Malacanang is for DBP to extend financial assistance to taxi operators or drivers who may wish to consider converting their fuel use to auto LPG (liquefied petroleum gas).
"The financial assistance from these banks is very crucial to intensify the use of alternative energy sources," the energy official said.
Aside from development and promotion of utilization of alternative fuels, the government is also aggressively enticing investments in new and renewable energy sources; primarily wind, hydro and solar for power generation.
DBP has allotted huge funding of up to P50 billion that can be accessed by companies who may wish to engage in these ventures.
Similarly, talks are being set by DoE with the Land Bank of the Philippines and Banco de Oro, for possible supplementary funding on projects for alternative fuels and renewable energy resources.
To advance these initiatives, the government is currently working on the immediate passage of measures - primarily the proposed Biofuels Act and Renewable Energy Act - to provide legal framework for the development of these sectors. (MMV)
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Manila Bulletin
May 14, 2006
Pilipinas Shell Petroleum Corporation is exploring alternative raw material from wastes for the production of ethanol, which is a blend to gasoline productions.
"We need to look for other means of producing ethanol, other than those which are based on plants, like sugarcane or potato so we’re looking at producing ethanol from wastes like straw," Pilipinas Shell Country Chairman Edgar O. Chua said.
He noted that carrying out such plan is still at feasibility and exploratory stage; but he sees great potential in such initiative.
Globally, Shell is already conducting research into technologies that convert agricultural waste to fuel with its Canadian partner, Iogen.
Similarly, the oil firm also formed joint venture with Choren GmBH of Germany for manufacturing biomass to diesel; and just in case, this will be an alternative to the coco methyl ester (CME), which is the blend for diesel products as promoted in the Philippine oil industry.
"Shell in the Philippines in drawing on this international experience," company officials said.
Meanwhile, for the first batch of ethanol shipments for its E10 blend (or a 10 percent ethanol blend to gasoline) on Shell unleaded products, Chua stressed that they had imported supply from Australia.
"For the next batch of our supply, we are eyeing to import from Brazil, he added.
The E10 blend was initially sold in four Shell gasoline stations; but until year-end, Chua said they plan to increase those offering it to around 50 to 80 stations.
Initially, the product is sold P0.50 per liter cheaper at P34.80 as compared to unleaded gasoline without blend at P35.30.
The importation cost of ethanol was pegged at {{MB:DR(ARTICLE:CONTENT):MB}}.60 to {{MB:DR(ARTICLE:CONTENT):MB}}.70 per liter or 0 per ton.
Meanwhile, the Department of Energy (DoE) sees it as a welcome development that finally, a major oil company, has plunged into introducing ethanol on commercial basis for the transport sector.
"The launching of Shell’s E10 gasoline is a welcome response to our recent calls for the use of alternative fuels as a mitigating measure that will soften the impact of high oil prices on the economy and the consuming public," it stressed.
In the country, the possible sources of bioethanol are sugarcane, corn, cassava, and nipa.
Projects already set on the pipeline are the San Carlos Bioenergy project, which will have a production capacity of 100,000 liters per day (or 30 million liters per year) and will be on line by 2008.
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The Philippine Star
05/14/2006
The National Electrification Administration (NEA) has vowed to continue with its efforts to intensify reforms in the country’s electric cooperatives (ECs) industry.
NEA administrator Edith Bueno said they have conducted conferences and seminars to further strengthen the ties between the government and the private electric cooperatives.
She said enhancing cooperation between the government energy agencies and the ECs will also help in bringing in more benefits to the consumers.
The NEA and the country’s 119 ECs have already extended the benefits of electrification to more than 42 million Filipinos in 33,558 barangays nationwide as of end-February 2006.
Bueno said more than 600 participants from the 119 ECs nationwide and the leaders of the Rural Electrification (RE) gathered recently for a three-day National Conference on Power Management Reforms and Recognition.
"The conference aims to strengthen the partnership of NEA and the ECs, to update and inform the ECs on NEA program status, policies and directions, and the latest development, trends and prospects in the deregulated electricity industry. Thus interactions and dialogues between and among the delegates are given prime importance," Bueno said.
An awarding ceremony highlighted the three-day conference. The program included an RE Milestone Award to Cebu I Electric Cooperative Inc. (CEBECO I), Cebu II Electric Cooperative Inc. (CEBECO II) and Cebu III Electric Cooperative Inc. (CEBECO III) for attaining consistent total excellent performance and sharing all its resources for the further development and enhancement of the level of performance of the partners in the industry.
Meantime, the Bohol I Electric Cooperative Inc. (BOHECO I) leads the list of NEA awardees, receiving the Emmanuel N. Pelaez Award for the Best Electric Cooperative of the Year, an award named in honor of the former Vice President, the acknowledged "Father of the Rural Electrification Program".
The EC of the Year Award is given to the cooperative that is the best under each of the 5 EC classifications, having garnered the highest score in their own respective groupings. These ECs are Davao del Sur Electric Cooperative Inc. (DASURECO) and Iloilo I Electric Cooperative Inc. (ILECO I) for the mega-large ECs; Tarlac II Electric Cooperative Inc. (TARELCO II) and MORESCO I for the extra-large ECs; Province of Siquijor Electric Cooperative Inc. (PROSIELCO) for the medium ECs; and Batanes Electric Cooperative Inc. (BATANELCO) for the small ECs.
Five Ecs, namely, Peninsula Electric Cooperative Inc. (PENELCO), CEBECO I, CEBECO II, CEBECO III and MORESCO I, are the recipient of the Administrator’s Award. This award is bestowed on ECs which have gone beyond the mandate of electrifying the countryside and have taken their advocacy in the propagation of the rural electrification program in terms of continuing education, providing the necessary assistance to others in terms of rehabilitation; initiated and shared best practices, thus promoting the paramount interest of member-consumers and spearheaded cooperation efforts among ECs in time of calamities and other needs.
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Manila Bulletin
May 12, 2006
CEBU CITY - The blackout that hit Cebu and parts of Central Visayas on Wednesday has caused damage of at least R100 million to businesses and factories who were forced to shut down and allow their workers to go home due to the lack of power.
Robert Go, Philippine Chamber of Commerce and Industry governor for the Visayas, said that most of those affected were small businesses which do not have standby power generators, although there were still big businesses and factories who were also hit.
Go said the blackout showed that most businesses in Cebu don’t have standby power generators that can be used in an event similar to what happened the other day. Because the businesses don’t have generators, the production was stopped and workers were sent home, causing financial loss.
Although the Cebu Chamber of Commerce and Industry has not conducted an inventory on the affected companies, he said, the amount of damages could reach more than R100 million.
Cebu City Mayor Tomas Osmeña described the blackout as a bad signal for would-be investors. He said everyone concerned should always be ready for similar incident.
Meanwhile, Ben Ypil, spokesman of the Transmission Corp. (Transco) said yesterday the supply of power in the Visayas was already back to normal, adding that the Visayas grid has even started supplying power to Luzon.
Ypil said it would have been better if provinces or islands were self-sustaining in terms of power to avert similar blackouts in the future.
The PNOC-Energy Development Corp. (PNOC-EDC) has informed the Department of Energy that initial assessment of possible damage is already ongoing.
The National Electrification Administration (NEA) and the electric cooperatives in the earthquake-affected areas have already dispatched their linemen to monitor the extent of the power outage and damage to distribution lines.
The power outage was triggered by an earthquake of tectonic origin that hit the Province of Leyte. Leyte hosts major geothermal plants in Southern Leyte that account for about 45 percent of generation capacity in the Visayas grid.
The Philippine Institute of Volcanology and Seismology (Phivolcs) reported that the earthquake’s magnitude was Intensity IV in Tongonan, Leyte and Intensity III in Ormoc, Leyte. It might be caused by the Leyte segment of the Philippine fault line, it said.
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manila Bulletin
May 12, 2006
Lopez-held First Gen Corporation has affirmed keen interest to acquire the 38 percent stake of German firm STEAG AG which is planned for divestment after the 210-megawatt coal-fired power facility kicks off commercial operation.
"Exploratory talks and project investments studies are ongoing. A stake in Mindanao coal project is an option," revealed First Gen vice chairman and chief executive officer Peter D. Garrucho, Jr. during the company’s first stockholders meeting yesterday.
He added that their company already made visits to STEAG’s head office in Essen, Germany for initial discussions on their interest in the project.
"I visited them in Germany to talk with their principals and of course, we’ve been talking with their officers here also…we will continue to search and negotiate for such stakes," Garrucho stressed.
The Mindanao coal facility is due for completion by the end of this year and it would only be after that time that they can open doors for formal negotiation on the divestiture of their 38-percent stake.
If the shares disposal is consummated, STEAG would still remain a majority shareholder in the Mindanao facility with 51 percent stake; as this has been a requirement under its power purchase agreement with the National Power Corporation.
STEAG currently has 89 percent stake STEAG State Power Inc., the corporate vehicle for the Mindanao coal project. The balance of 11 percent is held by local partner, State Investment Trust, Inc.
"We understand from them that they would activate this sale of 38 percent once the plant is completed by the end of the year. We indicated that we’ll be very interested in discussing with them about that," the First Gen top executive has added.
Meanwhile, First Gen noted that it has been pursuing various investment expansion opportunities, "it is an exciting time for our company as we go for growth and we are active in many fronts," Garrucho said.
In October last year, First Gen signed a memorandum of understanding with Marubeni Corporation to pursue non-gas power projects; including plans to bid for geothermal assets being divested in relation to NPC’s privatization.
Through its partnership with BG Asia plc, the company is also working on the construction of another 550-megawatt greenfield natural gas plant, in a site adjacent to the Sta. Rita and San Lorenzo facilities in Batangas.
By the latter part of last year, the company also obtained its environmental compliance certificate from the Department of Environment and Natural Resources for this proposed facility.
The other projects they have been pursuing are gas pipeline; which they plan to start by catering to the needs of United Coconut Chemicals, Inc.
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Manila Bulletin
May 12, 2006
With the Philippine oil market yet to debut on its ethanol production, Pilipinas Shell Petroleum Corporation disclosed that it currently sources its ethanol supply from Australia; which it blends to its unleaded gasoline.
"Ethanol will be imported from Australia and will conform to strict specific requirements," the company noted in its statement to media.
Shell is the first among the country’s oil giants to introduce for commmercial use ethanol at a 10 percent blend or E10 to its gasoline products.
"In support of the Philippine government’s commitment to biofuel targets, our intention at this stage is to expand our use of ethanol in line with the pending government mandate," the company stressed.
The proposed Biofuels Act which will lay down mandate for the use of alternative fuels, like ethanol for gasoline and coco methyl ester (CME) for diesel products, are still pending for approval by Congress.
Shell noted that its E10 blend "can be safely mixed," but it advised motorists to always follow the advice of their car manufacturers on which fuels can they utilize.
Instructions are given that there is no need to empty the gas tank before switching to Shell Super Unleaded E10.
It was however emphasized that the Shell E10 will not replace its unleaded gasoline already in the market, instead, this will be in addition to its product lines. The ethanol-blended product is not advisable for marine vehicles and aircrafts, though.
Ethanol is a renewable non-fossil fuel produced by either taking one of the byproducts of the sugarcane industry (molasses) or by taking wheat or other grains, such as sorghum or corn and processing it to produce ethanol.
Locally, the ethanol industry is to make its niche yet by 2007, with the commercial operation of the San Carlos plant in Negros Occidental.
Shell noted that its unleaded E10 contains a specially-formulated base fuel facility designed to accommodate 10-percent ethanol.
The additional oxygen provided by the ethanol, it said, "can help to improve combustion and ethanol itself is a cleaner burning component than gasoline."
The product is already sold at the pumps of selected Shell gasoline stations. (MMV)
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The Philippine Star
05/12/2006
First Gen Corp. (FGC) will pursue its bid for the 600-megawatt (MW) Calaca coal-fired power plant, a ranking company official said.
FGC vice chairman and chief executive officer Peter Garrucho Jr. said the company is willing to bid again or negotiate the purchase with the government if necessary.
But Garrucho said the Power Sector Assets and Liabilities Management Corp. (PSALM) would have to decide first what privatization route to take. "We wrote to them that we would be interested to get into discussions with them."
He said the company would be willing to negotiate the reserve price with PSALM.
The FGC executive added that they may also consider to take in a partner but at the moment, they prefer to bid on their own.
D.M. Consunji Inc. (DMCI), the other bidder for the Calaca power facility, has signified interest to forge a partnership with FGC to seal the acquisition of the power plant.
"We’ve read what DMCI announced, but for the moment it’s still early. I think the first step is really for PSALM. Yes, we’re willing to negotiate, maybe not with just one party but with a set of partners, maybe including DMCI which is just not another bidder to us since it’s also a coal supplier, so their role in that whole project is vital since of course, there might be other partners that could bring some things to the table. We were willing to do it alone and we can do it alone, since we have the funds for it; we have access to the technology that’s there; we have the people that we have already identified to assign there, we even have people that worked there; that’s not a question. They’re familiar with the asset," Garrucho said.
"You cannot avoid the government rules for bidding, especially for such a large government asset. But once it’s failed, we think we should be in pole position. Failed for the second time and we complied with all the requirements, except for the reserve price – that’s why we’re saying we’re in pole position. But all of the other requirements, our bid represented what seems reasonable given the market risks that are associated with it," he added.
In depending its bid price of $176 million – which was rejected by PSALM – Garrucho said: We realized that if you get the asset, you would have to spend considerable amounts of funds to rehabilitate the plant to address some of the environmental concerns, especially from the community. But the big ones are the market risks."
PSALM has set a ceiling price of $288 million for the asset, a National Power Corp. owned power facility.
The FGC official also pointed out that PSALM should consider the risks involved in the acquisition of Calaca.
"As you know with a coal plant, in fact, it’s even worse than a gas plant, since you cannot just shut it a night since restarting it is a major operation. But we like the asset, as we figure we would be in an excellent position to provide very cheap power to the market, but of course the economics has to fall into place," he said.
He also noted the huge investment that they have to pour in to rehabilitate Calaca, which is an investment on top of the acquisition amount.
"To rehabilitate, we would need a fairly large amount of investment and we cannot disclose that, but we spent quite a lot of money hiring international engineers to look at the coal plant and some of them were involved in the construction or design of the plant. We’ve also hired environmental engineers to look at the facility and what it would take to improve it. It really is a management decision, but in fact the demand is still building up rather strong already it would make sense that you’d do the rehab and get to dispatch at a higher level and do it while the market is still building up," he said.
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The Philippine Star
05/12/2006
Amid the controversy on the possible harmful effect of ethanol to automobiles, Pilipinas Shell Petroleum Corp. launched yesterday its pre-blended ethanol gasoline in one of its retail stations in Manila.
Carrying the brand "Super Unleaded E10," Shell said it is the first major oil firm to launch such product in the market. Small players Seaoil, Flying V, USA 88 and Eastern Petroleum Corp. are already selling pre-blended ethanol in some of their retail gas stations.
As claimed, the Super Unleaded E10 burns cleaner and helps complete combustion. It is not only good for the car’s engine but also for the environment. The ethanol blend helps reduce the harmful content in gasoline (benzene and sulfur), thus enabling motorists to contribute to a cleaner and greener environment.
However, the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) was very vocal about their reservation on the use of alternative fuels, particularly ethanol. The group insisted more tests should be conducted on cars before such product is used on local cars to avoid future problems.
Shell is the world’s largest retailer of biofuels and is investing in new advanced biofuels production routes in its commitment to being a coalition builder for environment-friendly solutions.
Shell has formed a partnership with IOGEN, a Canadian-based company, to bring the biofuels technology to the benefit of consumers.
IOGEN is a world leading biotechnology firm specializing in cellulose ethanol, a fully renewable, advanced biofuel that can be used in today’s cars.
The launch of this fuel is in support of the Philippine government’s bioethanol program to encourage motorists to use ethanol-blended gasoline in order to reduce oil imports and help develop the economy.
By 2007, the Philippines will have its first ethanol plant in San Carlos City, Negros Occidental. This will bring the country closer to reducing dependence on imported oil. This will also expand opportunities for livelihood in the countryside that can contribute to the nation’s sustainable economic growth.
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The Philippine Star
05/12/2006
Malaysian firm Ranhill Power Berhad, the newest member of the YNN Pacific Consortium that won in the bidding for the Masinloc power plant, wants a supply contract with Manila Electric Co. (Meralco) before the revised $14-million performance bond becomes valid.
Industry sources said Ranhill reportedly asked for such a pre-condition or else the performance bond would not be raised to $14 million from previous $11.2 million as agreed upon with the Power Sector Assets and Liabilities Management Corp. (PSALM).
PSALM vice president Froilan A. Tampinco, on the other hand, said Ranhill submitted the amended performance bond but it has to go through the approval of the PSALM board.
"It has to go through the approval of the PSALM board, and we’re setting a meeting on the week of May 22nd to 26th," he said. He would not directly confirm what were the conditions tied to the amended letter of credit that was submitted by Ranhill, but indicated that "these are being reviewed by our lawyers that would trigger acceptance or rejection of the bond."
It was not known if PSALM would give in to such request as Meralco is still in the process of finalizing its own transition supply contract (TSC) with Napocor. Napocor owns and operates Masinloc before it was auctioned off and sold to YNN Pacific.
"YNN-Ranhill submitted last April 28 their amended performance bond of $14 million whose effectivity is good until December 2006," Tampinco said.
In end 2005, PSALM asked YNN, the winning bidder of Masinloc, to deliver by mid-January 2006 the $11.14- million performance bond which would be effective until August 2006.
YNN complied with the requirement in January but with the entry of the Malaysian firm and a new payment deadline set, the consortium was given a higher performance bond of $14 million.
The performance bond serves as a guarantee that the consortium would not renege on its obligation to pay the upfront payment of $227 million on or before the June 30 deadline (from the original March 31) and later on settle the balance of $334.7 million to complete its winning bid of $561.7 million for the Masinloc facility.
"We believe that the additional $3 million performance bond is enough indication of YNN-Ranhill’s seriousness to push through with the deal. It is also sufficient protection for government’s interests in the next three months," PSALM president Nieves Osorio said earlier.
According to Osorio, the government has decided to extend the delivery of the upfront payment following a meeting with YNN officials and Ranhill president and chief executive officer Tan Sri Hamdan Mohamad.
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The Philippine Star
05/11/2006
First Gen Corp., the largest Filipino-owned independent power generation company, has declared a cash dividend of P1.75 per share after it posted a higher net income of $25.5 million in the first quarter of 2006.
During the company’s first stockholders’ meeting yesterday, First Gen vice chairman and chief executive officer Peter Garrucho Jr. said all stockholders of record as of June 2, 2006 will be entitled to the cash dividend.
Garrucho said the company posted an 18- percent increase in net income from $22 million in the first three months of 2005.
The P1.75 per share dividend is two percent higher than the company’s dividend policy of 30 percent of prior year’s recurring net income based on recommendations of the board of directors after considering factors such as debt service requirements, implementation of business plan, operating expenses, budgets, funding for new investments and acquisitions, appropriate reserves and working capital, among others.
In his report to the stockholders, Garrucho said they intend to continue investing in the power sector to further improve earnings in the coming years.
In the next five years, he said they expect to double the company’s existing capacity of about 1,700 megawatts (MW).
He said they would also look into various business opportunities such as the bidding for stakes in power generation companies owned by private companies. Garrucho said they are particularly eyeing the 38-percent stake of STEAG in Mindanao Coal Corp.
"I visited them (STEAG) in Germany to talk with their principals and of course we’ve been talking with their officers here. We understand from them that they would activate this sale of 38 percent once the plant is completed by the end of the year. We indicated that we’ll be very interested in discussing with them about that," he said.
Recently, STEAG said it plans to sell 38 percent of its 89-percent equity in the 210-MW Mindanao Coal.
He said they are looking at other similar opportunities. "Over the past three yeas, companies like Edison Mission, Intergen and El Paso have sold their Philippine assets. We will continue to search and negotiate for such stakes."
The First Gen executive also said they are focusing on the generating assets of the National Power Corp. (Napocor) being sold by the Power Sector Assets and Liabilities Management Corp. (PSALM).
"First Gen actively conducted market analysis, due diligence and investment evaluation of a number of Napocor power plants. We centered around coal-fired, geothermal and hydroelectric power plants," he said.
Based on its unaudited consolidated financial statements, First Gen’s consolidated revenues for the period ended March 31, 2006 rose to $217 million, an increase of 15 percent or $28 million.
The improvement in asset base was attributed to several factors such as the increase in cash and cash equivalents amounting to $305 million that came from internally-generated funds, proceeds from the initial public offering (IPO) and the issuance of the bond. Net proceeds raised from the equity and debt markets amounted to $250 million.
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The Philippine Star
05/11/2006
The Department of Energy (DOE) said a consortium led by Japan Petroleum Exploration Co. Ltd. (Japex) and Kuwait Foreign Petroleum Exploration Co. will start drilling an exploratory well off the Tañon Strait by mid-2007.
Energy Undersecretary Guillermo Balce, in an interview, said the consortium which bagged Service Contract (SC) 46 would likely push through with drilling activities in the second quarter next year "after it received encouraging results of seismic tests conducted last year."
Balce said the group is already finalizing the legwork for the drilling proper. "Preparations for the drilling are ongoing, including environmental, social preparations and local government unit consultations."
SC 46 allows the group to explore oil and gas prospects near Tañon Strait in Central Visayas.
Based on its agreement with the DOE, the consortium will invest $12.7 million for the seven-year duration of the contract.
If the consortium finds an oil or gas reservoir of commercial quantity, the they would be given another 25 years for the production period.
For the past years, the government has been actively encouraging oil and gas exploration projects in the wake of surging oil prices in the world market.
According to Energy Secretary Raphael P.M. Lotilla, the entry of Kuwait Petroleum in SC 46 will boost the country’s efforts to develop indigenous energy resources.
"Kuwait Petroleum is Kuwait’s arm in exploration and development of small oil and gas reserves in foreign countries. We are very pleased that the company has taken interest in the Philippines as it pursues expansion of operations worldwide," Lotilla said.
Kuwait Petroleum is engaged in exploration, development and production of crude and natural gas. It has operations in South Africa, Indonesia and Tunisia.
DOE awarded the contract to Japex in February 2005. The group recently completed initial seismic studies and presently processing and evaluating the data it gathered.
In awarding the SC to Japex, the DOE took note of the company’s extensive international exposure in oil and gas exploration. In the 1990s, Japex started production in the Daleel field in Oman, ABS field in North Sumatra and Lufeng 13-1 field in South China Sea.
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The Philippine Star
05/10/2006
The sale of the Masinloc power plant has been kept alive by the entry of new investors, a ranking official of the Power Sector Assets and Liabilities Management Corp. (PSALM) said.
PSALM vice president Froilan Tampinco said they have asked YNN Pacific Consortium Inc. – the winning bidder of the power facility – to increase its performance bond as a guarantee that the group will not renege on its obligation to settle the upfront payment amounting to $227 million and later on settle the balance of $334.7 million to complete its winning bid of $561.7 million.
PSALM’s decision to hike YNN’s performance bond from $11 million to $14 million and extend the deadline for the delivery of the upfront payment until June 30, 2006 resulted from a recent meeting with YNN officials and the Malaysian group led by Ranhill Berhad president and chief executive officer Tan Sri Hamdan Mohamad and Tan Sri Majid Khan, chairman of Ranhill Power Berhad, a subsidiary of Ranhill Berhad.
Ranhill, a publicly-listed company in Malaysia engaged in water, oil and gas, power and infrastructure development, has joined the consortium. PSALM expects Ranhill and YNN to complete within the three-month extension all financial arrangements related to Ranhill’s investments in YNN. Ranhill is tapping ABN AMRO for its fund-raising requirement. It is also talking with the Private Sector Operations Department of the Asian Development Bank (ADB) for project refinancing and possible equity investment.
YNN-Ranhill recently submitted to PSALM a copy of a letter-agreement between ADB and Ranhill dated March 27, 2006 in which ADB agreed to start its review of and due diligence on the project.
Another letter, this time from ABN AMRO dated March 27, 2006, was also submitted confirming its appointment as sole rating advisor, sole lead manager and sole bookrunner for Ranhill.
Prior to the decision to extend the deadline for the delivery of the upfront payment, PSALM met with the officers of ADB’s public sector and private sector departments to inquire on the process and check the feasibility of the arrangements being proposed by YNN-Ranhill. These issues were addressed to the satisfaction of PSALM.
"Thus, by keeping the Masinloc deal alive – at least for the next three months – the government has a bigger chance of completing the transaction and collecting not only the upfront payment of $227 million but, in due time, the entire bid price of $561.7 million," Tampinco said.
The PSALM official said the additional $3-million performance bond is enough indication of YNN-Ranhill’s seriousness to push through with the deal.
He said it is also sufficient protection for government’s interests in the next three months.
According to Tampinco, the decision of PSALM to consider Ranhill’s offer took into consideration the fact that a rebidding for the Masinloc power plant cannot be conducted immediately since a supply contract has yet to be signed with the Manila Electric Co. (Meralco), the power distributor controlling about 70 percent of Luzon’s electricity market on the retail level.
He noted that the supply contracts with Meralco, or with major electricity users, are important as these will assure a committed market for the electricity that the Masinloc plant will generate. YNN and Ranhill are aware that they have to undertake an aggressive marketing effort in this respect.
"When PSALM auctioned off Masinloc in December 2004, all bidders were aware that no supply contract was attached to it – it was offered as a merchant plant. And as far as the date of the commercial operation of the wholesale electricity spot market (WESM) was concerned, PSALM did not offer any guarantee.
The PSALM official said they are awaiting the commercial operation of the WESM to assure Masinloc and other privatized power plants as well as National Power Corp.’s (Napocor) independent power producers (IPPs) a competitive market for the electricity they are capable of producing.
"We are happy to note that Meralco is supportive of the government’s efforts to institutionalize open access through which power generators will be able to sell electricity directly to consumers located in the franchise areas of the distributors. Under this set-up, the distributors will be compensated for the use of their wires through the wheeling rates approved by the Energy Regulatory Commission," Tampinco said.
He said WESM, together with open access, will promote market competition down to the retail level, eventually resulting in better services and prices for consumers.
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The Philippine Star
05/09/2006
The National Transmission Corp. (TransCo) is intensifying its efforts to build up capacity in order to further reduce the incidence of power line shutdowns this year, a top company official said.
TransCo president Alan T. Ortiz said they have already put in place a comprehensive hotline training program primarily designed to improve live-line maintenance work.
"We are proud of this initiative which already saved the corporation at least P4.7 million for the first quarter of the year in Mindanao alone," he said.
Hotline maintenance work, Ortiz said, is a proven technology in the electric transmission industry that allows line repairs without shutting down power lines. Hence, consumers will not experience any power interruptions even while TransCo works on the lines."
The training of additional "hotliners" this year will augment the present hotline maintenance workers in TransCo’s various districts nationwide. Previously trained hotliners are already regularly assigned in the field to eliminate power line "hot spots" and to undergo emergency live-line repairs.
A hot spot is an abnormal heating of components or parts of a transmission line due to loose connections between points where electricity flows. The abnormal heat produced may cause lines to snap or trip and cause power interruptions. This is where hotliners get in to make the necessary remedies.
The hotline training, which consists of lectures and hands-on modules, takes one month to complete. Trainers are usually in-house hotliners who were trained in the early 1990’s by American experts.
In South Luzon, 38 linemen grouped in two batches have already completed their training during the first quarter of the year. In Mindanao, 20 linemen have already completed the course. A second batch composed of 23 linemen started their training last April 18. Four more batches of 25 linemen each are scheduled for the rigorous training within the rest of year.
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Manila Bulletin
May 8, 2006
At least two to three more Chinese firms are being eyed by the Department of Energy (DoE) to invest in compressed natural gas facilities in the country.
But DoE director Mario C. Marasigan noted that the project proposals are still being evaluated, "we need more documentation from them."
Since these are not formally considered as parties yet, the energy official stressed that he is constrained from divulging their identities at this point.
If ever, these expected investments will add up to earlier proposals by another Chinese consortium Synergy; US-based firm Callandra and the plan of Korean firm Samsung Heavy Industries Co. to tie up with Philippine National Oil Company for a CNG mother-daughter facility.
Synergy for one has committed 0-million investment; but implementation has yet to take off.
"Synergy already has a business plan," Marasigan said. Its feasibility study was due March 1 this year. Covered in its proposed project blueprint are CNG refueling system that includes mother-daughter refilling stations, mobile refueling facility and other facilities as deemed necessary.
With the astronomical rise in global oil prices, the government is pushing ahead the implementation of its self-devised natural gas fuel shift for public transport.
The pilot CNG mother-daughter stations with integrated refilling facilities have already been facing delays in commercial operation schedule.
To position natural gas for long-term use of the transport sector, it was noted that more advanced infrastructure should also be set in place, such as pipelines, to support the program.
The promotion and increased utilization of alternative transport fuels such as natural gas is all in keeping with the government’s goal to lessen the country’s dependence on imported fuel; especially at the regime of surging global oil prices.
The energy department takes in the responsibility of providing assistance in the preparation of relevant study on the viability of investments in the Natural GasVehicle Program for Public Transport (NGVPPT). Department Circular No. 2004-04-004 provides tha( participants in the government-devised NGVPPT are required to file an application for certificate of accreditation (CA) fromthe DoE.
Qualified applicants can be categorized as either engaged in the manufacturing or assembly,operation, retrofit or conversion and CNG refueling station operation for natural gas-fired vehicles.
The DoE also previously issued Department Circular No. 2005-07-006 setting open access to the naturalgas sourced or produced from future or existing petroleum service contracts such as the Malampaya andthe San Antonio, Isabela gas fields.
Upon commissioning of theanticipated motherdaughter CNG refueling station by Shell Philippines, at least 200 buses fueled by natural gas are expected to ply the ManilaBatangas and Manila-Laguna route. (MMV)
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Manila Bulletin
May 8, 2006
A revised long-term power supply agreement is about to be concluded with the National Power Corporation (NPC) to revive the commercial operations of the Bataan Polyethylene Corporation (BPC), an energy official has revealed.
But there remains some hitch in completing the loop for providing a reliable electricity supply for the petrochemical facility; thus, the government is now directing efforts to seek Mirant Philippines Corporation’s ‘high priority action’ on the substation that would cater to BPC’s power needs.
By the latter part of last year, National Petrochemical Co., a subsidiary of Iran’s petrochemical giant NPC International, announced that it is ready to fork out $ 100 million to resume commercial operations of the Bataan polyethylene plant.
The investment infusion would entitle the Iranian firm 60 percent stake in the NPC Alliance Corporation in a share purchase agreement it concluded with the Metro Alliance Holdings and Equities of the Gatchalian group; which retains 40 percent shareholdings.
Mirant reportedly made initial manifestation to the government that it cannot easily offer the use of its power substation because of the entry of an Iranian partner in the idled BPC facility.
Given the prevailing unilateral sanctions of the US State Department against Iran, it was made clear that American companies cannot do direct business or financial transactions with Iranian entities or investors.
For that, the government is now in a dilemma on how it can finally steer into motion the resumption of BPC’s operations since its electricity needs, which is a key component for such move, is not hammered out yet.
Mirant has invested for the substation and was supposed to cater to the power delivery needs of the entire petrochemical park in Mariveles, Bataan; so much so that the facility was set at roughly 100-megawatt capacity.
"We certainly want BPC to restart its operations soon…so, we are now looking at several options on howwe can remedy our dilemma with the substation — we might just build a new one or we’ll just acquire the substation and compensate Mirant," the energy official has stressed.
However, the present capacity of the substation is not seen as a practical remedy as the initial needs ofthe petrochemical plant may just be at 5.0 megawatts.
The entry of new investors in BPC was taken as a very positive development by the Philippine National Oil Company (PNOC) which was given the mandate by Malacañang to resuscitate the country’s flagging petrochemical industry.
But as preparations are being carried out to set the petrochem facility’s commercial operations into motion for a new round, dilemmas came along the way, primarily in the provision of electricity supply for the project.
Pressed for comment, PNOC president Eduardo V. Manalac noted that they are taking all possible approaches on resolving the problem; but he said this is balanced with what the new investors in BPC havebeen asking for from government.
Aside from production of polyethylene, it was noted that the Iranian firm is likewise looking at the production of downstream petrochemical products.
It has been emphasized that the initial funds to be raised shall cover the cost of recommissioning the Bataan polyethylene plant and the purchase of startup feedstock to prepare it for operations.
It has been the policy of the government to first strengthen the mid-stream sector of the petrochemical industry to establish a market for the long-envisioned naphtha cracker facility.
BPC was previously owned and operated by a consortium of British Petroleum of the United Kingdom, Petronas of Malaysia and Sumitomo of Japan and local investors.
From the Bataan polyethylene plant’s current rated capacity of 275,000 tons, this is still lined up for possible expansion by employing the so-called BP innovene gas phase process. This method enables the processing of the polyethylene resin for distribution to local plastic manufacturers.
The re-commissioning and eventual operation of theBataan polyethylene plant is seen crucial to the government’s thrust to revitalize and strengthen themid-stream petrochemical industry.
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The Philippine Star 05/08/2006
The financial turnaround of the National Power Corp. (Napocor) helped reduce the combined deficit of government-owned and controlled corporations (GOCCs) to P22 billion in end-2005 from P85 billion in 2004, an international study showed.
In its latest country report on the Philippines, the Institute of International Finance Inc. (IIFI) said specifically, the fiscal correction has been aided by the state power company’s return to profitability for the first time since 1997.
"The financial turnaround reflects the belated administrative adjustment in generation tariffs, which the government raised by 42 percent in April 2005 and 2.7 percent at the beginning of 2006," the IIFI said.
The study said part of the improvement, however, also reflects the assumption by the National Government at the end of 2004 of P200 billion ($3.9 billion) of external debt owed by Napocor, which was about 40 percent of the company’s total debt.
Recently, the Department of Finance (DOF) approved the transfer of some Napocor bonds to the Power Sector Assets and Liabilities Management Corp. (PSALM), the state agency handling the privatization of Napocor’s assets.
Finance Secretary Margarito M. Teves Jr. has informed the Monetary Board that the DOF has approved the transfer and guarantee of Napocor bonds worth $2.5 billion to PSALM.
The Napocor bonds that were transferred to PSALM include those that have maturities from 2006 to 2028.
These are $250-million certificates due in 2018; $191.604-million new guaranteed bonds due in 2006; $299.548-million new guaranteed bonds due in 2028; $159.867-million new guaranteed bonds due in 2016; $400-million guaranteed floating rate notes due in 2011; $500-million guaranteed bonds due in 2010; and $700-million zero coupon bonds due in 2020.
Under Republic Act 9136 or the Electric Power Industry and Reform Act (EPIRA), PSALM shall take ownership of all existing Napocor generation assets, liabilities, independent power producer (IPP) contracts, real estate and all other disposable assets of Napocor.
EPIRA also states that all outstanding obligations of Napocor arising from loans, issuances of bonds, securities and other instruments of indebtedness shall be transferred to and assumed by the PSALM.
In Dec. 2004, the National Government approved the absorption of some P200 billion of Napocor debts, which is also mandated by EPIRA.
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The Philippine Star 05/08/2006
Chemrez Inc., the owner of the first and largest coco-biodiesel plant in Asia, is planning to undertake an initial public offering (IPO) next year.
Jun Lao, Chemrez operations manager, told reporters that the company intends to list about 10 percent of its shares in the country’s stock exchange to raise funds to partly finance the construction of its P1.5-billion second coco-biodiesel plant.
"There are two possible ways to raise funds either through a straight commercial loan or by going public," he said.
Lao said so far, there are a lot of bilateral and multilateral financial institutions that they could tap.
"The World Bank is offering less than $10 million. We could also tap commercial banks like Equitable PCI Bank and Bank of the Philippine Islands for straight loans," he said.
Chemrez recently inaugurated its P950 million coco-biodiesel plant in Libis, Quezon City. It has capacity of 60 million liters a year.
The cost of the construction (P650 million) and raw materials (P350 million) of the newly-inaugurated coco-biodiesel plant was financed fully by internally-generated funds.
The second plant which will be located near a seaport or within an economic zone, will triple current capacity of Chemrez or 180 million liters a year production.
Potential sites of the second plant, he said, could be in Batangas Bay, Subic Bay and Cebu.
Chemrez is a leading manufacturer of colorants, resin, and specialty chemicals in the country. It has established a bio petroleum unit producing and market ester-based specialty products for automotive use, including fatty acids methyl ester also called as coconut methyl ester, and more popularly known as coco-biodiesel, carrying the brand name BioActiv BD 100.
Established in 1991, Chemrez is a member of a D&L Industries Group, a leading provider of colors, chemicals and plastics in the Philippines.
Incorporated in July 1971, D&L has six other subsidiaries aside from Chemrez.
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The Philippine Star 05/08/2006
Three more Chinese firms have expressed interest to invest in the country’s downstream natural gas industry particularly in the compressed natural gas (CNG) business, a ranking energy official said.
Department of Energy (DOE) director Mario Marasigan said one of these Chinese companies has signified interest to invest more than $50 million in the country’s pioneering CNG industry.
Marasigan, however, refused to give the identities of the China-based firms as they have yet to firm up their respective investments in the country.
"We need to check the veracity of their intention to invest in the CNG industry. They intend to put up CNG mother and daughter stations but we have yet to check on their claims," he said.
According to Marasigan, the DOE is also still in the process of firming up the proposals of other firms that have earlier signified interest to enter the country’s CNG industry.
Marasigan said Indian firm Tata Industries has stopped discussions with the DOE but started negotiations with some bus operators.
US-based Callandra Energy Research Co., he said, is currently finalizing its business plan and feasibility studies. "We expect them to present their initial legwork on the potential locations of their daughter stations," he said.
The Philippine National Oil Co. (PNOC), Marasigan said, has also started talks with Samsung Industries which initially proposed to supply equipment for the construction of a CNG plant.
PNOC has decided to take the lead in the development of the CNG business in the country after the Shell group indicated possible delay in the construction of their planned mother-daughter CNG stations in Batangas.
"PNOC wants to have an option in case Shell’s timeline to put up their CNG mother and daughter stations will be push back further. This option will also include entertaining any investors who could possibly build the CNG at the soonest possible time," he said.
Early this month, Shell had asked the government more time to put up its CNG mother-daughter stations, the country’s top energy official said.
"They (Shell) asked for enough time to make their full assessment and to get back to us," Energy Secretary Raphael P.M. Lotilla said.
Being a pioneer in the upstream natural gas sector, only Pilipinas Shell has the right to pilot test the setting up of mother and daughter CNG refilling stations.
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The Philippine Star 05/08/2006
The Philippine National Oil Co. (PNOC) is working out a way to put back in operation the Bataan Polyethylene Corp. (BPC), a ranking energy official said.
The official, who requested anonymity, said one of the problems being encountered in the revival of BPC is the availability of reliable power supply.
The source said there are ongoing discussions between the National Power Corp. (Napocor) and a potential source of reliable electricity, Mirant Philippines Corp.
Mirant Philippines is currently operating a substation that could service the need of the petrochemical plant.
But according to the source, there are some geopolitical issues that have to be resolved first before Mirant could enter into such agreement.
It would be recalled that last year, National Petrochemical Co., a subsidiary of Iran’s petrochemical giant NPC International, announced that it is ready to fork out $100 million to resume commercial operations of the Bataan polyethylene plant.
The investment infusion would entitle the Iranian firm 60-percent share in the NPC Alliance Corp. in a share purchase agreement it concluded with the
Metro Alliance Holdings and Equities of the Gatchalian group which retains 40-percent shareholdings.
The source said Mirant apparently indicated that it cannot easily offer the use of its power substation because of the entry of an Iranian partner in the idled BPC facility.
Considering the prevailing unilateral sanctions of the US State Department against Iran, it was learned that American companies cannot do direct business or financial transactions with Iranian entities or investors.
This dilemma, the source said, is the reason why the resumption of the crucial BPC’s operation is being delayed.
Mirant operates the 100-megawatts (MW) substation which is expected to supply the power requirement of the entire petrochemical park in Mariveles, Bataan.
"We certainly want BPC to re-start its operations soon. We are now looking at several options on how we can remedy our dilemma with the substation. We might just build a new one or we‚ll just acquire the substation and compensate Mirant," the energy official said.
BPC was previously owned and operated by a consortium of British Petroleum of the United Kingdom, Petronas of Malaysia and Sumitomo of Japan and local investors.
From the Bataan polyethylene plant‚s current rated capacity of 275,000 tons, this is still lined up for possible expansion by employing the so-called BP innovene gas phase process. This method enables the processing of the polyethylene resin for distribution to local plastic manufacturers
The revival of BPC is also seen to pave the way for the construction of the country’s first naphtha cracker plant.
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Inquirer
May 7, 2006
PETRON Corp., Chevron Philippines Inc., Eastern Petroleum Corp., Flying V and Unioil Petroleum Philippines Inc. hiked their fuel prices by 50 centavos a liter at different times on Sunday.
Total (Philippines) Corp. will increase its prices by the same amount at 12:01 a.m. Monday.
A similar price increase was implemented by Pilipinas Shell Petroleum Corp. last Saturday.
According to data from the Department of Energy, the regional benchmark Dubai crude skyrocketed to an average of 68.23 dollars a barrel as of May 3 from an April average of 64.14 dollars a barrel.
The price of unleaded gasoline based on the Mean of Platts Singapore (MOPS) benchmark for refined petroleum products also surged to 90.35 dollars a barrel in the first 3 days of May from 81.13 dollars a barrel last month.
MOPS-based diesel soared to 91.12 dollars a barrel in the May 1-3 period from 86.66 dollars a barrel in April.
These new price adjustments bring premium unleaded gasoline prices to between 38.29 and 39.76 pesos a liter, diesel to between 33.29 and 34.92 pesos a liter, and kerosene to between 36.10 and 38.50 pesos a liter.
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Inquirer
May 7, 2006
PRESIDENT Macapagal-Arroyo will explore ways to soften the impact of rising crude oil prices on the Filipino people in her talks with top officials of the Kingdom of Saudi Arabia, the country's main source of oil.
"We still don't know the possible arrangements that can be agreed on, whether this will be on supply or the price," Presidential Chief of Staff Michael Defensor said.
Defensor said that a possibility would be to course Saudi Arabia's support through Saudi Aramco which also owns Petron Corp., the country's biggest petroleum company, in partnership with the Philippine government.
"She might explore the links between Saudi Aramco and Petron to make special arrangements to ease the impact of oil prices on the public," Defensor said. Ms Arroyo is expected to tour the facilities of Aramco during her visit.
In her departure statement yesterday, President Arroyo said: "I have high hopes for the future of our relations and I hope that my visit to Saudi Arabia will further strengthen our ties, reinforce commitments, as well as open new avenues for cooperation and engagement."
The President has encouraged Petron and other oil suppliers to sell discounted diesel in more gasoline stations outside Metro Manila to benefit more public utility drivers.
For the second time this month, oil firms yesterday raised pump prices of gasoline, diesel and kerosene by 50 centavos a liter.
Pilipinas Shell Petroleum Corp. and Chevron Philippines Inc. raised prices Saturday morning, followed by new player Flying V at 12:01 a.m. today.
Eastern Petroleum Corp. increased prices at 5 a.m., followed by Petron Corp. and Unioil Petroleum Philippines Inc. an hour later.
The oil firms cited the increase in international oil prices for the latest price hike.
Data from the Department of Energy showed that Dubai crude jumped to an average of $68.23 a barrel as of May 3 from $64.14 a barrel in April.
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