The Philippine Star 09/26/2006
Arthur Aguilar, general manager of state holding firm National Development Co. (NDC), officially took over yesterday as president of National Transmission Corp. (TransCo). Aguilar replaced Alan T. Ortiz just two months before the expected bidding of TransCo concession on Nov. 7. In his five-year stint at TransCo, the operator of the country’s transmission highways, Ortiz was instrumental in averting a blackout-free Luzon for four straight years. TransCo also became the first transmission company in Asia with its management system ISO-certified and recognized as the best governed government-owned and controlled corporation (GOCC) in the country. Ortiz also managed to respond to the threat of an impending power crisis in the Visayas by fasttracking vital transmission projects like the construction of Leyte-Cebu and Cebu-Mactan transmission lines. Ortiz led TransCo in obtaining ISO certification, the first government corporation to hurdle the stringent ISO certification process in all its key functional and regional areas. He further led the divestment of TransCo’s sub-transmission assets to electric distributors with asset sales amounting to P1 billion. Aguilar, on the other hand, served as general manager of NDC. He has wide knowledge on asset privatization as he co-authored the original privatization law in the Philippines and played an instrumental role in the establishment of the Asset Privatization Trust (APT) which, in turn, tasked him to privatize Island Cement Corp. and to manage Maricalum Mining Corp. and the Menzi Development Corp. The newly-appointed TransCo head also served as executive vice president of Robinson’s Land Corp. where he held the concurrent position of general manager of broadsheet newspaper Manila Times. NDC is the investment arm of the government where Aguilar undertook a highly successful program of reengineering and selling government assets and enterprises. He was likewise concurrent chairman and CEO of the Philippine National Construction Corp. (PNCC). He is also credited with profitably managing and successfully privatizing Interbank (a joint venture with American Express) as well as the National Shipping Corp. of the Philippines and Filipinas Palm Oil Corp. Energy Secretary Raphael Lotilla said with Aguilar’s appointment, TransCo will continue to implement its critical projects especially in the Visayas and Mindanao where increasing power demand requires a reliable transmission system. Aguilar is a graduate of the De La Salle University with degrees in political science, history and accounting. He has a Master of Management degree from the Asian Institute of Management and holds a Master of Public Administration from Harvard University in Massachusetts, USA. He started his career in investment banking and project finance in reputable investment banks and financing houses overseas, such as the Singapore-based ASEAM Bank, the World Bank’s International Finance Corp., and Bancom Development Corp. Aside from Aguilar, Malacañang had also announced possible changes in several other energy agencies. Mary Anne B. Colayco, a former Energy Regulatory Commission (ERC) commissioner, will reportedly replace Nieves Osorio as president of the Power Sector Assets and Liabilities Management Corp. (PSALM). PSALM handles and oversees the privatization of the generation assets of the National Power Corp. (Napocor). Former ERC commissioner Oliver Butalid, on the other hand, is expected to assume Aguilar’s position in NDC. Butalid has just ended his term as commissioner at the ERC.
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The Philippine Star 09/26/2006STEAG State Power Inc. (SPI) will start full commercial operations of the biggest coal-fired power plant in Mindanao by January 2007, a ranking company official said. In a press briefing over the weekend, SPI plant manager Peter Just said they expect to complete the construction of the coal-fired power facility by the end of this year. Once completed, the thermal plant would be able to supply 15 percent of Mindanao’s power demand. He said they are already operating one 105 megawatt (MW) unit while the other unit is undergoing test and will be ready by yearend. The SPI facility is located in a 55-hectare lot inside the Phividec Industrial Estate in Villanueva, Misamis Oriental. It currently sources coal requirement from Indonesia but eventually expects to source at least 15 percent of its coal requirement from the local market. As the biggest single investment in Northern Mindanao for the past 20 years, SPI reportedly helped the local government double its revenues to P2.1 billion in 2005 from P1.04 billion in 2004. Germany’s STEAG AG owns a controlling stake of 89 percent in the project while its local partner, State Investment Trust Inc., holds 11 percent equity. The German power firm is tasked to operate and maintain the power facility. The $305-million SPI plant uses a flue gas desulfurizer (FGD), enhanced with quicklime-based flame-gas cleaning technology to guarantee its compliance to environmental regulations. SPI has 25-year build-operate-transfer contract with the National Power Corp. (Napocor). Under a power purchase agreement (PPA) with Napocor, SPI has to complete the construction of the facility by the end of 2006. A fixed-price turnkey engineering, procurement and construction (EPC) contract was awarded to Kawasaki Heavy Industries Ltd. of Japan. Of the 210 MW total capacity, SPI has contracted 200 MW to Napocor and the remaining 10 MW could be sold to direct offtakers or through the wholesale electricity spot market (WESM). Among the big industries that SPI is eyeing for the excess 10 MW capacity include Del Monte Processing and Mega Center Mall.
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The Philippine Star 09/25/2006
The National Transmission Corp. (TransCo) has recorded a net income of P10.84 billion as of end-July 2006, 10 percent more than the earnings registered in the same period in 2005.
TransCo president Alan T. Ortiz said the favorable earnings performance for the first seven months of the year shows strong indication that the company would be able to exceed its P16.14-billion earnings in 2005.
Based on the the company’s latest financial report, its net utility revenue increased by 8.4 percent to P15.54 billion for the seven-month period from last year’s P14.33 billion.
The better earnings could also be traced to the effort of the company to trim down its expenditures during the period.
TransCo’s operating expenses went down by 26.5 percent or P1.7 billion from the budgeted amount of P6.41 billion.
Due to the drop in expenses, TransCo’s operating ratio improved to 30.31 percent from last year’s figure of 30.80 percent.
Ortiz said the period’s strong financial performance could also be attributed to the implementation effective April 2006 of the interim Maximum Allowable Revenue (MAR) for the current year as approved by the Energy Regulatory Commission (ERC).
"This consistently favorable financial statements during the past years make TransCo a good investment prospect for the future concessionaire," he said.
The TransCo chief attributed the favorable financials to the collaborative effort of management and its more than 3,700-strong workforce as they gear up for the firm’s eventual privatization.
"Over the years, we have worked hard to become at par with world-class organizations. Practically all our units have adopted internationally-recognized quality management systems to make our processes more efficient and customer-oriented," he said.
TransCo has also been cited as the best GOCC in terms of corporate governance by the Institute of Corporate Directors.
Ortiz is optimistic that the company would be able to sustain the favorable financial position.
"We will not rest on our laurels. We will accomplish more in the coming months and years," he said.
Ortiz said they would continue to engage in various projects and programs that would help the company’s objective to provide reliable and dependable power to the country.
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The Philippine Star 09/25/2006
The Power Sector Assets and Liabilities Management Corp. (PSALM) is keen on attaching the 300-megawatt (MW) power purchase agreement (PPA) of San Pascual Co-generation plant as a sweetener to one of National Power Corp.’s (Napocor) generating assets.
A PSALM official, who requested anonymity, said that while the Department of Justice (DOJ) had already issued an opinion favoring the re-assignment of the San Pascual PPA, the process should still involve a public bidding.
"Based on PSALM board’s decision, we cannot go on a negotiated sale approach, we still have to bid it (San Pascual PPA) out," he said.
This decision will be an unwelcome development for Korean Electric and Power Corp. (KEPCO) that had earlier indicated plans to expand its capacity by 330 MW on condition that PSALM would allow them to contract the San Pascual’s 300 MW PPA.
The PSALM official said aside from KEPCO, there were also some proposals that would allow San Pascual’s PPA to be attached to a combined cycle power plant.
"We have received numerous alternative proposals for the use of San Pascual’s PPA. Aside from Kepco, there are also proposals to attach it to Limay combined cycle plant for the latter to be converted into a natural gas facility," he said.
There were also earlier proposals to attach such supply contract to Sucat power plant to make it more attractive to investors.
Kepco Philippines Inc. (Kephilco), the Philippine arm of Kepco, said it is willing to spend some $400 million to expand its Ilijan natural gas-fired power plant by 330 megawatt (MW) from the existing 1,200 MW if they can acquire the PPA from San Pascual.
The San Pascual project was supposed to take up the remaining 300 MW from the 3,000-MW Malampaya Deep Water Gas to Power project. The 2,700 MW were distributed to 1,200-MW Ilijan Power Plant; Lopez-owned 1,000-MW Sta. Rita and 500-MW San Lorenzo .
The construction of San Pascual plant did not materialize due to the existing excess capacity in the power system during that time. But the proponents of San Pascual have already signed a PPA with Napocor. Thus, it is already part of the renegotiations of IPP’s PPA contracts with Napocor.
Based on the plan, PSALM will buy out the 25-year PPA contract of the Napocor with San Pascual and assign the contract to Sucat power plant which is envisioned to be converted into a gas-fired power facility.
The government had been working out the pre-termination of the contract of San Pascual with US-based Edison Mission Energy since September 2002.
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The Philippine Star 09/25/2006
The Energy Regulatory Commission (ERC) has urged the Philippine Export Confederation (Philexport), a private sector team tasked to make an action agenda related to power concerns, to remain calm and objective in presenting the status of the electric power industry in the country.
The ERC’s advice is relative to Philexport’s recent claims that, "electricity costs and dwindling generation capacity remain some of the biggest factors that make it harder for people to do business in the Philippines compared to other countries in Asia."
The group attributes the "high power rates" to high generation cost. Moreover, Philexport said that "the National Transmission Corp. was also charging very high rates of P1 a kWh which business leaders believe was based on the rate-setting system that was too much and uncompetitive."
"The ERC would like to update the Philexport on a significant development in the regulatory front. Aside from the fact that the ERC undertakes thorough and in-depth analyses on all cases that cross its path, the ERC is now adopting performance based rate-setting schemes, in lieu of the 80-year old return on rate base (RORB) methodology, that will result in efficiency for electric utilities that will eventually translate to lower rates for consumers," ERC Chairman Rodolfo B. Albano Jr. said.
Albano argued that there are other factors that affect the performance of the export sector.
"A thorough assessment of the problems in the export industry must be done. There may be other factors that beset the export industry," Albano added.
The ERC chief is also requesting Philexport to carefully assess its plan to recommend to President Arroyo to declare a state of emergency "so that the problem will be solved with dispatch."
"Philexport must first establish beyond reasonable doubt that the electric power industry is in a crisis. It must also understand that the industry is in the middle of a reform process. Declaring a state of emergency will only send a wrong signal that the Philippines is incapable of managing change. Let the economic managers of the country do their job," Albano said.
According to Albano, the commission is open to discussing the concerns of the exporters.
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The Philippine Star 09/25/2006
The National Government wants Atlanta-based Mirant Corp. to get a prior consent from the National Power Corp. (Napocor) before the sale of its interest in the Philippines commences, Energy Secretary Raphael P.M. Lotilla said over the weekend.
"It is prior to any transfer, when you say ‘prior’ it has to be prior to any transaction. It has always been the case that before you can transfer any of the responsibilities or commitment, there has to be consent on the part of the Philippine government through Napocor," Lotilla told reporters.
Lotilla made this pronouncement after it was learned that Mirant Corp., owner of the more than 2,000 megawatt (MW) Mirant Philippines Corp. has yet to ask for Napocor’s consent on the sale of its equity in Mirant Philippines.
"We don’t want to be inflexible about that process. I don’t want to say that it has to be prior to the bidding or after the bidding. But what’s important is that there is prior consent," he said.
On the fate Mirant’s employees, Lotilla stressed that the government will protect the welfare of the workers.
"The government wants to make sure that everyone is protected. One looks at Mirant in the Philippines you look at both the hard and soft assets — in other words you’ll need the manpower to run the plant after it changes ownership or after Napocor is privatized," he explained.
He said it has been the National Government’s concern to protect the affected employees of soon-to-be sold assets of the government.
"In other words, the personnel are the ones who know the plant very well and so it is in the interest not only of the private buyer but of the National Government — with who Mirant has a contract — that we are able to preserve the strength of the human resources available to these plants," Lotilla said.
Lotilla also noted that US-based officials of Mirant earlier gave their assurance that both the assets (physical and human) would be protected once the sale pushes through.
"Mirant officials assured President Arroyo that they value these assets and the human resources as well. From that perspective of being able to find a buyer, the welfare of the personnel will always be a concern," he said.
Mirant employees have recently asked Napocor president Cyril del Callar’s help in ensuring that they would be given fair and just separation package before the actual sale of Mirant assets in the Philippines is undertaken.
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