Philippine Energy News

Napocor back in the red with P8.32-B loss in H1

2006-11-28T14:16:00.000-08:00

The Philippine Star 11/29/2006

State-owned National Power Corp. (Napocor) has reverted to a net loss of P8.32 billion in the first six months of 2006 due to huge foreign exchange and interest expenses, official documents said.

The amount, it was learned, did not yet include the financial losses as a result of its trades at the country’s wholesale electricity spot market (WESM).

The loss was a reversal from the P15.46 billion income registered in the same period in 2005.

Based on the documents, Napocor’s interest expense payments for the first half of the year jumped by P2.13 billion. "The increase in interest expenses was due to higher volume of loans," the report said.

Napocor, through the Power Sector Assets and Liabilities Management Corp. (PSALM), has been borrowing money to partly fund its huge principal and interest payments.

Since last year, PSALM, which handles the finances of Napocor as mandated under the Electric Power Industry Reform Act (EPIRA), has borrowed $700 million to refinance the power firm’s maturing obligations.

For the six-month period, forex losses went up to P9.86 billion due to the depreciation of the peso against the dollar and other foreign currencies as against a P13.982 billion gain in the same period in 2005.

In 2005, Napocor posted P62.756 billion net earnings due to forex gains of P64.756 billion.

Other factors that contributed to Napocor’s favorable income performance last year included the rate adjustment approved by the Energy Regulation Commission and its P200-billion outstanding debts absorbed by the National Government.

In the early part of its trading at the WESM, Napocor had been claiming to have incurred losses of more than P1 billion.

If this trend continues, it is estimated that Napocor may end the year 2006 with a net loss of P48.87 billion for 2006.

Noli Kabayan De Castro

Government urged to scrap nat gas royalties

2006-11-28T04:02:00.000-08:00

The Philippine Star 11/28/2006

Lopez-owned First Gen Corp. (FGC) is urging the government to consider scrapping the royalties on natural gas to bring down the power rates of Manila Electric Co. (Meralco) by at least P1 per kilowatthour (kwh).

"We are proposing that royalties be taken out as long as the natural gas is used domestically. This will result to at least P1 per kwh reduction on Meralco rates," First Gen president Federico Lopez said at the sidelines of the Foreign Correspondents Association of the Philippines (FOCAP) forum.

But while Lopez said this is one of the best ways for government to reduce electricity costs, this move may entail some amendments to old laws and may result to huge revenue losses to the government.

"This will require amending PD 87, however doing so could make the government lose revenues, but again they have a lot of revenues already from VAT (value-added tax)," he said.

Presidential Decree 87, issued during the time of President Marcos, was drawn to promote the discovery and production of indigenous petroleum.

Lopez said there is an existing provision in the Electric Power Industry Reform Act (EPIRA) which is supposed to address this concern but the government appears to be reluctant to push for it.

"I think they overlooked the royalty, as it was lifted from PD 87. Repealing it will take time, and this is why they pushed for equalization, which is not being implemented," he said.

Under the EPIRA, there is a provision that aims to equalize the taxes imposed on indigenous sources of energy. "Equalization is revenue-neutral, but equalization will not bring the general power rate down and will just level the playing field," Lopez said.

Government earns some $637 million from royalties being paid by the Malampaya consortium which supplies the natural gas requirements of First Gas Corp. (FGC), a First Gen subsidiary. FGC owns and runs the 1,500-megawatt (MW) Sta. Rita and San Lorenzo gas-fired power plants. The government has been raising about P11 billion or $200 million in tax revenues from the Malampaya project in Palawan.

"They could lose roughly $600 million a year from the Camago-Malampaya. But you can leave the VAT, and just remove the royalties," Lopez said.

In a presentation before the same FOCAP forum, Oscar Lopez, chairman of Benpres Holdings Corp., the investment arm of the Lopez Group, noted that in First Gas‚ the selling price of P4.76 per kwh to Meralco, fully P3.25 per kwh or almost 70 percent is the cost of gas, with approximately P1.79 per kwh going to government in the form of royalties. Aside from FGC, Korea Electric Power Corp. with the National Power Corp. (Napocor) runs a 1,200-MW Ilijan natural gas power plant.

The Benpres official noted that consumers also pay 56 centavos per kwh in the form of 12 percent VAT for power using Camago-Malampaya gas on top of the royalties.

The older Lopez also noted that though there was an improvement on the use of indigenous fuels in the generation mix to 70 percent, "we still haven’t narrowed the gap in our electricity prices vis-à-vis our neighbors and our indigenous fuels in fact appear costly."

Lopez Group considers sale of Meralco stake

2006-11-28T04:01:00.000-08:00

The Philippine Star 11/28/2006

The Lopez Group intends to revisit plans of disposing its stake at Manila Electric Co. (Meralco) amid continuing controversies being faced by the power utility firm, a top company official said yesterday.

Oscar Lopez, chairman of the Lopez Group, told reporters during a forum sponsored by the Foreign Correspondents Association of the Philippines (FOCAP), said the sale option is still being explored by the company.

"If the price is right, we will (divest our shares). If there is a good offer, we will (sell)," he said

Meralco is 23 percent owned by a venture of Spain’s Union Fenosa and the Lopez family’s First Philippine Holdings Corp.

Union Fenosa holds roughly nine percent; government owns about 25 percent; while the rest is owned by the public and other investors.

Lopez noted that the power distribution firm’s operations have been severely affected by judicial issues such as decisions by the Supreme Court. "We continue to have a problem in courts."

The High Tribunal’s rulings have taken a huge toll on the country’s largest private power distributor’s finances. The Supreme Court two years ago ordered Meralco to refund some P30-billion worth of alleged "excess charges." The company is still paying the refund and is expected to complete the process in three years’ time.

The SC had also nullified the second generation rate adjustment mechanism (GRAM) application of Meralco which will also result to the refund of over P800 million to its consumers.

In 2005, Union Fenosa had expressed "strong disappointment" and was "getting restless" in its investment in Meralco and wanted to "sell out."

Aside from Meralco, Lopez said they continue to look for a buyer for its telecom subsidiary Bayan Telecommunications Inc. (BayanTel).

While the SC rulings had severely affected Meralco’s financial position, BayanTel suffered huge losses due to its dollar dominated loans. The company was forced to seek court action for corporate rehabilitation in 2003.

First Gen posts $67-M income in 3rd quarter

2006-11-17T16:48:00.000-08:00

The Philippine Star 11/17/2006

In a disclosure to the Philippine Stock Exchange, First Gen vice chairman and CEO Peter Garrucho Jr. said the improvement in earnings could be attributed to lower professional fees with the conclusion of the Santa Rita plant’s dispute with its contractor Siemens.

Garrucho said the favorable settlement of the dispute with the Malampaya consortium, lower administrative expenses, and lower net interest expense also helped in posting improved earnings for the said period.

According to the First Gen official, the positive outcome of Santa Rita’s arbitration case with Siemens and the dispute with the gas sellers generated millions in savings from professional fees alone.

He noted that First Gen’s administrative expenses went down by $8 million from the same period last year.

Net interest expense was also lower by $4 million due to higher interest income earned from its robust cash position.

"We are pleased that Sta. Rita and San Lorenzo have finally settled their long-standing disputes resulting in substantial benefits to the company. With these developments, our gas plants will provide strong platforms for First Gen’s growth aspirations," Garrucho said.

First Gen’s consolidated revenues rose to $725 million, up by 19 percent. The increase was primarily due to improved dispatch and higher fuel prices.

Dispatch was significantly higher for San Lorenzo at an average of 80 percent as of September 2006 compared to 77 percent in September 2005.

Garrucho said this was a result of the operation of the wholesale electricity spot market (WESM), which commenced in June this year.

Sta. Rita registered almost the same dispatch in comparison with the same period last year due to scheduled plant outages.

First Gen operates principally through its power plants Sta. Rita and San Lorenzo in Batangas, Bauang in La Union and Agusan in Bukidnon.

Last Sept. 6, 2006, it successfully bid for the 112 megawatt Pantabangan/Masiway hydroelectric power complex which will be turned over by Power Sector Assets and Liabilities Management Corp.

Int’l lenders OK transfer of hydropower plant to First Gen

2006-11-17T16:47:00.000-08:00

The Philippine Star 11/17/2006

The major multilateral creditors of the National Power Corp. (Napocor) have approved the transfer of the 112-megawatt Pantabangan-Masiway hydroelectric power plant to its new owner, First Gen Hydro Power Corp. (FGHPC), a ranking energy official said.

Power Sector Assets and Liabilities Management Corp. (PSALM) president Nieves Osorio said the consent of the creditors is a crucial component in completing the sale process.

Osorio said the Asian Development Bank, the World Bank and the Japan Bank for International Cooperation gave their individual consents to the sale and transfer of the power facility, which was bid out last Sept. 8 and won by FGHPC with an offer of $129 million.

PSALM is a government entity tasked to oversee the privatization of Napocor’s assets.

According to Osorio, FGHPC has also delivered its certificate of closing and documentary deliverables and has posted a performance bond of $2.58 million, which is equivalent to two percent of the purchase price.

The completion of the closing deliverables by both parties paves the way for the turnover of the Nueva Ecija-based power facility.

"The turnover of the Pantabangan-Masiway hydroelectric power plant complex to FGHPC marks another milestone in the ongoing privatization efforts of the government to fasttrack the restructuring and privatization of the country’s electric power industry," Osorio said.

The operational turnover of the 100-MW Pantabangan and 12-MW Masiway hydro power plants will be held at the Pantabangan plant site in Pantabangan, Nueva Ecija.

Under the asset purchase agreement (APA) executed between PSALM and FGHPC, PSALM as the "seller" is required to submit to FGHPC, the "buyer," the certificate of closing and deliverables to complete the transaction.

PSALM has complied with all the conditions stipulated in the APA, the primary requisite for closing the contract. Specifically, the consents and proceedings allowing the transfer of the purchased assets, as specified in the APA, from the Napocor to PSALM and from PSALM to FGHPC have been secured and completed.

PSALM has likewise delivered to FGHPC its closing deliverables. These include the certificate of closing, the certificate of the seller’s representations and warranties as of the closing date, and a transmittal of deliverables acknowledged before a person authorized to administer oaths.

"Let us give credit to the Napocor plant personnel whose diligence in operating and maintaining the Pantabangan-Masiway facility allowed the government to seek the optimum value of the power plant," Osorio said.

"We would also like to thank the National Irrigation Administration for its cooperation and support in forging the pperation and maintenance agreement for the non-power component to ensure the continued safe and reliable operation of the dam, reservoir and other structures," she added.

Osorio also lauded the Department of Environment and Natural Resources and the Protected Area Management Board (PAMB) for allowing PSALM to continue administering the Masiway land through a Memorandum of Agreement signed between PSALM and the PAMB for purposes of power generation.

PSALM, under the terms of the APA, can now require FGHPC to deliver at least 40 percent of the purchase price as upfront payment payable on or before the closing date. The balance of 60 percent may be paid in 14 equal semi-annual payments with an interest of 12 percent per annum compounded semi-annually. FGHPC will also be required to post a deferred payment security deposit.

Mirant employees, mgm’t face off today

2006-11-17T16:45:00.000-08:00

The Philippine Star 11/17/2006

The management and employees of Mirant Philippines Corp. will face off for a conciliatory meeting at the Department of Labor and Employment (DOLE) on Friday.

In a press statement, Mirant employees said a prior meeting was called by DOLE director Reynaldo Ubaldo last Monday to resolve the issues between them and the company’s management before Mirant’s assets in the country are eventually sold.

Mirant Philippines is set to be auctioned off to at least four bidders by Nov. 17 this year.

Some 1,200 employees of Mirant Philippines had sought Labor Secretary Arturo Brion’s help in mediating to avert a possible labor dispute that may disrupt plant operations.

Due to management’s failure to send a representative last Monday, the DOLE, through a notification letter signed by Undersecretary Luzviminda Padilla, reset the meeting between management and the employees to Nov. 17.

In a statement, Mirant’s management said it begged off from the proposed meeting last Monday, citing conflict in schedule and pointed out that it would attend instead its pre-set meeting with the National Conciliation and Mediation Board on Friday.

It stressed that the NCMB mediation process is voluntary. "That fact that we are actively participating in it shows our desire to help those employees involved understand our position. We are cooperating because we believe we must clarify certain matters and set them to rest once and for all," the statement said.

Mirant employees reiterated their position that all 1,200 workers be paid out separation packages, upon sale of the Philippine assets, in accordance with company policy.

According to the employees, this is to protect their years of service to the company and give the new owners the option start from a clean slate with employees who they intend to rehire. Those who will not be rehired will, at least, have their years of service protected by severance payments.

"Employees will only pull the case out of DOLE and agree to an amicable settlement if management agrees to pay separation packages to all employees upon the sale. That is the bottom line," a company source said.

The source added that employees are willing to sign a transition agreement if paid a severance package to ensure a smooth turn-over and non disruption of plant operations.

The sale of Mirant Philippines is expected to fetch close to $3 billion for its parent company, Atlanta-based Mirant Corp.

Sy, Campos, Ang team up for TransCo bidding

2006-11-15T14:24:00.000-08:00

The Philippine Star 11/16/2006

Prominent businessmen Ramon Ang of San Miguel Corp., Henry Sy Sr. of the SM Group and Joselito Campos of Unilab are teaming up for the bidding of the National Transmission Corp. (TransCo), the Power Sector Assets and Liabilities Management Corp. (PSALM) said yesterday.

In a letter to the Joint Congressional Power Commission (JCPC), PSALM said the group forms part of a consortium that was among those pre-qualified to join the TransCo bidding on Dec. 20.

PSALM said the businessmen will control the consortium through Triratna Holdings Corp. with a 60-percent stake. Its partners are Tenaga Nasional Berhad (five percent) and Newbridge Asia IV L.P. (35 percent).

Tenaga Nasional is a state-owned Malaysian power company which is one of the first entities that have signified interest in TransCo some years back, while Newbridge is a US-based investment group.

A second consortium eyeing TransCo, is composed of Citadel Holdings Inc. (60 percent) and Terna SPA (40 percent). The group is represented by Rogelio Singson.

Citadel is the investment vehicle of Delgado family, engaged in exports, logistics and transportation while Terna SPA is one of the biggest power companies in Italy involved in the production and transmission of electricity for domestic and industrial use.

The last pre-qualified group consists of Monte Oro Grid Resources Corp. (60 percent) and State Grid Corp. of China (40 percent). Monte Oro is represented by Walter B. Brown. State Grid is the largest transmission firm in China while Brown is the chairman Philex Mining Corp.

PSALM named the three bidders for the country’s sole transmission arm after completing the evaluation of their respective prequalification proposals submitted last Sept. 28.

The prequalification group composed of PSALM and TransCo technical teams conducted the evaluation based on stringent technical and financial criteria that each group adequately met.

"Our financial criteria ensure that the technical partner, the prequalifying Filipino investor and foreign investor are all financially healthy," PSALM president Nieves L. Osorio said.

The three bidders for the TransCo concession must have a member or affiliate with experience in operating and maintaining electricity transmission systems comparable to that of the Philippines, with at least 6,000 circuit kilometers, a minimum 6,000 megawatts peak demand and a voltage level of 115 kilovolts (kv) to 230 kv.

At the same time, the member of the prospective bidder who meets the technical prequalification criteria must have a net asset value or market capitalization of at least $500 million.

The Filipino investor must have a net asset value or market capitalization of at least $300 million, or must be able to present a bank opinion that the Filipino group can fund equity investment of not less than $300 million.

The foreign investor must have a net asset value of at least $175 million, or present a bank opinion that it can fund equity investment of not less than $175 million.

The prequalification process is the second stage of the entire bidding procedure for the TransCo concession. In this phase, the prospective bidders submit their proposals to PSALM for review and validation.

Osorio said this is to ensure that only serious bidders with proven domestic or international experience and expertise as a leading transmission system operator will be qualified to participate in the formal bidding.

The TransCo privatization process officially started on May 28 with the publication of the invitation to express interest, prequalify and bid. The pre-bid conference will be held on Nov.20 to give prospective bidders the opportunity to clarify issues and concerns.

Gatchalian hits Mirant for refusing to provide power to Bataan plant

2006-11-05T14:02:00.000-08:00

The Philippine Star 11/06/2006

Plastics king William Gatchalian is accusing the local unit of Atlanta-based Mirant Corp. of deliberately refusing to provide power to the recommissioned plant of Bataan Polyethy-lene Corp. (BPC), hindering the resumption of the plant’s operations.

In an interview, Gatchalian — a major shareholder in BPC — said the BPC has been recommissioned at a cost of $20 million and is ready to operate.

Unfortunately, he said the plant cannot resume operation because Mirant refuses to provide the plant with power, allegedly since the project will be controlled by Iranian investors.

Iran’s National Power Co. International is acquiring 60 percent of BPC, while Gatchalian, through his Metro Alliance Group, will hold 40 percent.

Gatchalian complained the problem has turned political, spawned by the long-standing conflict between the US and Iran. Mirant, being a US firm, allegedly refuses to deal with any firm that has Iranian investments.

However, Gatchalian pointed out, the buy-in by NPC International has not been concluded specifically because of the power problem.

The Iranian payment is already deposited in a Philippine bank, awaiting resolution of the power problem.

Gatchalian said while BPC can acquire power directly from the state-run National Power Corp., it would be costly since it must put up its own sub-station which would cost between $4 million to $10 million.

BPC is hoping to resolve the power problem so that it can resume operation by the first quarter of 2007 with an initial production capacity of 270,000 metric tons per year. BPC’s maximum production capacity is at 400,000 MT a year all for domestic consumption.

The Metro Alliance Group acquired in 2005 the shares of British Petroleum (38.5 percent), Malaysia’s Petronas (38.5 percent) and Japan’s Sumitomo Corp.(six percent) in BPC. Gatchalian is the majority shareholder of Metro Alliance.

BPC started operating in 2000 with a capacity of 200,000 MT.

Unfortunately, because of the global glut in petrochemical resin production, the local petrochemical players have been under a constant struggle to remain afloat.

The local petrochemical industry has been beleaguered that it had asked the government to delay a planned tariff reduction under the ASEAN Free Trade Area - Common Effective Preferential Tariff (AFTA-CEPT).

Plans to put up a naphtha cracker that would fully integrate the local petrochemical industry have remained on paper following the difficulties faced by the local petrochemical players and foreign proponents.

Capacity of wind power project to be scaled down

2006-11-05T14:01:00.000-08:00

The Philippine Star 11/06/2006

The government is considering a reduction in the capacity of wind turbine generators to be put up in Ilocos Norte as it cannot afford the construction of the originally planned wind farm and transmission line.

During a meeting of the National Economic and Development Authority (NEDA) Investment Coordinating Committee (ICC), it said the plan to construct an alternative power plant was conceptualized over six years ago but was shelved because the project was too expensive.

In November 2004, the Philippine National Oil Co. - Energy Development Corp. (PNOC-EDC) bid out the project under two contracts but both exceeded the ICC-approved cost and available funding.

As a result, the government made changes on the proposed project such as reducing the power the generators can produce.

For example, the wind power project in Burgos, Ilocos Norte will only have a 30-megawatt (MW) nominal wind capacity instead of the planned 40 MW.

Also, the original project was supposed to have 42 kilometers of 230 kilovolts (kv) transmission lines that will interconnect the wind farm to the nearest power substation in Laoag City. But under the revised plan, it was reduced to a 115-kv single circuit.

Because of the delay, the project completion and commercial operation are now expected in January 2009.

The government needs to expedite the project because the expected electricity demand in 2007 will exceed supply. Should the project be completed on time, it would stabilize energy costs through reduction of use of imported energy.

Also, it would enhance the environment through the reduction of greenhouse gas by displacing a similar capacity thermal plant.

PNOC unit’s IPO to fetch P19.2B

2006-10-30T20:40:00.000-08:00

The Philippine Star 10/31/2006

The sale of the shares of Philippine National Oil Co.-Energy Development Corp. (PNOC-EDC) next week is expected to generate up to P19.2 billion in proceeds for the government.

According to documents obtained by The STAR, the initial public offering (IPO) of PNOC-EDC, the country’s biggest geothermal power producer, will fetch between P8.9 billion to P19.2 billion.

The offer price for the 30 percent to 40 percent block of common shares has been set at a range of from P2.10 to P3.20 per share.

PNOC-EDC said the money will be used to finance the development of new steam fields, the acquisition of a new drilling rig and to meet working capital requirements.

The IPO consists of a domestic offer and an international offer. The domestic offer shall consist of shares amounting to the lesser of 20 percent of the combined offer and will have an offer value of P2 billion. The international offer meanwhile, will consist of the balance.

After the international and domestic offers, including the over-allotment option, PNOC-EDC will have a total of 14.118 billion to 15 billion common shares issued and outstanding.

The IPO has an over-allotment option which is an option for the international underwriter to buy up to 15 percent of the offer shares exercisable in full or in part within 30 days from listing date to effect price stabilization.

P1.6-B Iloilo biomass power plant to start operations by next year

2006-10-30T20:39:00.000-08:00

The Philippine Star 10/31/2006

The 14-megawatt (MW) biomass co-generation power plant being put up by Central Azucarera de San Antonio (CASA) in Passi City, Iloilo at a cost of P1.6 billion will be operational by the first quarter of 2007.

The power facility will not only service the power requirements of the sugar mill but also help supply electricity to Passi City and the towns of Dueñas and San Enrique in Iloilo.

The co-generation facility will be powered by a 200-metric ton per hour suspension-fired bagasse boiler. It will use sugar cane bagasse, a refuse from sugar milling operations, to fuel the power plant.

While CASA said that about nine MW of the capacity will be used for operations and five MW will be allocated initially for commercial dispatch to local distribution utilities, it also foresees another 12-MW expansion for commercial dispatch in the midterm.

CASA’s co-generation plant is equipped with dual wet scrubbers to ensure compliance with air quality standards prescribed by the Department of Environment and Natural Resources (DENR).

Energy Secretary Raphael P. M. Lotilla, in a statement, hailed the sugar central’s decision to invest in its own co-generation plant fueled from the refuse of its own sugar milling operations.

"This not only increases renewable energy use in the country but also indicates a trend where large electricity users take steps to improve the cost efficiency of their operations and at the same time provide for their own power requirements," Lotilla added.

The country generates substantial fuel potential from biomass resources, such as bagasse or sugarcane residue, fuel wood, rice hull, coconut residue and animal waste, coming from extensive agriculture, livestock and forestry industries.

For instance, the Western Visayas, Eastern Visayas and Southern Tagalog regions where the traditional sugar centrals are located generate abundant supply of sugarcane bagasse. Research and field trials on biomass-based energy solutions show that integrating the collection and supply of sugarcane for sugar production and cane residue as fuel for energy production is an ideal method of utilizing cheap and widely available fuel resources for bagasse co-generation projects in the Philippines.

Joker raps PSALM over TransCo bidding

2006-10-30T20:36:00.000-08:00

The Philippine Star 10/31/2006

Sen. Joker Arroyo reprimanded the Power Sector Assets and Liabilities Management Corp. (PSALM) yesterday for refusing to disclose information about the three qualified bidders for the National Transmission Corp. (TransCo).

Arroyo, chairman of the Senate committee on public services and a member of the Joint Congressional Power Commission, said he asked PSALM for the ownership structure of each of the three qualified bidders as part of the responsibilities of Congress.

But PSALM, as expected, told Arroyo that the confidentiality agreement between them and the bidders prohibits it from declaring the identities of those who make up the companies awarded the right to bid.

"TransCo is owned by the government 100 percent, ergo, it is owned 100 percent by the public. Bidding it out must be transparent 100 percent because it is taxpayers’ money involved," Arroyo said in a statement.

PSALM president Nieves Osorio recently announced that three investor groups have passed the financial and technical criteria for the Dec. 20 bidding for 25-year contract to run TransCo.

This would be the fourth attempt by the government to privatize its power transmission network since 2003.

"True, there is such a thing as confidentiality provisions in bidding contracts. They are fairly common when it involves transactions between one private company and another private company. But not when it involves public funds," Arroyo said.

"PSALM went beyond its powers by binding itself to a confidentiality agreement that forbids Congress from even asking the identities of the people behind the corporate bidders," he added.

Arroyo reminded PSALM about the $525-million sale of the Masinloc power facility to the YNN Pacific-Ranhill Berhad consortium, which he said "failed miserably."

He recalled that Masinloc was awarded to the company with a paid-in capital of only P800,000 whose office was located at a warehouse without any desk.

"TransCo is worth four times that. P100 billion. And Congress cannot have a peep as to who are the bidders? Who can peep and who can know? Only a select few," Arroyo said.

Arroyo emphasized that the privatization of Transco will be the biggest transaction ever in Philippine history so all the more reason that Congress should be informed about its details.

Mirant workers complain over sale bonus

2006-10-23T04:05:00.000-07:00

The Philippine Star 10/23/2006

Employees of Mirant Philippines are crying discrimination on their compensation packages as they claim their US counterparts are getting $34-million in bonuses from the sale of the firm’s Philippine assets.

In a letter to the Department of Labor and Employment (DOLE) dated Oct. 20, same 1,200 employees of Mirant Phils. sought the department’s intervention regarding the sale of the local Mirant unit, the largest private producer of electricity in the country.

Through three separate petitions, the employees warned of "a potential labor dispute which may result in massive labor unrest of employees, and eventually cause a disruption of the electricity supply in Luzon."

The Mirant employees, represented by Joyce Bellas, Maria Anna Delos Reyes and Andres Boron, said that the present management has failed to provide workers with a definite program to protect their interest after the company’s sale is consummated.

"The employees persistently demanded this protection from the management but management consistently ignored, despite oral and written demands to specifically and definitely address these concerns," the group said in the letter.

Last July, the Atlanta-based parent firm Mirant Corp., announced plans to sell its Philippine assets through an international auction. The sale is expected to fetch $3 billion for the parent company.

As this developed, Mirant Phils. employees asked for the formalization of a severance policy that will guarantee an employee, who will be affected or terminated as a result of the sale, 2.5 months severance pay for every year of service, as consistent with company practice.

"To date, management has failed to enact such a policy despite the fact that the sale date is set to be finalized in November," they said in the letter.

Mirant Phils. has, for the past five years, contributed a yearly net income of at least P11 billion to the US-based parent company.

In the letter, employees also slammed the racial discrimination against Filipino employees.

"It is very apparent that Filipino employees are being treated unfairly. In the US SEC filing on Oct. 5, Mirant Corp. in Atlanta announced the grant of $34 million to 125 US employees for the successful sale of the Philippine assets. Filipino employees who worked hard not only for the sale but also for making Mirant Philippines a very profitable company get nothing," they said.

The only Filipino employee included in the $34-million sale bonus is Mirant Phils. chairman and president Jose P. Leviste Jr. To separate all 1,200 employees of Mirant Phils. would cost around only $24 million.

Mirant owns and operates the 1,200- megawatt (MW) power generating plant in Sual, Pangasinan, and the 735-MW facility in Pagbilao, Quezon. Both plants account for around 25 percent of the power supply in Luzon.

Napocor sees another profit year as peso strengthens

2006-10-23T04:03:00.000-07:00

The Philippine Star 10/23/2006

National Power Corp. (Napocor) is highly optimistic it will continue to register profits this year, helped by the strengthening of the peso.

Napocor president Cyril C. del Callar said after a recent company planning session that they intend to sustain the financial gains last year into this year and the suceeding years.

"Napocor is becoming a profit center, not cost-centric," Del Callar said. However, he refused to cite exact amounts until the final figures are released.

But he printed out demand for power was very strong in the third quarter as manufacturers went full blast to meet December demand, both for exports and domestic Christmas buying. Traditionally, the fourth quarter is consumer spending for the Christmas season, with a big bulk coming from the province.

Napocor has total outstanding loans of $7 billion (roughly P372 billion), from its creditors including the Asian Development Bank (ADB), the World Bank, the Japan Bank for International Cooperation (JBIC) and other commercial creditors.

Majority of the debts has been assumed by the state-run Power Sector Assets and Liabilities Management Corp. (PSALM).

Del Callar said they expect more foreign exchange gains with the strengthening of the peso. Government expects Napocor to register losses or become loss-neutral based on the exchange rate assumption of P52 to the dollar.

The peso closed at 50.10 last Friday, although it had challenged the 49 level several times last week.

As a rule of thumb, every peso gain against the dollar is equivalent to about P15 billion in forex gain or loss. "So we could just imagine the gains if the peso continues to appreciate."

Also expected to contribute to better earnings this year is the use of biodiesel and other biofuels.

Napocor has started testing the use biofuels on all its power plants.

"I have ordered testing of all kinds of alternative sources of fuel for our power plants. It looks good based on the tests of jathropa done by Department of Science and Technology (DOST)," the Napocor official added.

$450-M loan for power sector OK’d

2006-10-21T05:39:00.000-07:00

The Philippine Star 10/21/2006

The Bangko Sentral ng Pilipinas (BSP) has approved in principle the $450-million power sector program loan from the Asian Development Bank (ADB) that would bankroll the further deregulation and privatization of power generation in the country.

The BSP said yesterday that the Monetary Board (MB) has approved the loan, paving the way for the National Government (NG) to finalize negotiations with the ADB.

The MB also gave its final approval on two loans from the World Bank amounting to $310 million for the education and health sectors, the first program loans from the bank in almost seven years.

BSP Governor Amando M. Tetangco Jr. told reporters that the ADB loan was a loan of the republic with the Department of Finance (DOF) as the executing agency and the Department of Energy as the implementing agency.

"This is a policy-based loan for the Power Sector Development Program," Tetangco said. "The goal is to develop a financially sustainable, efficient and secure power supply to minimize the risk of power shortages."

Perhaps more than any other multilateral funding agencies, the ADB has expressed serious concern over the country’s looming power supply crisis that threatened to reverse economic growth in recent years.

Tetangco said the objective was to arrest the drain in government finances caused by power sector, thus freeing the funds for social services.

"The program is basically designed to strengthen the financial viability of the sector," Tetangco said.

Since it would be a program loan, Tetangco said the ADB facility would have attached policy conditions intended to strengthen the regulatory framework in the energy sector and further enhance market restructuring through competition.

"The intention is to encourage private participation in power generation," he said.

Initially, Tetangco said the terms of the loan would include a 15-year maturity inclusive of a three-year grace period. Interest rate on the loan was tentatively set at 6-month US LIBOR (London Interbank Overnight Rate) plus 60 basis points.

IFC to assist TransCo bid winner

2006-10-15T00:16:00.000-07:00

The Philippine Star 10/15/2006

The winning bidder for the 25-year concession of the National Transmission Corp. (TransCo), the country’s sole power transmission provider, has been assured of financial assistance. This as the International Finance Corp. (IFC) said it was prepared to provide financing support to the winning concessionaire. The IFC is the private sector investment arm of the World Bank. "IFC would be pleased to consider working with the winning bidder on mutually acceptable terms, in an effort to determine the feasibility of the proposed financing and the potential for IFC support," Vipul Bhagat, IFC country manager for the Philippines and Thailand, said in a letter addressed to the Power Sector Assets and Liabilities Management Corp. (PSALM), the agency tasked by government to privatize the TransCo assets. Bhagat added that debt financing, quasi-equity or equity investment would be subject to IFC’s "comfort with the shareholding group, a satisfactory completion of legal, environmental, technical and financial due diligence, approval by IFC’s management and board of directors, and execution of mutually satisfactory documentation." IFC extends attractive interest rates from its financing programs aimed at development projects. Likewise, it infuses equity with an option to sell its stake to the lead entity of a development project. PSALM president and chief executive officer Nieves L. Osorio said the IFC offer affirms the multilateral lending agency’s faith in the country’s power sector. "It also encourages potential bidders to participate in the final bidding for the TransCo concession set in November," Osorio said. Three interested bidders for the concession had submitted their prequalification proposals to PSALM last month. Government is expected to announce the qualified bidders as soon as it completes the deliberation and validation of the financial and technical capabilities of the three investor groups. IFC, which provides financing for projects in less developed countries and promotes private enterprise in developing nations, has substantially invested in the Philippine power sector since the 1960s. Bhagat said the IFC is prepared to invest between $2 billion and $5 billion more in the Philippines in the next three to four years. Since 1962, IFC has invested $2 billion into various projects in the country. Among the key sectors for IFC’s direct investments or assistance in enticing foreign investors to invest, are in infrastructure, tourism, information technology (IT) especially the business processing outsourcing (BPO) sector, electronics, and energy. Next in the priority list are investments in water, medical tourism, financial sector, and the mining sector.

RP power co-ops poorly regulated — WB

2006-10-12T22:23:00.000-07:00

The Philippine Star 10/13/2006

Washington D – The World Bank has criticized the Philippine government for its failure to regulate properly the country’s electric cooperatives.

In a speech at the World Forum on Energy Regulation here, World Bank lead energy specialist Bernard Tenenbaum took note of some "bad examples" carried out by regulators on off-grid electrification.

Tenenbaum said the Philippines’ off-grid electrification was "heavy-handed," citing a study he authored in 2004 and released April 2006 showing that "prepared program for new mini-grids has more than 20 regulatory steps." This means the SPUG (small power utilities group) program under the National Power Corp. has too many regulatory steps.

With this, Tenenbaum recommended that "the regulator should be allowed to vary the nature of its regulation depending on the entity that is being regulated."

"The national or regional regulator should be allowed to contract out or delegate either temporarily or permanently regulatory tasks to either government or non-government entities," he said.

Another poor example the World Bank official noted is that "there was an unsuccessful self-regulation of these electric cooperatives."

"Our general recommendation is that there should be a presumption of "self-regulation" for cooperative and other community-based organizations. However this does not mean that the regulator should take a completely "hands-off" approach," he said.

The World Bank study also noted that it would be hard to believe that community-based organizations always exemplify good governance.

"Like any other local organization, they are susceptible to corruption and capture by local politicians for political purposes. This has been a major issue for the rural electric cooperatives in the Philippines," the study said."

According to the recent in-depth analysis of the Philippine cooperative movement, it concluded that Philippine cooperative managements "tend to be relatively fragile and isolated, making them susceptible to local corrupting influences."

This is a polite way of saying, the study said, that Philippine cooperatives have been vulnerable to takeover by local politicians.

"Once local politicians gained control, many cooperatives were "run into the ground" through economically unjustified grid extensions, padding of cooperative payrolls with supporters of the politicians, a general reluctance to raise tariffs, an unwillingness to pursue collections and sometimes even outright theft of funds," it said.

A 1989 World Bank report found that only 22 of the 117 Philippine electric cooperatives were commercially viable.

Energy giant AES keen on Napocor power plants

2006-10-12T22:22:00.000-07:00

The Philippine Star 10/13/2006

Washington D – AES Corp. is still keen on participating in the privatization of the National Power Corp. (Napocor) generating assets, a ranking company official said.

In an interview during the World Forum on Energy Regulation here, AES executive vice president Robert F. Hemphill Jr. said the company has remained optimistic on the prospect of the Napocor privatization although they have not been successful in winning any of the assets sold.

"We have looked at the Philippines 20 years ago. And we continue to be interested. Our Singapore office is handling our investment in the Philippines," he said.

Hemphill admitted they are particularly eyeing the hydroelectric power plants of Napocor.

"We are generally interested in hydro assets," the AES official said. Hydropower accounts for 17 percent of AES’ total capacity.

The Power Sector Assets and Liabilities Management Corp. (PSALM) had earlier included AES in the list of interested parties that have signified keen intesest to join the bidding for the 360-megawatt (MW) Magat hydropower plant facility which will be placed on the auction block by November this year.

The Magat hydroelectric plant, located in Ramon, Isabela, is Asia’s biggest dam project which serves the primary functions of power generation and irrigation. It was built at a cost of $83.7 million.

But Hemphill said their continued interest in the country’s power sector would depend on the soundness of the regulatory policies and presence of demand.

"We will participate as long as the country’s regulatory policies remain sound. As long as there is a potential market for additional capacity, we will continue to explore opportunities in the Philippine power sector," he said.

Hemphill said AES has considered Asia, including the Philippines, as one of the company’s targeted areas for future investments.

"We have been exploring Asia. We have power plants in Vietnam, India, Sri Lanka and other Asian countries," he said.

AES is one of the world’s largest global companies with 2005 revenues of $11.1 billion. With operations in 26 countries on five continents, AES’ generation and distribution facilities have the capacity to serve 100 million people worldwide.

Power rate rigging probe set

2006-10-12T22:20:00.000-07:00

The Philippine Star 10/13/2006

President Arroyo directed yesterday Energy Secretary Raphael Lotilla and other concerned officials to investigate allegations of price manipulation in the wholesale electricity spot market (WESM) that would lead to an increase in power rates in the coming months.

Presidential Anti-Graft Commission Chairman Constancia de Guzman also vowed to monitor the investigation of the Department of Energy (DOE) on the alleged price manipulation by the National Power Corp. (Napocor), the Power Sector Assets and Liabilities Management Corp. (PSALM) and the Manila Electric Co. (Meralco) so the PAGC would be ready in the event that the case is transferred to the commission.

"I already instructed the DOE and other government agencies concerned to look into the allegations of price manipulation in the power sector and to ensure that consumers will not be taken advantage of," the President said in her message to the Liga ng mga Barangay convention in Cebu.

"Reports of price manipulations are unacceptable. They should not go unpunished if culpabilities are established," she said.

Reports of price manipulation came after Mrs. Arroyo announced last August that consumers can expect lower electric bills as a result of the WESM, which was implemented by the government in pursuit of reform laws for the power industry.

She said electricity rates will be reduced by as much as 52 centavos per kilowatt-hour due to WESM.

WESM is a trading or bidding system where power companies could purchase electricity at lower rates from different power generators.

She said the government will find ways to stabilize power rates and ensure the protection of consumers.

Mrs. Arroyo said the government is mapping out preemptive measures against power shortages or blackouts in the future.

De Guzman said the PAGC cannot yet conduct its own investigation since the DOE has primary jurisdiction over the case.

"If there is prima facie evidence (on price manipulation), that’s the only time it can be referred to the PAGC to act on the presidential appointees and the criminal cases may (be filed) through the Ombudsman or the Department of Justice," she said.

She said the commission will monitor the case and when it is transferred to the PAGC there would be a faster disposition of the alleged scam.

De Guzman said there are several laws that could have been violated if the allegations are proven, including the Anti-Graft and Corrupt Practices Act, laws on the proper actions of public officials, and the Administrative Code of 1987.

Mrs. Arroyo said the free and open competition on the sale of electricity from power generators would result in more savings for consumers and businessmen.

She had earlier bared that more reforms will be undertaken to lower the expenditures on electricity not only by the power generating sector but also electric companies.

She said the measures include opening access and retail competition by distribution of utilities at the level of household, industries and businesses.

Meanwhile, Meralco, the largest power distributor in the country, denied that the firm is involved in manipulating the price of electricity in the open market.

"Meralco had nothing to do with the alleged increase in the price of electricity on the third month of the WESM," Jesus Francisco, Meralco president and chief operating officer, said in a statement sent to The STAR.

He was reacting to the report of Albay Rep. Joey Salceda on Wednesday that the Napocor, PSALM, and Meralco were responsible for the increase in WESM prices three weeks ago from P2.88 per kilowatt-hour to P6.88 per kwh.

Salceda, an economic adviser of Mrs. Arroyo, said there was no reason for the sudden increase except price manipulation by the three sellers since there was no significant change in supply and demand.

"The three sellers, in particular Napocor, which controls power generation, owe the public an explanation," he said.

He added that the high WESM price of electricity would soon be reflected in the monthly power bills.

Francisco said Meralco is a buyer and not a seller in WESM.

"We would like to stress that Meralco is not a seller in the market and is not in a position to manipulate the price," he said.

He said although the company owns two independent power producers (IPPs) or power plants that participate in WESM, they are in no position to set the price.

"We should like to stress that we in Meralco are always looking for ways to provide lower power cost to all our customers," he stressed.

Open market backed

Meralco earlier expressed support for the open market system, saying it would promote a competitive environment in the industry that could bring down prices.

Francisco said Meralco hopes that the recent unusual price hike could still be corrected.

That is actually the objective of the Electric Power Industry Reform Act of 2001 in creating WESM.

Rep. Alipio Badelles, House energy committee chairman, said a truly competitive environment could not be attained for as long as Napocor controls the power generation sector.

He said PSALM, the agency tasked to sell Napocor assets, should have sold at least 70 percent of the corporation’s power plants.

The Joint Congressional Power Commission (Powercom), chaired jointly by Badelles and Sen. Miriam Defensor Santiago, has started an inquiry into the reported WESM price manipulation.

Santiago said Powercom is prepared to take drastic measures to stop the anticipated increase in power rates.

She said the commission could even order a stop to the operation of the WESM if necessary.

Last Saturday, there was cause for concern over the escalating prices in the WESM as indicated in the average prices over the first three months of trading.

In the first month of trading in June, biddings resulted in an average price of P2.75 per kilowatt-hour, in the second month it rose again, and in the third month it went up to P4.853 per kwh.

Santiago said the increase was unreasonably high and raises suspicion that there is price manipulation among the WESM players.

During the public hearing of the Powercom at the Senate yesterday, Philippine Electricity Market Corp. president Lassee Holopainen explained that an investigation was conducted after the average price per kwh at the WESM increased dramatically in the third month of bidding.

He said the sudden increase was enough to warrant an investigation, saying that while volatility is expected in the market, they want to ensure that the cause is nothing other than economic reasons.

Holopainen said the investigation is ongoing so he could not yet determine whether there was price manipulation.

First Gas assures continued operation despite Malampaya shutdown

2006-10-09T17:18:00.000-07:00

The Philippine Star 10/10/2006

First Gas Corp. (FGC) has assured the public that it would continue the operations of its power plants despite the scheduled platform maintenance of the Malampaya project this November.

In a disclosure to the Philippine Stock Exchange, FGC said the 1,000-MW Santa Rita and 500- MW San Lorenzo natural gas-fired power facilities will not cease operations despite the natural gas supply interruption during the scheduled maintenance of the Malampaya natural gas pipeline from Nov.18 to Dec. 12, 2006.

FGC vice chairman and chief executive officer Peter D. Garrucho Jr. said contrary to news reports indicating otherwise, "we would like to assure the general public that the First Gas power facilities consisting of the MW Santa Rita and San Lorenzo power plants will continue to deliver power during the scheduled Malampaya shutdown in November to December of this year.

Garrucho explained that both power plants were designed to operate on a wide variety of liquid fuels.

The FGC official also noted that these power plants are equipped with adequate liquid fuel storage facilities to enable uninterrupted and continued power generation during natural gas supply interruptions, regardless of whether the disruption is anticipated or not."

He also stressed that all measures have already been undertaken to ensure that sufficient quantities of liquid fuel will be available during the scheduled Malampaya maintenance period to augment the existing fuel inventory.

First Gas Power Corp. and FGP Corp., the operating companies of the Santa Rita and San Lorenzo plants, respectively, are subsidiaries of publicly-listed FGC.

For its part, Kepco Ilijan Corp. said they would shut down the 1,200-mw Ilijan natural gas power plant, a joint venture of the National Power Corp. (Napocor) and Korea Electric and Power Corp. (Kepco).

A Kepco official said they would use another Napocor plant to augment the power requirement once the shutdown starts. "Napocor has verbally advised us to get ready (with Malaya) if there is a need to run it."

Malaya, a 650-MW bunker plant located in Pililla, Rizal, is on an economic shutdown since January this year due to the excess capacity in the Luzon grid.

"We might run to it as an additional capacity due to the shutdown of the 1,200-MW Ilijan plant," the Kepco official said.

He said the start-up of Malaya diesel-fired power facility will take about three days. "If Ilijan is shut down on a Friday, then we will start up Malaya on a Monday and it will be operating by Wednesday."

The government had earlier said that it is looking at the possibility of temporarily halting the operation of the wholesale electricity spot market (WESM) to prevent prices at the electricity market from shooting up as the power demand and supply scenario might be affected by the expected shutdown of the three natural gas power plants.

But Philippine Electricity Market Corp. (PEMC) president Lasse Holopainen said they are still studying this option if the operators of the gas-fired power plants would not be able to come up with an alternative fuel source.

With FGC’s assurance, though, it was not clear if the PEMC would still consider the proposed shutdown of WESM for the period covered by the temporary maintenance of the said facilities.

First Gas, Siemens reach accord on Sta Rita plant

2006-10-09T17:14:00.000-07:00

The Philippine Star 10/10/2006

First Gas Power Corp. (FGPC) and Germany’s Siemens AG have reached an amicable settlement of their dispute over the construction of the 1,000-megawatt Santa Rita power plant in Batangas province.

With the settlement, both parties have agreed to terminate arbitration proceedings and fully settle all outstanding obligations between them with all previous decisions of the arbitral tribunal remaining valid.

Under the agreement, Siemens will pay FGPC $10.5 million on Oct. 18.

FGPC is a wholly-owned subsidiary of First Gas Holdings Corp., a joint venture between the Lopez-controlled First Gen Corp. and British Gas.

The International Chamber of Commerce had ruled that First Gas was entitled to liquidated damages worth $99.3 million from Siemens for delays in the construction of the Santa Rita power plant.

First Gas in 2003 withheld $94.2 million in "project milestone payments" to Siemens to protect that claim.

However, the London-based tribunal declared that Siemens was "entitled to extensions of time and/or suspension of liquidated damages in respect of Block 1 and Block 2 completion of 32 days and 60 days, respectively" involving the Santa Rita project.

The dispute arose when Siemens and its subcontractors incurred delays in the completion of the project, resulting in $99 million owing from Siemens to FGPC under the turnkey engineering, procurement and construction contract forged on Dec. 16, 1996.

Pursuant to the contract, FGPC withheld about $96 million of its milestone payments to Siemens.

In Dec. 2002, Siemens submitted a request of arbitration to the ICC in which Siemens claimed payment of the sums withheld by FGPC and an additional sum of approximately $64 million for alleged prolongation costs and miscellaneous matters.

Apart from the issue of delay, First Gas also filed an $83-million counterclaim against Siemens for alleged defects in the power plant.

PNOC-EC operations adversely affected by ‘leadership crisis’

2006-10-05T21:45:00.000-07:00

The Philippine Star 10/06/2006

The operations of state-owned PNOC-Exploration Corp. is reportedly being hampered by a "leadership crisis" as the company’s board and employees recently expressed a "no confidence vote" for PNOC-EC president Eduardo Mañalac.

Company sources said the PNOC-EC board, in a planning session in Cebu, has allegedly not been able to come up with any resolution or decision from the agenda due to various disagreements with Mañalac.

"It appears that PNOC-EC is ‘paralyzed’ and the entire operation of the company is in imbroglio," the sources said.

Declining to confirm nor deny the issue, Energy Secretary Raphael P.M. Lotilla said "it (issue) has been there since a month ago." He, however, declined to say if he would investigate whether such issue really exists in the PNOC-EC organization.

In a letter written by concerned officials and employees of the Philippine National Oil Co. (PNOC) family, they said "what PNOC needs now is a decent, morally upright and honest manager".

"What PNOC need is a man of integrity and credibility, who does not say one thing and does another; a man who practices transparency thus avoid this kind of CMOL controversy," they said.

They added that "what PNOC needs is an official who will attract investments and not to bring PNOC to various court and Ombudsman cases and negative media releases, thus damaging seriously the corporate image of PNOC."

In an earlier interview, Mañalac denied allegations that he favored the proposal submitted by Malaysia’s Mitra Energy on the Camago-Malampaya oil leg (MOL) since some officials of the oil exploration firm were his former colleagues in Conoco Philips and China National Oil where he used to work as an executive.

"That is not true. We have implemented a good process and properly selected the right company," he said.

Based on the proposal submitted by the Mitra group to PNOC, production of oil in CMOL will commence before the end of 2007. Mitra Energy estimated a total of 41 million barrels of oil could be extracted from the reservoir for a period of four years with a total project cost estimated at $684 million.

But sources claimed that Mitra Energy has very limited net worth as of December 2005 of only a million dollar.

President Arroyo issued last month Executive Order 556 which effectively revoked Mitra Energy’s contract, saying that "there shall be no farm in or farm-out contracts awarded by any government agency, including PNOC, including contract for the exploration development, and production of crude oil from Camago-Malampaya reservoir."

With the Malacañang decision, PNOC will have to bid out the oil rim project.

Mañalac said they recognized the valid concern of President Arroyo in issuing such order. "We support President Arroyo’s move. The President only wants to make sure that future partners of government agencies, particularly PNOC, will be legitimate and has the right financial strength," he said.

It would be recalled that when PNOC started discussions with Mitra Energy, local conglomerate Burgundy Global Exploration Corp. requested for the Office of Solicitor General’s ruling and opinion to uphold the Constitutional mandate regarding the granting of rights to Filipino when it comes to national patrimony.

PSALM faces probe on alleged price manipulation at WESM

2006-10-05T21:44:00.000-07:00

The Philippine Star 10/06/2006

The state-run Power Sector Assets and Liabilities Management Corp. (PSALM) faces a possible probe for alleged "price manipulation" at the wholesale electricity spot market (WESM).

In a press conference yesterday, Philippine Electricity Market Corp. (PEMC) president Lasse Holopainen said they would start an investigation on PSALM’s "unusual price bids" during August and September this year.

As a trader in WESM, PSALM accounts for 50 percent of the trading volume. PSALM, created under the Electric Power Industry Reform Act of 2001, administers the independent power producers (IPPs) of the National Power Corp. (Napocor). It has four teams consisting of 16 power plants that have been trading at the WESM.

"Napocor owns 20 percent of the generating capacity and the rest, or about 50 percent, of our total generating capacity is owned by IPPs, which Napocor was previously managing. However, under the WESM, PSALM has been trading the IPPs, and the thing is if you have market power then you can set the prices. Then 50 percent is under control of PSALM," Holopainen noted.

The investigation, which could last up to 45 days, was ordered by the PEMC board when it noticed the rising prices in the WESM over the past months. The probe, Holopainen said, is reflective of PEMC’s thrust to adhere to a transparent market.

"Whenever there are significant changes in price, whether upward or downward, PEMC will closely monitor the operations of the power spot market, conduct investigations if needed, and penalize responsible parties. PEMC’s mandate is to protect the public interest and ensure transparency, reliability and unfair competition in the WESM," the PEMC head said.

When prices in the WESM go beyond certain thresholds, the Market Surveillance Committee (MSC) will automatically conduct a closer scrutiny of the trading behavior as a matter of procedure.

"All I can say is that there is suspicion of manipulation of prices and there will be an investigation," Holopainen said.

He also assured the stakeholders of WESM and the general public that PEMC will always take a proactive stance to safeguard the transparency, reliability and competitive character of the WESM, with the MCS closely monitoring and analyzing the market’s indices and the behavior of its members and participants.

The market is neutral," Holopainen said, when asked if they would penalize PSALM if found violating the WESM market rules even if it is state-run.

He stressed that "the market has the ability to penalize and correct the prices. Ideally, this investigation will be done prior to the price reflected on the consumers’ bill."

"The way it works after the trading it takes another 30 days to be billed to the distribution utility. So if there is manipulation, then the adjustments will hopefully happen before 70 days lapse," he said.

The PEMC official admitted that he was not expecting this kind of investigation. "This is something that we do expect to happen six months into our operations."

PSALM president Nieves Osorio, for her part, said "in the interest of transparency, we welcome the investigation in order to clarify issues raised against our traders."

"Under the WESM rules, any complaint must be investigated by PEMC. As far as we are concerned, PSALM’s electricity trading teams have been trading electricity based on the rules laid out by PEMC," she said.

"Bid prices are influenced by several factors, among them the cost of producing electricity which varies from plant to plant," Osorio said.

Temporary halt to WESM mulled

2006-10-05T21:42:00.000-07:00

The Philippine Star 10/06/2006

The Philippine Electricity Market Corp. (PEMC), the operator of the country’s wholesale electricity spot market (WESM), is looking at the possibility of temporarily stopping the operation of WESM next month to prevent rotating brownouts in the Luzon grid.

PEMC vice president for market operations Mario R. Pangilinan told a press conference that there would be a fuel supply interruption from Nov. 18 to Dec. 12 due to the scheduled maintenance of the Malampaya gas pipeline in Palawan.

As an offshoot of the natural gas supply interruption, the operations of the gas-fired power facilities Ilijan (1,200 megawatt) and Sta.Rita/San Lorenzo (1,500 MW) would cease during the period.

During the expected outage of these gas-powered power plants, PEMC sees projected demand to reach an average 4,536 MW, or a maximum of 5,810 MW and a minimum of 3,104 MW.

PEMC president Lasse Holopainen said they are now coordinating with the Department of Energy (DOE) to determine if there would really be a need to suspend the WESM operation to prevent any supply problem during these periods.

"There also ongoing discussions in the DOE on whether or not to suspend the market to prevent possible high prices. However, this are still being considered along with other contingency measures being discussed with DOE, National Power Corp. (Napocor) and the other major generators," he said.

"We’re still discussing whether it’s needed, if economic trading can continue, then we will continue it, but this is again a preemptive measure," he added.

He said they are also closely coordinating with the parties involved to determine if it would be necessary to shut down the WESM operations.

"We have been discussing with the natural gas operators the possibility of having substitute fuel. For instance, First Gas and Kepco are trying to source possible substitute fuel to keep them running at certain periods of time, particularly during peak demand," he said.

Holopainen noted that the interruption will result to thin reserve margin due to the combined outage of all natural gas plants amounting to 2,700 MW.

He also expressed apprehension that there are also other factors that may affect supply and could lead to a price uptick and worse power outages.

"This will imply a possible escalation of spot prices due to tight supply condition and dispatch of oil-based plants. It will also result in the poor quality of system frequency due to low reserve and possible rotating brownouts in case there are additional forced outages of the generating plants, which means with only 6,700 megawatt left, and a plant will trip, we might then have to go a rotating brownout," he said.

PNOC-EDC firms up price range for initial public offer

2006-10-04T21:36:00.000-07:00

The Philippine Star 10/05/2006

PNOC-Energy Development Corp. (EDC), the most profitable subsidiary of state-owned Philippine National Oil Co. (PNOC), has firmed up a price range for its planned initial public offering (IPO) this year.

Energy Undersecretary Melinda Ocampo told reporters that the PNOC-EDC board has approved the proposed price range submitted by the company’s financial advisor, CLSA Exchange Capital. Ocampo, however, declined to give the price range for the stock offer.

She said with the board approval, PNOC-EDC’s IPO is expected to start anytime this year.

It was earlier feared that the PNOC-EDC stock offering may be deferred to early next year due to some unresolved issues such as the consent to be given by its creditor bank, the World Bank (WB).

But Ocampo said they are optimistic the WB would be able to issue its consent soon. "That is the idea and we hope that the IPO will push through this year."

It was also learned that CLSA and the PNOC-EDC privatization team are currently working on the firm’s registration with the Philippine Stock Exchange (PSE).

PNOC-EDC expects to raise some $300 million from the IPO initially scheduled in September. This schedule was moved to November or December this year.

Proceeds from the IPO would be used for the modernization and upgrading of PNOC-EDC’s drilling facilities. Some $60 million from the proceeds would be utilized to pay portion of the company’s build-operate-transfer (BOT) contracts this year.

PNOC-EDC also want to generate new funds from the public offering to veer away from new borrowings.

PNOC-EDC, the geothermal and renewable energy development arm of PNOC, has a present net book value of $800 million to $1 billion. It expects its earnings to reach more than P10 billion this year from P8.6 billion in 2005.

In May this year, the PNOC-EDC board approved the privatization blueprint which will allow the sale of 30 to 40 percent of the company through an IPO.

First Gen gets award notice from PSALM for Pantabangan-Masiway hydropower plant

2006-10-04T21:35:00.000-07:00

The Philippine Star 10/05/2006

Lopez-owned First Gen Hydro Power Corp. said yesterday that the Power Sector Assets and Liabilities Management Corp. (PSALM) has issued the notice of award for the company’s purchase of the 112-megawatt (MW) Pantabangan-Masiway hydroelectric power plant complex in Nueva Ecija.

PSALM is the government agency tasked to handle the privatization of the generation and transmission assets of the National Power Corp. (Napocor).

In a disclosure to the Philippine Stock Exchange, First Gen Hydro, a wholly-owned subsidiary of publicly-listed First Gen Corp., said it won over SN-Aboitiz Power Corp. in the successful bidding conducted by PSALM last Sept. 8. First Gen Hydro submitted a higher bid of $129 million.

With this acquisition, First Gen Corp. will have a total of 1,839 MW of installed generating capacity, accounting for almost 12 percent of the country’s total installed capacity.

First Gen’s other subsidiaries currently own and operate the 1,000-MW Santa Rita and 500-MW San Lorenzo natural gas-fired power plants in Batangas City, the 225-MW Bauang diesel power plant in La Union, and the 1.6-MW Agusan hydroelectric plant in Bukidnon.

According to First Gen, its foray into hydropower is a significant step towards fulfilling the company’s aspirations to diversify its portfolio and help protect the environment.

The Pantabangan-Masiway plant was practically the first big ticket item sold by PSALM since it started the privatization of Napocor assets in 2004.

The Pantabangan hydropower plant is located in San Jose, Nueva Ecija and is composed of two 50-MW units. Both are commissioned in 1977.

The Masiway power facility, on the other hand, is located near the Pantabangan power plant and was commissioned in 1981.

First Gen also won in the bidding for the 1.6-MW Agusan hydropower plant auctioned off by PSALM last year for $1.53 million.

Next on the auction block is the 360-MW Magat hydroelectric complex in Isabela and the 25-year concession of TransCo (National Transmission Corp.).

Under the asset purchase agreement (APA), First Gen will sign a land lease agreement with PSALM, and the operation and maintenance agreement with the National Irrigation Administration for the non-power components.

The APA for the Pantabangan-Masiway facility requires the winning bidder to deliver at least 40 percent of the purchase price as upfront payment payable on or before the closing date. The balance of 60 percent may be paid in 14 equal semi-annual payments with an interest of 12 percent per annum compounded semi-annually.

The winning bidder is also required to post a performance bond of $2.58 million, equivalent to two percent of the purchase price. The performance bond will be reduced every year equivalent to two percent of the aggregate amount of the deferred payments.

In addition, the winning bidder will be required to post a deferred payment security deposit equivalent to at least the next deferred payment in the form of cash, currently dated manager’s check or an irrevocable standby letter of credit acceptable to PSALM.

Napocor denies influencing spot market auction results

2006-10-04T03:37:00.000-07:00

The Philippine Star 10/04/2006

State-owned National Power Corp. (Napocor) yesterday denied that it has been influencing the bidding at the wholesale electricity spot market (WESM) by submitting high bids.

In a press statement, Napocor said the changes in electricity prices of generators at WESM, such as the Napocor, are just part of the dynamics that govern the relationships of market participants. It is also an indication of the self-correcting mechanism in prices brought about by competition and deregulation – where rates approximate, if not reflect, the true cost of generation.

The power firm was reacting to allegations that it is bidding "high" to recover losses incurred in the past two months in the WESM, which could put an end to cheaper electricity for consumers.

Napocor earlier said it had incurred almost P1 billion losses from its first month of participation in the WESM

The state-owned power generation company also denied it has been engaging in any "bid low" strategies.

"On the contrary, Napocor has been consistently bidding well within its allowable rate-of-return. It is the market that dictates how much can be charged in a given bidding hour. This is the very essence of competition."

The power company said WESM records will show that it has been bidding in the spot market using electricity generation prices based on its approved revenue requirement.

As one of the major participants in the WESM, Napocor also explained there are many factors that affect prices in an open market.

"Trading in an open market such as the WESM depends on the strategies and decisions on electricity pricing by trading participants. These strategies and decisions tend to respond to real market situations," it said.

3 groups submit prequalification documents for TransCo bidding

2006-10-02T17:15:00.000-07:00

The Philippine Star 10/03/2006

The Power Sector Assets and Liabilities and Management Corp. (PSALM) said three prospective bidders submitted yesterday their respective prequalification documents in preparation for the bidding of the 25-year concession of the National Transmission Corp. (TransCo).

Citing the confidentiality agreement between the government privatization arm and the prospective groups, PSALM declined to name the members of each consortium.

The list of prequalified bidders will be released after the evaluation of the documents is completed. The documents were accepted and verified last Sept. 28. The evaluation process of the prequalification documents starts immediately.

"We’re very happy with the turnout of the event notwithstanding the inconvenience caused by typhoon Milenyo. Considering the stringent requirements set in the terms of reference, the three groups represent quality investors both local and foreign. This only indicates the earnestness of the parties to participate in the final bidding for the TransCo concession set in November," PSALM president Nieves L. Osorio said.

The prequalification procedure enables PSALM to assess the financial and technical capabilities of investors interested in bidding for the 25-year TransCo concession to ensure strict compliance with the provisions of the Electric Power Industry Reform Act (EPIRA).

"The prequalification process was also conducted to ensure that only serious bidders with proven domestic or international experience and expertise as a leading transmission system operator would be qualified to participate in the formal bidding," Osorio said.

PSALM units involved in the process stamped initials on each page of the documents to indicate completion and precision in terms of the number of pages submitted vis-à-vis the bidders’ receiving copies.

PSALM is now evaluating the documents and will announce the qualified bidders in about a month’s time.

Among those who witnessed the proceedings were newly appointed TransCo president Arthur Aguilar and assistant chief state counsel Ruben Fondevilla, who regularly attends the PSALM board meetings representing Justice Secretary Raul Gonzales.

Bidders for the TransCo concession must have a member or affiliate with experience in operating and maintaining electricity transmission systems comparable to that of the Philippines , with at least 6,000 circuit kilometers, a minimum 6,000 megawatts peak demand and a voltage level of 115 kilovolts (kV) to 230 kV.

At the same time, a member of the prospective bidder who meets the technical prequalification criteria must have a net asset value or market capitalization of at least $500 million.

Bidders should also have the capability to form a concessionaire who will meet the 60- percent Filipino ownership restrictions for grantees of a public utility franchise. The largest foreign and Filipino members of the prospective bidder will also need to pass a net asset value market capitalization test.

DOE welcomes Mirant’s offer to employees

2006-10-02T17:14:00.000-07:00

The Philippine Star 10/03/2006

Energy Secretary Raphael P.M. Lotilla has lauded Mirant Philippines’ decision to give in to its employees’ request for a severance package of 2.5 months of salary for every year of service.

"We are gratified and satisfied with the decision of Mirant Philippines management," Lotilla said.

He said the move resolves one of the utmost concerns of the Philippine government. "We want to ensure that the welfare of the employees that would be affected by the sale is protected."

"Employees are part of the assets of the corporation. The investors need to take care of them as they will be the ones to run the Mirant power plants," he said.

Late last week, Mirant Philippines chairman and president Jose Leviste Jr. said they would formalize and come up with a written policy on the severance package this week.

Leviste said he had personally relayed this matter to the employees in the Sual and Pagbilao plants last week.

"I told them Mirant will formalize in its company policies the practice of giving 2.5 months for every year of service, including all benefits in the past. In other words, we’re going to put it as part of our company policy. Before it was practice, and our written policy does not reflect it. So we’re going to put it in writing and assure our employees on that matter," he said.

He said management will also work out an amendment to the Mirant Information Package (MIP) to reflect the changes in the separation package.

"The one reflected in the MIP will be changed. But the commitment is to the Philippine employees," he said.

Another part of the MIP that would be changed is the company’s retirement plan which is a defined benefit plan with a fund held in trust by a Philippine bank. The plan covers all regular Filipino employees, including senior management and officers, and pays benefits that are above the minimum requirement of the law. The plan pays 1.25 months salary per year of service for early and normal retirements; and for voluntary separation, the plan pays one-half month salary per year of service provided the employee has served for not less than 15 years. The plan is subject to an annual actuarial assessment by a certified professional.

The Mirant chief said they would revise this particular part of the MIP to assure employees that their welfare are aptly protected.

He said they have yet to thresh out details on how the new package will be implemented.

"The issue on whether when our employees will be severed has yet to be discussed, I don’t know what the new owner will do and I don’t know who the new owner is. But we are not only changing the company policy, hence we are putting the company practice into the company policy," he added.

Leviste said the new policy containing the separation package will also be placed in the company’s data room.

"We are also going to put this in our data room. We have a data room where all the bidders can access," he said.

The changes, he said, would also be reflected in the sale agreement. "We are going to put it also in the PSA [purchase and sale agreement], in short it will be part of the deal. If they are severed for whatever reasons, they are covered," he said.

UK oil search firm to install solar home system in Ifugao

2006-10-02T17:13:00.000-07:00

The Philippine Star 10/03/2006

State-owned Philippine National Oil Co. (PNOC) has entered into an agreement with a UK-based oil exploration firm for the installation of solar home systems in Ifugao province.

PNOC said Middle East Petroleum Services (MEPS) has agreed to provide the funding to electrify households in selected barangays in the province.

MEPS is an oil exploration company and is also diversifying into renewable energy development. The project is part of MEPS’ corporate social responsibility program.

According to PNOC, the project will be part of its PNOC Solar Homes Project which is now on its fourth year.

There are now P210.6 million worth of solar systems installed under the project. As of August 2006, the project has benefited 10,551 households in various regions in the country.

PNOC said there are about 4,500 units left to install for the project to be completed, which is targeted by the middle of 2007. It added it is confident that with the entry and participation of MEPS in this project will enable it to meet this target.

The project was made possible through a 5.591-million euro grant from the government of Netherlands and partly subsidized by PNOC.

"Because of this support, the solar home systems are made much more affordable," PNOC said.

The state-run company is optimistic of the benefits and long-term positive impact of the project, citing the need to develop other energy resources so that households that are not connected to the main power grid can enjoy the benefits of electricity.

In 2004, the PNOC solar project was a recipient of the highest award for sustainability in the internationally-renowned Energy Globe Awards.

Through the same solar project, the government also aims to install some 15,000 solar home systems as source of electricity in Regions 1 to 7 as well as in the Cordillera Administrative Region.

About 40 agrarian reform communities in Mindanao are also expected to enjoy electricity through the Solar Power Technology Support (SPOTS) project of the Department of Agrarian Reform and the Department of Energy (DOE). Phase 1 of the project involves a $25.188-million loan from a Spanish mix credit facility and a P450-million government counterpart.

Aguilar replaces Ortiz as TransCo head

2006-09-26T07:36:00.000-07:00

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.

Biggest coal power plant in Mindanao goes online Jan 2007

2006-09-26T07:34:00.000-07:00

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.

TransCo income up to P10.8B as of July

2006-09-24T22:10:00.000-07:00

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.

PSALM eyes sweetener in sale of Napocor asset

2006-09-24T22:09:00.001-07:00

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.

Philexport urged to shed bias in giving status of power industry

2006-09-24T22:09:00.000-07:00

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.

NG wants Mirant to get okay on sale of assets

2006-09-24T22:08:00.000-07:00

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.

Chinese firms among 40 bidders for 2 power plants

2006-09-21T17:23:00.000-07:00

The Philippine Star 09/22/2006

At least 40 foreign and local companies have expressed interest in bidding for the two decommissioned plants of the National Power Corp. (Napocor) set to be auctioned off within this year, a ranking Power Sector Assets and Liabilities Management Corp. (PSALM) official said.

PSALM vice president for asset management and disposal Froilan Tampinco said most of the interested bidders are Chinese firms.

He said they intend to put in the auction block in the last quarter of the year either the Bataan Thermal or Manila Thermal power plant, both decommissioned power facilities.

Tampinco said PSALM has decided to sell these power plants as scraps.

The PSALM official has admitted that while they plan to sell either of these two decommissioned power plants, they have yet to firm up the terms of reference (TOR) for the bidding .

"We have yet to decide on the TOR. We have to make sure that those that will bid are qualified and has capacity to pay for the plants," he said.

He said one of the areas in the TOR that they are closely looking at is the bid security. "If possible, we are trying to put a quite significant bid security so that not just anybody could comply."

Tampinco said they are also making sure that they have the correct valuation for each of the decommissioned asset that would be sold. "We have to make sure that we have the right weight. It will depend on the equipment in the plant that we will sell."

Recognizing the difficulties tied to the disposal of the retired plants of Napocor, PSALM decided in April this year to hire the services of a third party auctioneer as an alternative strategy in the auction of these decommissioned facilities.

The main function of the third party auctioneer, who will provide a comprehensive asset disposal service to PSALM, involves formulating an appropriate sale strategy and methodology for the decommissioned power plants. This includes the administration of an inventory of the assets, the preparation of the assets, the strategic conduct of the auction, and the removal of the assets from their respective sites.

Napocor currently has at least five retired plants in its portfolio: the 225- megawatt (MW) Bataan (bunker), the 54-MW Cebu II (diesel), the 200-MW Manila (bunker), the 22.3-MW General Santos (diesel), and the 108-MW Aplaya (diesel) power plants.

By engaging the services of a third party auctioneer, PSALM hopes to gain ground in selling these decommissioned power facilities, three of which underwent unsuccessful bidding exercises in 2005.

The Bataan thermal plant, which is scheduled for a negotiated sale this year, underwent two rounds of failed biddings in April and September last year.

The first auction for both the Cebu II and Manila plants held in the first quarter of 2005 were declared failures.

Napocor readies payment for damage claims in oil spill

2006-09-17T21:37:00.001-07:00

The Philippine Star 09/18/2006

The National Power Corp. (Napocor) said over the weekend that it would soon start paying claims for damages by individuals affected by the oil spill in Semirara Island.

Napocor sources said the amount of payment for the claims would reach P9 million.

"We are now finalizing the lists of claimants and would start the release of payments soon," a source said.

The Government Service Insurance System (GSIS) is the main insurer of the state-run power firm for oil spill damages.

The GSIS will, in turn, hand over the Napocor insurance claims to its reinsurers (British Marine Insurance and GTS) which will then negotiate with the adjusters.

While awaiting the disbursement of fund, Napocor is currently shouldering all the cost for the clean-up operations.

Last May, the state-owned power firm secured a provisional certificate of completion from the Philippine Coast Guard (PCG) for the clean-up of the oil spill in the 114-hectare area in the island of Semirara .

The certificate, the PCG acknowledged Napocor’s effort to complete and finish cleaning the affected areas which include sandy and rocky beaches as well as mangroves.

The clean-up was conducted by Napocor together with a PCG-accredited private company specializing in oil-spill clean-up, First Response Marine Services Inc. (FRMSI).

Aside from the clean-up and settlement of damage claims, livelihood assistance for the affected residents are also entering the final phase of processing.

With the clean-up substantially finished, the rehabilitation of the affected mangrove areas, under the direction and guidance of the Department of Environment and Natural Resources, had also started.

On Dec. 18, 2005, Napocor-owned Power Barge 106, ran aground off the coast of Semirara Island, in Caluya, Antique, after encountering strong winds and waves due to inclement weather.

More than 210,000 liters of Bunker C fuel oil were spilled due to the accident. The strong sea currents subsequently brought the spilled oil to Kaybelo Cove, affecting some 113 hectares of shoreline, sandy and rocky beach, and mangroves.

Mirant employees urged to submit formal request for Napocor assistance

2006-09-17T21:37:00.000-07:00

The Philippine Star 09/18/2006

National Power Corp. (Napocor) president Cyril del Callar is urging employees of Mirant Philippines Inc. to submit their formal request for assistance from Napocor.

"We are willing to listen to them. But we need them to provide us with information on the status of the separation package they are asking from Mirant Corp.," Del Callar told reporters over the weekend.

Del Callar said the extent of help that they may give would "depend on the merits of the information provided to us."

Napocor wants Mirant to seek prior consent before Mirant proceeds with the equity sale.

Specifically, Mirant employees have asked Napocor to make the severance pay as part of the transaction documents for the sale of Mirant Philippines’ equity to ensure that the employees’ welfare is protected.

Up to now, the employees of Mirant Philippines claim that there are no clearer and more definite guidelines on their separation packages should any of them be retrenched as a result of the planned sale of the company by the US-based Mirant Corp.

A source who declined to be named said that employees are "uneasy" over the assurance given by Mirant Philippines president Jose Leviste Jr., that employees will be treated fairly.

"At present the company has no written separation policy. At best what the company has are practices which are not binding on the new owners should they decide to fire people," the source said.

The source added that the close to 1,200 employees of the company will lobby for the payment of two and a half months of pay for every year of service once the sale is consummated.

"Employees feel that this is only fair considering that they have made Mirant one of the top profit makers in the country all these years," the source said.

The source said they may raised this concern to the Napocor which has yet to give its consent to the sale.

"They are hoping that Napocor will take up their cause and that of the Filipino worker by compelling Mirant to protect their years of service by paying severance once the sale is completed as Mirant should not pass this burden to the new owner," the source said.

Leviste, during a Congressional hearing earlier this week said that Mirant employees are among the best compensated in the industry, and that the company presently has a generous severance package.

Napocor power plants need P10.14B worth of fuel

2006-09-17T21:36:00.000-07:00

The Philippine Star 09/18/2006

The National Power Corp. (Napocor) will need P10.14 billion worth of fuel for its barges and power facilities for the period May to December 2006.

Documents showed that the oil-based requirements will reach 453,415 kiloliters.

The bidding for the fuel requirement will be undertaken through open competitive bidding procedures using non-discretionary pass/fail criteria.

Interested bidders were asked to submit bids and eligibility requirements last April 25.

It was not known if Napocor has already awarded the contract for the supply and delivery of the fuel requirement for the eight-month period.

On top of this, Napocor will need P191.33 million (57,500 metric tons) worth of coal to cover the requirement of Naga-Cebu thermal power plant for the rest of the year.

The bidding, which is also through open competitive bidding, for the Naga power plant’s requirement was conducted last Sept. 12 this year.

The pre-bid conference was held last Aug. 31 at the Napocor compound in Quezon City.

In 2004, coal bulk of the generation mix of Napocor at 16,194 GWh or 28.9 percent of total.

But the share of coal in the company’s generation mix has gone down to 15,307 MW or 26 percent in 2005.

It is expected that in 2006, the share of coal in the gross generation of state-run power firm will further decrease to 25.3 percent.

Based on the Department of Energy (DOE) data, the country’s utilization of local coal has jumped to 28.7 percent in 2004 from only 10 percent in 2000, spurred by rising domestic demand.

Napocor is exploring the possibility of increasing the volume of local coal that is being used to run its coal-fired power plants.

The state-run power firm is currently blending 10 percent of local coal every month to generate power for its coal-fired facilities.

In 2004, Napocor had started to bid out for blended coal at that time when there was coal shortage in China.

Napocor is currently importing most of its coal requirement. Using blended coal, on the other hand, will enable the power firm to diversify its coal sources.

Aside from Pagbilao and Naga, Napocor runs the Calaca, Masinloc, Sual and Batangas coal-fired power plants.

12 investors to bid for small power utilities in Masbate

2006-09-17T21:34:00.000-07:00

The Philippine Star 09/18/2006

The International Finance Corp. (IFC), the financial advisor for the privatization of the areas under the Small Power Utilities Group of the National Power Corp. (Napocor), has reported that at least 12 investors have expressed interest to participate in the bidding for SPUG in the province of Masbate.

In a report to Energy Secretary Raphael P.M. Lotilla, IFC, the investment arm of the World Bank, said the 12 investors have already submitted their respective expressions of interests (EOIs) for Masbate.

Launched last July 25, 2006, IFC said, the private sector participation (PSP) in the Napocor-SPUG Areas for Masbate had positive results in as far as EOIs are concerned.

The IFC issued requests for proposals last month while submission of bids are expected to come in by mid-October, to be followed by the announcement of the winning bidder by end of October this year.

The report has also indicated that activities relative to the second PSP has also been started in Occidental Mindoro.

"Due diligence report was completed in March 2006. There are legal and contractual issues that need to be resolved. IFC will submit its formal recommendations to address these issues," the report said.

The third batch of the PSP for SPUG, comprising of the three islands of Sulu, Basilan and Tawi-Tawi in Mindanao, will start this September, with the signing of a memorandum of agreement (MOA) with each of the island’s electric cooperatives.

The privatization of SPUG Areas was mandated by Department of Energy (DOE) Circular No. 2004-01-001 issued on Jan. 26, 2004. It calls for the periodic assessment of the requirements and prospects of bringing power generation and associated power delivery systems to commercial viability on an area-by-area basis, including a program to encourage private sector participation in the SPUG areas.

The said circular prescribed the guidelines for private sector participation in existing National Power — SPUG areas. This undertaking is consistent with the objectives of the Electric Power Industry Reform Act (EPIRA) and its implementing rules and regulations. In 2005, Napocor identified the first wave areas comprising of 14 islands nationwide.

The program is part of a determined effort of the DOE and Napocor to turn over to the private sector the generation of power in these islands, which hopefully will result in some annual operating cost savings of P1.5 billion.

BOI grants incentives to GNPower’s 600-MW plant

2006-09-17T21:33:00.000-07:00

The Philippine Star 09/18/2006

The Board of Investments (BOI) has approved the application for registration of GNPower Ltd. Co.’s P43.903 billion 600 megawatt (MW) coal-fired power plant.

According to its application with the BOI, GNPower will develop, construct and operate two 300 MW clean pulverized coal-fired power plant at a 75 hectare parcel of coastal land located at Barangay Alasain, Mariveles, Bataan.

The planned plant site will be an integrated energy complex with state-of-the-art generating plants as well as modern, environmentally-compliant fuel handling facilities.

The energy complex will have a reserved space for the coal fired power plants, a liquefied natural gas (LNG) power plant and an import terminal.

The coal plants will be identical 300-MW power blocks which will use pulverized coal technology.

Imported ultra low sulfur and low ash coal will be the major fuel used throughout the life of the plant with low sulfur bunker fuel oil only used during start-up.

The coal-fired power plants will meet the forecast capacity shortage in the Luzon grid by the year 2010.

The BOI-approved GNPower coal fired power plant is on a pioneer status because of the magnitude of investment of P43.903 billion which exceeds the requirement of over P1 billion.

Likewise, power generation projects using non-renewable energy source is listed as a preferred activity under the 2005 Investment Priorities Plan (IPP).

GNPower Ltd. Co. is a 100 percent foreign-owned (Nauruan and American) company.

Its listed major stockholders (partnership) is Power Partners Ltd. Co. (99 percent) and PMR Holding Corp. (one percent).

Meralco to refund P1B due to SC order voiding GRAM

2006-09-14T23:54:00.000-07:00

The Philippine Star 09/15/2006

The Manila Electric Co. (Meralco) is likely to refund its customers about P1 billion starting January 2007 with the recent Supreme Court’s order voiding the company’s application for a second generation rate adjustment mechanism (GRAM).

In its application for approval with the Energy Regulatory Commission (ERC), Meralco said it will start its refund scheme by next year and will be implemented over the span of three months across all customer groups.

Meralco’s head of utility economics Ivanna dela Pena said they requested to undertake the refund next year to give the utility firm ample time to determine which customers are entitled to the refund.

The 2nd GRAM application nullified by the High Tribunal covered the period from June to August 2004.

"It will take us some time to retrieve the data from our customers which will determine their per kilowatt-hour (kwh) consumption for the period covering June to August 2004," Dela Peña said.

Based on Meralco’s proposal on the mode of the refund, it said it may deduct it to the customers’ bills.

The power utility firm believes this scheme will be ‘convenient’ for the customers since the average refundable amount is very small as compared to their average monthly bill.

But Meralco pointed out that the credit-to-future-billing mode will also be cost-efficient for the company.

"It also provides minimal operational implication and cost on the part of the company," Meralco said in its ERC application. Based on its ERC submission, Meralco noted that a household with a monthly consumption of between 201 to 300 kwh can expect a refund of about P35. Households consuming 401 kwh and above can expect a monthly refund of P110.

Commercial customers with the highest monthly kwh consumption can expect a refund of P191,000 while industrial customers with the highest monthly consumption can expect a refund of P986,000.

According to the Meralco official, the refund scheme is part of their compliance with the ERC’s order.

She admitted that this new refund scheme will affect the company’s cash flow. It would be recalled that Meralco is being ordered to refund some P30 billion worth of overcharges to customers. It has nearly completed the refund process and is in the last phase of the P30-billion refund scheme.

Earlier, Meralco said it will file a formal petition to recover the cost which will be subjected to public hearing.

Mirant shortlists eligible bidders

2006-09-14T23:50:00.000-07:00

The Philippine Star 09/15/2006

Atlanta-based Mirant Corp. has drawn a shortlist of groups that will be given the right to bid for its assets in the Philippine power sector, reliable sources said yesterday.

"Due to pre-emptive news articles on low indicative bids, Mirant-Atlanta is forced to put up a shortlist on the advice of Credit Suisse," industry sources said.

The sources said those on the list are basically the same companies named earlier: Marubeni-Tokyo Electric-First Gen; Korea Electric Power Corp. (Kepco)/ Chubu Electric; One Energy with China Light and Power and Mitsubishi Corp.; and Mitsui/International Power Group.

Others such as Avenue Capital were apparently dropped from the list since they do not have an O&M (operations and maintenance) partner.

It was learned that the same verdict was given to the Carlyle Group, an investment firm with no technical expertise on O&M of power facilities.

"Mirant sets criteria and chose candidates from those that have a strong O&M track record for power facilities and those deemed to be acceptable to the Philippine government," the sources said.

Credit Suisse, the financial advisor of Mirant for the sale of the shares in Mirant Philippines Inc., will reportedly release the official list this week. "They are eyeing to finalize the shortlist before this weekend and correspondingly inform the bidders," the sources said.

In another development, some 1,200 employees of Mirant Philippines have appealed to the Philippine government to make their separation package a pre-condition to the consent to be given on Mirant’s asset sale.

A source familiar with the matter but who declined to be identified said Mirant employees are asking the parent firm for the payment of 2.5-months worth of pay for every year of service to be paid out to all employees regardless of rank once the sale is completed. The sale of the Philippine shares is expected to fetch between $2 billion to $3 billion for the mother company.

"Mirant employees just want their years of service to the company protected. After all, they have given the parent firm billions of pesos in net income the past years. What they are asking for is just standard industry practice. It is a very small amount compared to what will be earned from the sale," said the source who has been working closely with the employees.

Mirant, the country’s biggest independent power producer (IPP) has consistently posted net incomes in excess of P10 billion every year for the past five years on account of its long-term energy conversion agreements (ECA) with government.

The employees, the source added, are willing to sign a transition contract to ensure that they will continue to work and run the plants for at least three months after the sale to give the new management the prerogative to re-organize the company. Should they be re-hired, they can start their tenure with a clean slate.

Earlier this week, Jose Leviste Jr., Mirant Philippines president, said the company has a generous severance package for employees who will be separated as a result of the sale.

He pointed out that Mirant employees are among the best compensated in the industry.

However, employees are reportedly uneasy over the assurance since there is no written policy, only company practice, which are non-binding on the new owners, who can easily change such a practice.

"They (employees) will seek the help of the Napocor and possibly Malacanang in order for the rights of the Filipino worker to be protected," said the source. "Napocor will be asked to withhold its consent until separation packages are paid outright once the sale takes place."

Majority of Mirant Philippines employees are plant workers and technical staff operating the plants 24 hours a day.

In July this year, it announced plans to begin an auction process to sell of its Philippine assets.

Lopez’s First Gen bags 2 hydropower projects

2006-09-09T06:10:00.000-07:00

The Philippine Star 09/09/2006

The Power Sector Assets and Liabilities Management Corp. (PSALM) declared yesterday the Lopez-owned First Gen Corp. as the winning bidder for the 100 megawatt (MW) Pantabangan and 12-MW Masiway hydropower plants in Nueva Ecija.

PSALM president Nieves L. Osorio said First Gen submitted a bid of $129 million, besting the only other bidder SN Aboitiz Power Corp. (SNAP), a partnership between Aboitiz Power Corp. and SN Power Holding Singapore which bid $112 million.

First Gen’s bid was way above the reserve price of $80 million set by PSALM for the two hydropower plants.

The Pantabangan facility is located in San Jose, Nueva Ecija and is composed of two 50 MW units. Both were commissioned in 1977.

Masiway power facility, on the other hand, is located near Pantabangan plant and was commissioned in 1981.

First Gen also won the action for the 1.6 MW Agusan hydropower plant for $1.53 million last year.

"We are very happy with the offers. Clearly, this is the result of good competition and continued interest in Philippine power assets," Energy Secretary Raphael P.M. Lotilla said.

Osorio said the energy sector welcomes the success of the bidding. "We will work to sustain this as we are set to move forward with the privatization of power assets. Next to be offered is the 360-MW Magat hydroelectric complex in Isabela and the 25-year concession of TransCo (National Transmission Corp.)," she added.

SNAP and First Gen submitted their bids before the 12:00 pmdeadline set by PSALM, the agency tasked by the government to privatize the assets of the National Power Corp. (Napocor).

The terms of the sale are contained in the asset purchase agreement (APA) between the winning bidder and PSALM. First Gen will also sign a land lease agreement with PSALM, and the Operation and Maintenance agreement with the National Irrigation Administration for the non-power components.

The APA for the Pantabangan-Masiway facility requires the winning bidder to deliver at least 40 percent of the purchase price as upfront payment payable on or before the closing date. The balance of 60 percent may be paid in 14 equal semi-annual payments with an interest of 12 percent per annum compounded semi-annually.

The winning bidder is also required to post a performance bond of $2.58 million, equivalent to two percent of the purchase price. The performance bond will be reduced every year equivalent to two percent of the aggregate amount of the deferred payments.

In addition, the winning bidder will be required to post a deferred payment security deposit equivalent to at least the next deferred payment in the form of cash, currently dated manager’s check or an irrevocable stand-by letter of credit acceptable to PSALM.

Representatives of the Philippine Chamber of Commerce and Industry and Procurement Watch, a non-government organization, attended the bidding as observers.

Aside from Masiway and Pantabangan, PSALM will also bid out 300-MW Magat facility and the 275-MW Tiwi and 425.73-MW Makiling-Banahaw geothermal complexes. Pantabangan-Masiway is the second major power asset to be bid out by PSALM this year. PSALM bid out the 600-MW Calaca coal plant in April, which resulted in a failure after the offers fell short of the reserve price set for the plant.

Prospective buyers of Mirant assets to start due diligence

2006-09-04T21:53:00.000-07:00

The Philippine Star 09/05/2006

Prospective bidders of Mirant Philippines Inc.’s assets are expected to start their respective due diligence on Sept. 12, industry sources said yesterday.

The sources said Mirant Corp. has already concluded accepting indicative bids from interested groups.

It was learned that the interested groups, which had expressed deep concern over major issues confronting the sale, have submitted lower than expected bids of Mirant.

Among the main issues raised by interested parties is the National Power Corp. (Napocor)’s claim for Mirant to secure government’s approval before proceeding with the sale.

Another bone of contention is the fate of the employees of Mirant Philippines, particularly the rank-and-file, who reportedly have not been offered a severance package.

"There have been major issues that we raised, like the government consent issue and the employees, and we’ll see how Mirant will tackle them as we move forward," an official from an interested group said.

The Joint Congressional Power Commission (JCPC) has also expressed concern over the issue of consent.

According to sources, these two major concerns are more complicated than the unpaid real estate taxes and contractual obligations with Napocor as these would be settled by adjusting valuation of the sale.

It was learned that among those that have submitted their indicative bids for Mirant’s equity in the Philippines last Aug. 31 were the group composed of Marubeni Corp., Tokyo Electric Power Corp., and First Gen Corp.; consortium of Korea Electric Power Corp., Chubu Electric Power Co. and Tractebel/Suez; and the group of One Energy, China Light and Power, Mitsubishi Corp.

The Aboitiz group reportedly did not submit its indicative bid. An Aboitiz insider earlier described Mirant as a "monster that we (Philippines) created. It is so big (to handle)."

Mirant’s assets in the Philippines are valued at $2.4 billion to $2.8 billion. Mirant’s assets in the country include its interest in three generating power plants, namely Pagbilao, Sual and Ilijan.

Aboitiz power unit to bid for Masinloc coal plant

2006-08-27T15:33:00.000-07:00

Inq7
Aug. 28, 2006

ABOITIZ Equity Ventures Inc. will participate in the new bidding for the 600-megawatt (MW) Masinloc coal-fired power plant, provided that there are attached supply contracts for at least 50-percent of the plant's capacity.

AEV executive vice president and chief operating officer Erramon Aboitiz said 50 percent, or at least 300 MW, of the plant's capacity should have sure offtakers for the company to consider bidding for it.

"We'll see what the terms are for the Masinloc re-bid," Aboitiz said. "If there are some contracts assigned, we may participate. [Supply contracts] should be for a minimum of 50 percent of the capacity."

The Power Sector Assets and Liabilities Management Corp. (PSALM) has decided to re-bid the Masinloc plant, following the termination of its asset purchase agreement with the previous winning bidder YNN Pacific Consortium Inc.

PSALM president Nieves Osorio had earlier said that the generation facility would again be offered to interested investors through a public bidding.

But the agency tasked to privatize the National Power Corp.'s generation and transmission assets has yet to set a concrete schedule for the auction.

"We have to make sure that favorable conditions are in place as we must have enough bidders to ensure that government will get competitive offers," Osorio said.

"Considering the recent experience, investors need to be assured of a market for Masinloc's power output. Aside from power sales contracts, the wholesale electricity spot market, which is now operating, provides a market-driven venue through which generators can sell the electricity they produce."

By the time PSALM places the Masinloc plant on the auction block again, the electricity bourse will have already established a "favorable track record," Osorio added.

PSALM's asset purchase agreement with YNN was formally terminated last Aug. 6. The group forfeited its 227-million dollar down payment for the plant.

IPPs show interest in NE power plants

2006-08-02T21:49:00.000-07:00

The Philippine Star 08/03/2006

The second pre-bid conference for the sale of the 100-megawatt (MW) Pantabangan and the 12-MW Masiway hydroelectric power plants in Nueva Ecija has attracted several interested parties, mostly independent power producers (IPPs).

The pre-bid conference was conducted by Power Sector Assets and Liabilities Management Corp. (PSALM), the agency tasked to privatize the generation assets of National Power Corp. (Napocor).

PSALM vice president for asset management and electricity trading Froilan A. Tampinco discussed with the parties the provisions contained in the revised draft of the operation and maintenance agreement (O&M) for the two hydropower plants.

Tampinco also threshed out the terms and conditions set by the National Irrigation Administration (NIA) regarding the commercial, technical operation and maintenance of the non-power components of the plants.

Under its charter, the NIA administers all irrigation systems and other pertinent non-power components of multi-purpose hydropower facilities. These include the Pantabangan and Masiway dams that supply the water used by the two hydropower plants to generate electricity.

The firms include Kepco Philippines Corp., CalEnergy, Aboitiz Equity Ventures with partner Norwegian firm SN Power, First Generation Holdings Corp., and TransAsia Power.

Last year, 13 companies participated in the pre-bid conference for the Masiway hydropower plant while 24 investors expressed interest in the Pantabangan plant.

PSALM has also lined up for sale other big-ticket facilities such as the 275-MW Tiwi geothermal plant and the 425-MW Makban geothermal power facilities.

Government to draw up clearer rules on cross-ownership in power sector

2006-07-25T07:22:00.000-07:00

The Philippine Star 07/25/2006

The government is expected to draw up clearer rules on cross-ownership in the power sector, the Power Sector Assets and Liabilities Management Corp. (PSALM) said.

In a statement, PSALM said the economic managers have recognized the need for the adoption of lucid rules on cross-ownership with the forthcoming sale of generation assets by both the government and private companies.

"We are aware that we cannot totally eliminate cross-ownership. But we hope to avoid the creation of groups with enough market power to dictate the price of electricity in their respective grids," PSALM said.

This year, PSALM is scheduled to bid out the 25-year concession of the National Transmission Corp. (TransCo) and five asset packages of hydro and geothermal plants with a total capacity of 1,157 megawatts (MW) capacity.

PSALM has announced it would re-bid the 600-MW Calaca and the 600-MW Masinloc upon official termination of the contract with winning bidder YNN who failed to deliver the upfront payment of $227 million. The new bidding schedule for these two coal-fired power plants has yet to be announced.

Atlanta-based energy firm Mirant Philippines is also planning to transfer ownership of its interest in about 2,000 MW of generating capacity.

According to PSALM, the economic managers believed the ongoing divestments in the power sector should not lead to the consolidation of market power.

"They also encouraged private investors to put up new power generating facilities, particularly in areas where the power supply situation is getting tight," PSALM said.

Except for missionary electrification projects, PSALM also noted that government-owned National Power Corp. (Napocor) is no longer developing new facilities.

"Clear rules on cross-ownership would provide an assurance to the millions of electricity consumers that their interests are amply protected," the economic managers said. "These measures are meant to enhance competition and ultimately bring down the price of electricity in the Philippines."

Oil firms urged to back biofuels measure

2006-07-25T07:20:00.000-07:00

The Philippine Star 07/25/2006

The Department of Energy (DOE) is urging all oil industry players to stop making unnecessary objections to the Biofuels Bill.

"I urge the stakeholders in the downstream oil industry to come up with positive actions by supporting the Biofuels Bill for the sake of the consuming public especially now that prices of oil in the international market are becoming extremely expensive," Energy Secretary Raphael P.M. Lotilla said.

"Instead of opposing what is good for the economy, we urge our stakeholders to rally behind us in advocating the passage of the Biofuels Bill to realize our goal of becoming energy self sufficient, Lotilla said.

He said the government, for its part, has already played its role in coming up with possible measures to help mitigate the impact of rising oil prices.

"DOE has laid down the foundation for the roll out of government’s alternative fuels program, which has accelerated the use of biofuels, in particular, bioethanol and home-grown coco-biodiesel," he said.

Aside from the passge of the Biofuels Bill, the DOE is also pushing for the Renewable Energy Bill. These two crucial pieces of legislations would help realize energy self-sufficiency, Lotilla said.

"With the volatility of prices of imported petroleum products brought about by the geopolitical tensions in the Middle East, both the Biofuels Bill and RE Bill will help us further lessen our dependence on imported oil as well as help address air quality management and respond to climate change," the energy official said.

Lotilla said the country’s lawmakers have committed to prioritize these bills. "Congress is committed to enact these two pieces of legislations as both are critical to help minimize our economy’s exposure to price instability of imported fuels and I am confident approval will be expedited upon resumption of Congress." Lotilla said.

While imported energy accounted for 42.9 percent of total energy use in 2005, it is expected to decrease to 38.5 percent in 2014 based on the Philippine Energy Plan. The RE Bill is expected to allow the country to meet its growth in energy demand from renewable energy sources as well as increase the share of renewable energy in the country’s primary energy mix from 41.7 percent in 2005 to 42.4 percent in 2010.

"As of last year, we successfully utilized locally sourced fuel to power 64 percent of our electricity needs by maximizing the use of indigenous and renewable energy capacity," Lotilla said.

A number of achievements have likewise boosted the development of renewable energy. For instance, the country’s action plan in the development of renewable energy was cited as one of the best three action plans worldwide in the 2004 International Conference for Renewable Energies in Bonn, Germany. The Philippines was joined by China and Egypt.

"Apart from the fact that both the Biofuels Bill and the RE Bill can help minimize our economy’s exposure to price fluctuations of imported fuels, we are also one with all the environmental groups in advocating policies that would protect our environment", Lotilla said.

TransCo fasttracks pole replacements to prepare against strong typhoons

2006-07-24T06:47:00.000-07:00

The Philippine Star 07/24/2006

The National Transmission Corporation (TransCo) is speeding up efforts to replace its wooden transmission line poles with steel poles to increase line reliability and significantly lessen the probability of line outages especially during strong typhoons.

TransCo president Alan T. Ortiz said as of end-June, the company has already erected 1,598 new steel pole replacements.

Of the total, 487 were put up in North Luzon, 370 in South Luzon, 460 in Visayas and 281 in Mindanao.

The steel poles, which measure between 50-65 feet, are made of galvanized material that can withstand drastic weather changes. Aside from being much more durable than wood poles, the galvanized steel poles are also longer by 10 feet, an attribute that adds to the distance or safety clearance between the lines and the ground.

"This makes steel poles much safer than wood poles," the TransCo official said.

According to Ortiz, the second delivery of steel poles totaling 2,800 is expected by August this year.

Ortiz said with the rising prices of the imported wood poles, they now cost almost the same as steel poles. Hence, TransCo is shifting to steel and other metal-based line suspension poles.

"Steel poles are more durable and require less regular inspection and maintenance. TransCo will be having more and more of these steel pole line sections that are more reliable as we continue with the replacement program," he added.

TransCo is planning to put in place almost 60,000 steel poles throughout the country in 10 years.

The state-owned transmission firm started implementing the P600-million steel pole program in 2003 to modernize its electricity transmission assets nationwide.

The replacement of aging wood poles with new steel poles is in line with TransCo’s zero outage program which aims to significantly minimize or prevent outages in areas covered by the transmission firm.

TransCo sells assets in Ilocos Norte

2006-07-24T06:46:00.000-07:00

The Philippine Star 07/24/2006

The National Transmission Corp. (TransCo) has sold another sub-transmission assets in Ilocos Norte.

TransCo president Alan T. Ortiz signed last July 21 a divestment contract with Ilocos Norte Electric Cooperative Inc. (INEC) board president Lorenzo Rey G. Ruiz to effect the sale of 53.33 circuit kilometers of sub-transmission lines in the province.

"Today, we have reached another milestone in our program to divest our sub-transmission assets. This is our 27th divestment contract and the first in the Ilocos region," Ortiz said.

"The sale is expected to further boost the services of INEC, thus ensuring the further economic development of Ilocos Norte, which is truly endowed with abundant resources and an attractive investment area in the northern part of the country," he said.

INEC’s service area covers the whole of Ilocos Norte composed of Laoag City, 22 municipalities, and 557 barangays with 116,742 house connections.

The divestment contract with INEC, valued at P94.1 million payable in 20 years, involves five sub-transmission lines, all rated at 69 kilovolts. These are the Curimao-San Nicolas, San Nicolas-Laoag, Laoag-Sarrat, Sarrat-Marcos, and Sarrat-Piddig lines.

The recent divestment brought the total sales of TransCo’s STAs at over P1.5 billion comprising 9,256 structures and spanning 1,048 circuit kilometers.

Flying V seeks tax perks for its P800-M ethanol project

2006-07-24T06:42:00.000-07:00

The Philippine Star 07/24/2006

Flying V, one of the country’s most aggressive oil players, has submitted to the Board of Investment (BOI) an application for tax incentives for its proposed P800-million ethanol project in the town of Mariveles, Bataan.

Macky Lopez, Flying V spokesman, said they would start tapping interested investors for the said 60,000-liter per day ethanol refinery.

Lopez said the company is committed to put up the ethanol plant and plans are now being finalized for the construction of the said ethanol facility.

"Even as we wait for the passage of the BioFuels Law still pending, we at Flying V continue to support the government’s alternative fuels program. We hope foreign investors will partner with us in this endeavor. Export opportunities of ethanol is great," Lopez said.

The Flying V official said now is the time to shift to ethanol to lessen the country’s dependence on imported gasoline.

"At this time of high oil prices in the world market, we should intensify the use of alternative fuels especially ethanol to reduce our dependence on imported fuel," Lopez said.

Ethanol is an alternative energy resource produced from crops such as sugar, corn, grain sorghum, wheat and other agricultural feedstocks. It can be used as a transportation fuel, as a blend to gasoline, a component of reformulated gasoline, or a primary fuel with gasoline as blend.

Industry studies showed that the use of ethanol-blended fuels reduces greenhouse gas emissions by 12 to 19 percent compared to conventional gasoline. It was estimated that in 2003, ethanol use in the US reduced gas emissions at a level equivalent to removing 853,000 cars from the highways.

Flying V has already sold E10 or gasoline mixed with 10 percent ethanol. However, ethanol supply is still being imported from Brazil. Flying V has started studies on the possibility of putting up its own ethanol plant in August last year.

The government’s ethanol program aims to intensify the use of bio-fuels in the transport sector by blending a minimum of five percent bio-ethanol fuel into all gasoline-fed motor vehicles.

Napocor, Meralco near agreement on customer choice program

2006-07-21T22:14:00.000-07:00

The Philippine Star 07/22/2006

State-owned National Power Corp. (Napocor) expects to come up with an agreement soon with the Manila Electric Co. (Meralco) for the implementation of what it calls customer choice program (CCP).

Napocor corporate communications officer-in-charge (OIC) Alma P. Hermosura said they are holding a series of meetings with Meralco to pursue this program.

"We have been conducting continuous discussions with Meralco. Although there are still some issues that have to be resolved, there are already some agreements reached," she said.

Early this year, Meralco wrote a letter to President Arroyo to express its willingness to allow its customers with a monthly electricity demand of at least one megawatt (MW) the right to choose their own suppliers, with the option of availing of the time-of-use (TOU) rates of the Napocor.

Deemed "unconditional", the "Power of Choice" offer by Meralco elicited positive reactions from various business and industry sectors, as well as from key government agencies.

Energy Secretary Raphael P. M. Lotilla, in a joint statement with Economic Planning Secretary Romulo L. Neri, commended this move by Meralco, saying "it will help reduce the costs of doing business in the Meralco franchise area, help promote investments in the creation of additional jobs, and help push privatization forward".

In a letter dated April 7, 2006, Meralco informed its customers with at least one MW monthly consumption, including the head office of the National Power Corp., that the proposed program is not yet the start of retail competition and open access as defined by the EPIRA.

Meralco said the offer is a gesture of cooperation, and is being made to provide our large customers the option of availing the present time-of-use (TOU) rates of the Napocor."

"Those who will not be qualified and benefit from the NPC TOU rates can opt for Meralco’s average mixed generation charges which are computed monthly based on the actual blend of energy sourced from Napocor and Meralco IPPs.

ERC approves retail license for GNPower

2006-07-21T22:13:00.000-07:00

The Philippine Star 07/22/2006

The Energy Regulatory Commission (ERC) has approved the application of GNPower Ltd. Co. for a retail electricity supplier’s license.

GNPower is the first electricity supplier to comply with the ERC’s directive to secure a supplier’s license prior to marketing electricity.

"The awarding ceremony marks the dawn of the ultimate goal of the EPIRA, that is competition at the retail level," ERC chairman Rodolfo B. Albano Jr. said.

The awarding was held last July 19 at the ERC office in Ortigas Center, Pasig City.

With the ERC’s issuance of a supplier’s license to GNPower, the power firm can now legally engage in marketing activities for its retail electricity supply business and secure supply contracts with prospective end-users.

The Electric Power Industry Reform Act (EPIRA), mandates the ERC to issue licenses to electricity suppliers that will operate in the contestable market, which comprises end-users who will soon have a choice of an electricity supplier.

GNPower is a limited partnership registered with the Securities and Exchange Commission on Oct. 1, 1997.

The partnership was formed by Power Partners Ltd. Co. and PMR Holding Corp. as general and limited partners, respectively.

It has a 600MW clean-coal fired power plant currently being developed near the town of Mariveles, Bataan. The construction of said power plant is expected to commence in mid-2007 with planned commercial operation by the third quarter of 2010.

"This is another milestone in the emerging restructured electric power industry. Rest assured that the ERC will always adhere to its mandate and encourage the full participation of the stakeholders in the industry towards achieving the goals envisioned in the EPIRA,"Albano said.

Napocor to hike power rate for Luzon customers

2006-07-21T07:29:00.000-07:00

The Philippine Star 07/21/2006

The Energy Regulatory Commission (ERC) has approved a P.0110 per kilowatthour additional recovery for the National Power Corp.’s generation rate adjustment mechanism (GRAM) and another P0.3687 per kwh for incremental currency exchange rate adjustment (ICERA) from Luzon customers.

The ERC said the total P0.3797 per kwh increase supercedes an earlier order for the recovery of costs to be collected from customers through deferred accounting adjustments (DAA).

The new GRAM for Luzon will be recovered for a period of nine months while the ICERA will be two-fold: the debt service and operating expenses component will be for eight months while the capacity and infrastructure fee component will be for 24 months.

The new rates will remain in effect unless the ERC subsequently approves the recovery of the deferred charges of Napocor.

GRAM is a pass-on, revenue-neutral charge allowed by the ERC for Napocor to recover from end-consumers the costs it incurred to produce electricity. The costs include fuel and power purchases from independent power producers.

ICERA, on the other hand, represents the recoveries that must be made by Napocor from customers for money it advanced to defray the cost of foreign currency exchanges adjustments resulting from fluctuations in the exchange rate.

ERC chairman Rodolfo Albano said the existing policy of the ERC only allows the recovery of GRAM and ICERA charges after thorough review.

Early last month, the ERC, instead of granting automatic implementation, extended for another 45 days the resolution of Napocor’s GRAM and ICERA for the period covering April 26 to Oct. 25, 2005.

In separate rulings, the ERC argued that the 45-day resolution deadline set by the implementing rules should not apply since the same rules provide only for a three-month recovery period.

Napocor had filed for a seven-month recovery, which the ERC said would need more time to resolve.

Under the Electric Power Industry Reform Act (EPIRA) of 2001, Napocor is allowed to recover its costs incurred from operations and fluctuating currency from its customers. Before, Napocor and distribution utilities were allowed to automatically recover these costs and the ERC would just review it after.

Based on the current set-up, the power generators and distributors should apply quarterly for the recovery of GRAM and ICERA.

TransCo sale attracts 12 bidders

2006-07-20T07:27:00.000-07:00

The Philippine Star 07/20/2006

A dozen foreign and local investor groups have expressed interest to bid for the 25-year concession contract for the National Transmission Corp. (TransCo), the Power Sector Assets and Liabilities Management Corp. (PSALM) said.

PSALM vice-president Nonito R. Bernardo, Jr. said they have received 12 expressions of interest (EOI) to participate in the forthcoming public bidding for TransCo in September this year. PSALM gave interested parties until July 18 to send their respective EOI.

The government expects to raise between $2.5 billion to $3 billion from the bidding of TransCo’s operations and management contract.

Based on the bidding procedures, interested bidders are required to sign a confidentiality agreement before they are given their copies of the transaction documents and access to the TransCo data room and facilities so they can start due diligence efforts.

Bernardo declined to reveal the identities of the prospective bidders, saying most of them are represented by their lawyers and investment bankers.

The interested bidders can now submit the documents required by PSALM for the pre-qualification stage. Bernardo said the schedule of the first pre-bid conference will be announced soon.

Prospective bidders are required to have a member or affiliate with sufficient experience in operating and maintaining electricity transmission systems comparable to that of the Philippines, with at least 6,000 circuit kilometers and a minimum of 6,000 megawatts peak demand, and a voltage level of 115 kilovolts to 230 kV.

A foreign investor for TransCo must have a net asset value or market capitalization of $175 million. Its Filipino partner, on the other hand, must have $300 million.

A pre-bid conference is scheduled on Sept. 6, 2006 and the deadline for the receipts of bids is on Sept. 27 this year.

Following the notice of award, PSALM estimates a closing period of 12 months inclusive of the application for a congressional franchise.

The bidding procedures will be done in a two-envelope final bid. Under the technical proposal, the bidders should post a $30 million bid bond through an irrevocable standby letter of credit, issued by a qualified bank and set at a fixed amount.

The winning group, by the time of the award, must not have ownership of generating, distribution or supply assets in the Philippines.

Big local conglomerates controlled by the Cojuangcos (San Miguel Corp.), Ayalas (BPI Capital) and Gokongweis (JG Summit Holdings) were reportedly eyeing to participate in the TransCo privatization because of the 60-40 foreign ownership ceiling.

Since these big firms have the financial strength to invest in this capital-intensive exercise, they are likely seen to participate by forging partnership with foreign power firms.

A group of local financial investors led by Concepcion Industries Inc. is reportedly also planning to form a consortium to bid for TransCo.

In late 2002 when Transco’s supposed privatization was announced, several foreign power firms have expressed interest to bid. These power companies are based in Hong Kong, Thailand, Singapore and New Zealand.

Singapore Power was the lone bidder in the two previous biddings for TransCo, both of which were declared a failure.

Electricity Generating Authority of Thailand (EGAT), Hydro Quebéc and the Delgado group, and Australia’s Trans-Grid have also joined the bandwagon of firms eyeing TransCo.

Other groups that have reportedly signified interest for TransCo are Japan’s Tokyo Electric Corp. and US-based Trans-Electric, as well as First Pacific Co. Ltd. (financial) and Trans-Grid of Australia.

First Gen junks bid for Masinloc

2006-07-20T07:25:00.000-07:00

The Philippine Star 07/20/2006

Publicly-listed First Gen Corp. said yesterday it is no longer interested in bidding for the Masinloc coal-fired power plant in Zambales.

"To dispel any and all further notions that First Gen remains an interested party in Masinloc, First Gen would like to categorically state that it has absolutely no intentions now, or in the future, to take part in the privatization of the Masinloc power plant," First Gen vice chairman and CEO Peter Garrucho said in a press statement.

Garrucho made this statement to counter Economic Planning Secretary Romulo Neri’s pronouncement alluding that First Gen and its affiliate firm Manila Electric Co. (Meralco)’s apparent vested interest in the Masinloc power plant resulted in the failure of the plant’s privatization.

According to Garrucho, First Gen has participated actively and in good faith in the privatization process conducted by the Power Sector Assets and Liabilities Management Corp. (PSALM).

First Gen, he said, has also invested millions of pesos in preparing for bids and conducting due diligence in the interest of participating in the PSALM bidding processes.

"Rather than criticizing First Gen, we should be credited for our role in helping PSALM’s bid processes succeed," Garrucho said.

"In fact, in the case of Masinloc, were it not for the First Gen participation, the entire bid would have been a failure. The $14 million collected from the winning bidder of Masinloc represents the largest proceeds collected by government from all its power privatization efforts in three years and this would not have been possible without the legitimizing bid of First Gen," he said.

Garrucho also pointed out that First Gen bid below the government’s reserve or minimum price and therefore it does not stand to gain from a failed bidding of Masinloc.

"As a bidder that did not meet the reserve price, First Gen is not automatically in line to win the Masinloc plant at its bid price," he said.

In defending their bid, Garrucho said they believe that their bid price must allow them to offer cost-competitive power to end-consumers.

"First Gen’s bid price reflected the market risks associated with a merchant or non-contracted power plant."

Garrucho also urged the government to properly implement the Electric Power Industry Reform Act (EPIRA).

"First Gen believes that the way forward for the industry is to uphold and implement the EPIRA that stipulates that utilities enter into transition supply contracts (TSC) with Napocor prior to being bid out," he said.

Under the EPIRA, these TSCs, he said, are meant to underpin the privatization of PSALM’s assets in order to encourage more bidders and maximize privatization proceeds.

"Implementing the EPIRA in line with its original intent will result in a vital balance being struck between maximizing the proceeds of privatization and minimizing power costs to the end-consumer," he added.

Osmeña hits Palace for ‘favoring’ YNN group in Masinloc bidding

2006-07-19T07:24:00.000-07:00

The Philippine Star 07/19/2006

Sen. Sergio Osmeña III accused some Palace officials yesterday of pushing their way to favor the YNN Pacific consortium and its new partner, Malaysia’s Ranhill Bernard, in cornering the operations of the Masinloc power plant in Zambales.

Osmeña told reporters that Malacañang is also "pressuring" Manila Electric Co. (Meralco) to sign a guaranteed supply contract with YNN and Ranhill Berhad to salvage the Masinloc privatization fiasco.

This came even after government, through the Power Sector Assets and Liabilities Management Corp. (PSALM), forfeited YNN’s performance bond after failing to meet the final deadline to put up the $227-million downpayment for the coal-fired power plant last June 30. PSALM has extended for another month the YNN to comply with its commitment.

"The (Palace) dummies claimed that although the security deposit has been forfeited, YNN still has 30 days to execute the contract by paying the $227-million downpayment. That is designed to give YNN time to sign a power supply contact with Meralco. With the assistance of the Palace, of course," Osmeña said.

On the other hand, Meralco said it should not be blamed for the botched sale of the 600-megawatt facility.

"We took exception to a statement made last week by Economic Planning Secretary and NEDA director general Romulo Neri, which apparently puts the blame on Meralco for PSALM’s difficulties in selling the Masinloc power plant," Meralco vice president and corporate communication head Elpi Cuna said.

"Mr. Neri seems to be suggesting that Meralco is deliberately making it difficult for the winning bidder of Masinloc to obtain a power sales contract from us with the end of strengthening our so-called monopoly," Cuna said.

"Far from wanting to establish a monopoly, we have even given our consumers who use at least one megawatt the freedom to choose their own electricity suppliers. By doing this, we have even actually initiated the groundwork for the implementation of open access," he added.

Cuna said it would not be advisable for any party to pressure Meralco into signing any contract just for the sake of convenience.

"We are not trying to avoid or delay anything here. We are merely making a careful study of the possible implications of a possible deal, especially on the customers. You can be rest assured that any supply agreement that Meralco enters into will be done with the intent of bringing down the generation component in the customers’ electricity bill," he said.

Meralco, in an earlier disclosure to the Philippine Stock Exchange (PSE), confirmed previous meetings with YNN but stressed that nothing has been agreed upon. YNN won in the bidding for the Masinloc power facility in December 2004.

For its part, PSALM said its board did not receive a "P10-million bonus" in 2004 out of the Masinloc sale.

PSALM president Nieves L. Osorio said the asset management firm did grant a performance incentive to PSALM officials and employees for accomplishments made in that year, but the sale of the Masinloc coal-fired power plant was not the sole basis for the grant.

Osorio made this statement to debunk reports that the proceeds from the sale of the Masinloc facility were used to fund the Corporate Variable Incentive Award (CVIA).

The PSALM chief said the CVIA amounted to around P6.4 million and not P10 million as erroneously reported.

"The money used for the CVIA was taken from corporate funds budgeted for incentives under the 2004 PSALM corporate operating budget approved by the Department of Budget and Management. It did not come from privatization proceeds," she said, adding that it was not only the Masinloc sale that was used as gauge in giving the CVIA.

"Masinloc was not the only key result area for 2004. It was bid out in December 2004 and while it was the largest plant to be bid out, it was only one of six plants that were bid out that year. PSALM had made other significant achievements, which the PSALM board rightfully recognized," Osorio added.

According to Osorio, five other power plants were sold before Masinloc which can also be used in justifying the CVIA.

"Privatization has various stages, each composed of sets of activities that require significant amounts of time and effort, regardless of the size of the plant. Hard work has been put in before an asset can be placed in the auction block," she noted.

She noted that before the privatization program can go full swing, PSALM had to facilitate the transfer of the P200-billion debt of National Power Corp. (Napocor) to the National Government.

The debt transfer, she said, was key to getting the consent of the World Bank (WB), Asian Development Bank (ADB) and the Japan Bank for International Cooperation (JBIC) which, in turn, is a requirement before PSALM can sell the assets.

PSALM had to secure individual consents for the plants, including Masinloc, which were bid out in 2004.

Furthermore, PSALM also conducted activities to implement the assumption of loans owed by rural electric cooperatives to the National Electrification Administration (NEA) totaling P18 billion and renegotiated remaining IPP (independent power producers) contracts with an estimated additional net present value savings of $6.5 million, or P364 million.

PSALM also generated additional P973 million in savings resulting from cost-cutting measures implemented in 2004.

Northwind Power to double capacity of Ilocos power plant

2006-07-18T06:54:00.000-07:00

The Philippine Star 07/18/2006

Northwind Power Development Corp. is planning to double the existing capacity of its wind power facility in Ilocos by another 25 megawatts (MW) over the next five years.

Department of Energy (DOE) director Mario Marasigan said Northwind is currently evaluating the feasibility of the additional five turbines totaling eight MW.

Marasigan said this will form part of the second phase of Northwind’s five-year expansion program.

He said, the expansion will help address the projected growth in demand in the Luzon area in the next five years.

"Northwind targets to put up the 50-megawatt wind power plant in the next five years, as there is a need to be attuned to the demand," he said.

In August last year, the Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas (BSP), approved the $12.5 million loan application of Northwind.

Specifically, the MB approved the mixed-credit facility of the Danish-Filipino consortium that would put up a 25-MW wind power facility in Bangui Bay, Ilocos Norte.

The 10-year loan would be guaranteed by Tidcorp and will be based on commercial interest rates or a margin of 20 basis points.

The Northwind project, which started construction last April 24, will make the Philippines the first producer of wind power in Southeast Asia.

The wind project, which is expected to be ready by the end of the year, will augment the supply of power in Ilocos Norte.

The construction of the first 25-MW wind farm in Southeast Asia will involve the installation of modern and sophisticated wind technologies that will be placed in a single row stretching nine kilometers along the shoreline of Bangui Bay.

It will harvest breezes from the South China Sea using 15 giant wind turbines, each standing 70 meters in height with rotor blades spanning 40 meters.

The Northwind project will become the pioneering model for future wind power projects in the Philippines and a magnet to attract at least 417 MW of wind-based power projects within the next 10 years.

With wind speeds reaching an average of at least seven meters per second or an equivalent of 26 km per hour, the Bangui Bay shoreline was one of the recommended sites by the US National Renewable Energy Laboratory (USNREL) as the most ideal place for wind power generation.

The government plans to increase the harnessing of wind power for the electrification for off-grid rural areas.

To date, several similar projects are already in the pipeline including the 40-MW Pagudpod wind project of PNOC-EDC, 10-MW Abra de Ilog wind project in Mindoro, 15-MW wind project in Camiguin, Siargao and Diangat Islands and the 30-MW Smith Bell Negros wind farm.

No plans to scrap 1-day power sales

2006-07-18T06:53:00.000-07:00

The Philippine Star 07/18/2006

The National Power Corp. (Napocor) has no plans of scrapping its one-day power sales (ODPS) program, the company’s top official said.

Napocor president Cyril del Callar said the company is currently even undertaking improvements in its ODPS program to bring more benefits to its regular bidders.

"We wish to allay any apprehensions that the ODPS will be scrapped, and apologize for whatever inconvenience the temporary cancellation of the ODPS transactions may have caused," Del Callar said.

Del Callar has assured customers that Napocor will not terminate the ODPS scheme amid concerns raised by the Philippine Chamber of Commerce and Industry and by the Federation of Philippine Industries following the brief suspension of the ODPS trading in May and June.

At the same time, the Napocor chief said revisions are now being made on the ODPS, including "a commitment to guarantee a firm three-day price for (the electricity) quantities that will be bid out through the ODPS".

"Through this three-day firm price guarantee, Napocor will thereby assume the generator’s risk, which will hopefully prevent any recurrence of sudden suspensions of the ODPS program in the future," he added.

Under the ODPS, Napocor sells its excess capacity through an on-line, daily public bidding. The program is open to its customers, in particular those that have self-generation capacity of at least one megawatt.

Del Callar clarified that the program was only suspended on two occasions (on May 23-27 and on June 5-11) and only because there were not enough power reserves to bid out on the said dates.

DOE hints of another 1% tariff cut on crude imports

2006-07-18T06:52:00.000-07:00

The Philippine Star 07/18/2006

The Department of Energy (DOE) hinted yesterday the possibility of implementing another one-percent tariff reduction on imported crude products to soften the impact on consumers of the continued rise in global oil prices.

"A one-percent tariff reduction is expected to be implemented immediately this week and further tariff reductions up to three percent maybe expected depending on the movements of prices in the world market," Energy Undersecretary and officer-in-charge Guillermo R. Balce said.

Balce said they are currently working out a scheme that would enable them to implement this short-term mitigating measure without necessarily sacrificing government revenues.

Every one percent cut in tariff on imported fuel products results in about P2.5 billion in foregone revenues for the government a month. The revenue impact would also depend on the volume of oil that the oil firms will import.

Balce said the DOE is closely monitoring developments in the global oil market.

He said they have been trying all efforts to cushion consumers from the impact of the prevailing volatility in international oil prices.

According to Balce, they are particularly zeroing in on the possible effect rising oil prices will have on the country’s inflation rate.

"The government will not cease its efforts to mitigate the impact of rising oil prices on the lives of our people as the DOE pursues its long term goal of accelerating the use of alternative sources of energy," he said.

In view of this, Balce has assured the public that prices of oil in the domestic market are expected to remain stable for the rest of July.

World oil prices hit peak levels anew, reaching almost $72 per barrel in Dubai in the past few days following continued geopolitical tensions in the Middle East.

DOE monitoring showed that Dubai crude rose to $71.99 per barrel last July 14, bringing the July average to $69.24 per barrel or up by $4.02 against the June average.

MOPS-based unleaded gasoline jumped by $2.55 to $85.31 per barrel this month compared to June average of $82.76 per barrel while MOPS-based diesel soared to $88.03 per barrel from $87.57 per barrel in June or up by $0.47.

Israel’s attack on Lebanon in response to the kidnapping of two soldiers and the firing of more than 100 rockets into northern Israel by Hezbollah guerrillas have heightened the tension in the Middle East and sent the world oil market in frenzy. Lingering tensions over Iran’s nuclear program continue to expose the world’s vulnerability to supply disruptions in the Middle East.

Consistent with the Executive Order 527 signed by President Arroyo last month, trigger prices were set as part of the guidelines for the implementation of the new EO.

Based on the guidelines, one percent tariff rates shall be imposed on crude and petroleum products should the average price of both Dubai crude and Mean of Platts Singapore (MOPS) — based diesel in the last two weeks reach $75 per barrel and $88 per barrel, respectively.

On the other hand, the two percent tariff rates shall be imposed on crude and petroleum products should the average price of both Dubai crude and MOPS — based diesel in the last two weeks reach $66 per barrel and $88 per barrel, respectively.

Zero percent tariff rates, meanwhile, shall be levied on crude and petroleum products should the average price for both Dubai crude and Mean of Platts Singapore (MOPS) — based diesel in the last two weeks reached $85.00 per barrel and $88.00 barrel respectively.

The tariff adjustments will only be implemented upon certification issued by DOE to the Department of Finance and the Bureau of Customs that the trigger prices for both crude and diesel have been met.

The guidelines, the DOE said, also impose on oil companies to reflect the corresponding reduction in pump prices of diesel fuel sold to the public transport sector.

Oil companies have been asked to provide sufficient number of gasoline stations offering the appropriate tariff-reduced diesel prices to the public transport sector.

"The government will not cease its efforts to mitigate the impact of rising oil prices on the lives of our people as the DOE pursues its long term goal of accelerating the use of alternative sources of energy," he said.

In view of this, Balce has assured the public that prices of oil in the domestic market are expected to remain stable for the rest of July.

World oil prices hit peak levels anew, reaching almost $72 per barrel in Dubai in the past few days following continued geopolitical tensions in the Middle East.

DOE monitoring showed that Dubai crude rose to $71.99 per barrel last July 14, bringing the July average to $69.24 per barrel or up by $4.02 against the June average.

MOPS-based unleaded gasoline jumped by $2.55 to $85.31 per barrel this month compared to June average of $82.76 per barrel while MOPS-based diesel soared to $88.03 per barrel from $87.57 per barrel in June or up by $0.47.

Israel’s attack on Lebanon in response to the kidnapping of two soldiers and the firing of more than 100 rockets into northern Israel by Hezbollah guerrillas have heightened the tension in the Middle East and sent the world oil market in frenzy. Lingering tensions over Iran’s nuclear program continue to expose the world’s vulnerability to supply disruptions in the Middle East.

Consistent with the Executive Order 527 signed by President Arroyo last month, trigger prices were set as part of the guidelines for the implementation of the new EO.

Based on the guidelines, one percent tariff rates shall be imposed on crude and petroleum products should the average price of both Dubai crude and Mean of Platts Singapore (MOPS)-based diesel in the last two weeks reach $75 per barrel and $88 per barrel, respectively.

On the other hand, the two percent tariff rates shall be imposed on crude and petroleum products should the average price of both Dubai crude and MOPS-based diesel in the last two weeks reach $66 per barrel and $88 per barrel, respectively.

Zero percent tariff rates, meanwhile, shall be levied on crude and petroleum products should the average price for both Dubai crude and MOPS-based diesel in the last two weeks reached $85 per barrel and $88 barrel, respectively.

Oil companies’ concerns on coco-diesel

2006-07-17T05:50:00.001-07:00

The Philippine Star 07/17/2006

The Philippine Institute of Petroleum (PIP), which represents mostly the interest of the country’s three giant oil companies, is in full gear as debates rage on the proposed government policy on the development and usage of alternative fuels.

In February 2004, the government mandated the use of one percent coconut methyl ester (CME) for its diesel-powered vehicles. In March last year, the Department of Energy (DOE) issued a circular enjoining oil companies to sell coco-biodiesel as additive mix in service stations, but with a very clear view of pursuing the implementation of a national coco-biodiesel program.

Pip position

I recently had lunch with the amiable spokesperson of Pilipinas Shell, Bobby Kanapi, at Tsumura (at 88 Corporate Center, corner Sedeno and Valero Streets, Makati), the authentic Japanese restaurant owned by the well-known restaurateur Jimmy Go. Although we seldom discuss oil industry issues during our regular golf and lunch sessions, our conversation drifted to the issue of bio-diesel.

Bobby had ready answers to the questions raised. After enthusiastically presenting his case, I promised to print the gist of PIP’s position (there is no free lunch, nowadays!) with the caveat that I may have a differing view. Being a true professional, Bobby Kanapi understood.

I am reprinting below excerpts of PIP position, specifically on the oil companies concerns on product quality, supply security, product liability and supply. Here goes:

"While CME, which is a very old technology, my be incorporated as a diesel blend, there is a need for a more extensive and comprehensive technical evaluation based on internationally accepted tests and procedures, including assessment on product stability; product handling, transportation and storage; long-term suitability, solvency and corrosiveness; and long-term effects on the diesel engine in the Philippine setting.

"Likewise, CME which was given a permit as a fuel additive by the Environmental Management Bureau (EMB) must be able to demonstrate on a sustained usage that it will not contribute to the increase in exhaust gas emissions of the transport vehicles

"There were concerns raised during discussions at the technical level of the proposed testing protocols on whether the handling of CME can be undertaken using the current facilities of the industry players. To date, no conclusions have been formulated so far to address this concern.

Only lab tests results

"The United States National Renewable Energy Laboratory (NREL) representatives presented the results on laboratory tests only and not the performance tests. What it showed was that the properties of the CME blended samples (one percent to five percent blended to diesel) fall within the specifications of the current Philippine diesel standards.

"However, the actual performance of the blending component or additive can only be assessed through comprehensive engine testing based on internationally accepted trials and standards. Positive laboratory test data is not a guarantee that CME will perform the same as diesel fuel. The completion of comprehensive engine tests as well as the durability tests are mandatory.

"It will be recalled that the previous coco-diesel program of the government was halted since the product’s moisture content led to bacterial and algae growth in the storage tanks. This contamination, in turn, led to clogging of fuel filters and breakdown of vehicles.

Concern on customer complaints

"To guarantee the quality and performance of products sold at the retail station level, our member companies endorse only products that are of high quality standards. These products undergo strict adherence to safety, environment and quality standards.

"To date, there have been limited study results and available empirical data on CME. We wish to reiterate our collective concern that the sale of CME in retail stations may subject individual oil companies or retailers to customer complaints and possible legal action.

"Recent tests show that five percent FAME (fatty acid methyl esters where CME is categorized/classified) in diesel has negative effects on engine parts. Engine tests on FAME-diesel blends conducted by the Ministry of Economy, Trade, and Industry (METI) of Japan, which was commissioned by the Fuels and Lubricants Sub-Committee of the Japan Automobile Manufacturers Association (JAMA), indicate negative effects on engine parts.

"Using five percent blend of FAME in diesel fuel resulted in the abrasive wear in fuel injector equipment for both Bosch and Denso, fuel flow reduction which means that the engine may suffer power reduction for insufficient supply of fuel. It also found heavy corrosion in fuel tanks, and leakage in fuel filters.

"Similarly, Cummins and Caterpillar neither approves or prohibits use of biodiesel fuel, but failures caused by the use of biodiesel are not defects of workmanship and/or material as supplied by the two manufacturers would not be covered nor compensated under the warranty.

"Thus, long term effects of CME on diesel should be considered as it would greatly affect the motoring public in terms of engine performance, its compliance to emission regulatory requirements, and the subsequently heavy toll on maintenance.

More expensive

"We likewise wish to raise our concerns on the volatile price of CME in the country. It is important to note that on a per liter basis, CME is more expensive than diesel. Given its budget constraint, the government may find it not advisable to sustain with subsidy the proposed CME to make such a product as "affordable" as conventional diesel fuel.

"Even if money can be made available to provide such a subsidy, there is the potential danger of encouraging a shift from manufacturing coconut oil to CME rather than to household cooking oil. As such, the price of cooking oil may thus rise to such levels that will be beyond the reach of common housewives."

In view of space limitations, I will present the comments and suggestions that I discussed with Bobby in succeeding columns.

Flying V launches its ‘Biodiesel Premium’ product in Ilocos

2006-07-17T05:50:00.000-07:00

The Philippine Star 07/17/2006

Biodiesel pioneer Flying V recently announced the general roll-out of its "Biodiesel Premium," its brand of pre-blended coco bio-Diesel in all of its stations in Ilocandia area.

Flying V spokesman Macky Lopez said this move is in response to government’s call encouraging the greater usage of alternative fuels in the face of spiralling prices of imported fuels.

From July 24-30, all Flying V stations in Ilocos Norte, Ilocos Sur, La Union, Baguio, and Pangasinan shall successively commence dispensing pre-blended BioDiesel at station pumps.

Lopez said the Ilocandia Biodiesel roll-out is pursuant to the company’s ongoing nationwide Biodiesel program.

Lopez said this will coincide with the intensified information campaign being undertaken by the Department of Energy in North Luzon on the consumer benefits and importance to the economy of Alternative Fuels.

Part of the DOE agenda during its various meetings with leaders of LGUs, and regional government agencies in the North is the stricter enforcement of Memorandum Circular 55 mandating the use of Biodiesel in all government-owned vehicles running on diesel.

Flying V is generally acknowledged as the Biodiesel Distribution pioneer, having received two Awards as a Pioneering Partner by the Department of Energy in the field of Alternative Fuels at ceremonies held and presided over by President Arroyo.

Flying V managing director Vicente de Jesus, meanwhile, announced that construction on Flying V’s Bio-Fuels Center at Philcoa’s Elliptical Circle Compound shall commence shortly.

Upon its opening, the center shall serve as the company’s flagship for alternative fuels, dispensing pre-blended Bio-Diesel, Fuel E-10 Ethanol, and auto gas, direct from the station pumps, and shall be home to year-round presentations, exhibits, and fora to accelerate general public acceptance of this revolutionary alternative fuel.

In a related development, USAID-Sustainable Energy Development Program (SEDP), during the grand launch of its clean cities program in Marikina City, announced that the Cinema Ad on Coco biodiesel shall be released before the end of the month.

The ad will be shown in theaters nationwide by USAID-SEDP pursuant to its advocacy for the use of biodiesel in promoting clean air and healthy environment.

The coco biodiesel brochures currently are also off the press and are being distributed in its Clean Cities pilot areas by USAID-SEDP.

PSALM to sell 25 Napocor gensets over next 2 years

2006-07-17T05:49:00.000-07:00

The Philippine Star 07/17/2006

The Power Sector Assets and Liabilities Management Corp. (PSALM) is expecting to sell 25 generating assets of the National Power Corp. (Napocor) this year and the next two years.

Based on the updated sale sequence, PSALM will sell 10 power plants, organized into eight asset packages that include the decommissioned and retired power plants this year.

These plants form part of the 25 remaining power facilities lined up for privatization until 2008.

Under the new genco sale line-up, PSALM will have to sell from January to June 2006: 600-MW Calaca; 275-MW Tiwi/410-MW Makban; and 100-MW Pantabangan/12 MW Masiway.

For the second half of 2006 or for July to December 2006, PSALM expects to auction off the 200-MW Manila Thermal bunker; 360-MW Magat Hydro; 620-MW Limay CC diesel; 114-MW Iligan I and II diesel/bunker; and 225-MW Bataan thermal bunker.

For the period January to June 2007, the government asset disposal firm is scheduled to sell the 22-MW Bohol diesel plant; 246-MW Angat hydro; 54-MW Cebu II diesel; and 192.5-MW Palinpinon geothermal.

From July 2007 to December 2007, PSALM will bid out the 112. 5-MW Tongonan geothermal; 22.3-MW Gen. Santos diesel; 75-MW Ambuklao/100 MW Binga hydro; 850-MW Sucat Thermal bunker; 0.8-MW Amlan hydro; and 210 MW Navotas I/ 100-MW Navotas II diesel.

For the first half of 2008, the genco assets that would be sold by PSALM include: 150-MW Bacman geothermal; 108- MW Aplaya diesel; and 146.5-MW Dingle (36.5 MW Panay I/110-MW Panay III) diesel/bunker.

This latest sale schedule will push back anew the earlier target of PSALM to sell 70 percent of Napocor generating assets in the first half of 2007.

Among the major causes of delay in the privatization of the gencos, PSALM said, are: creditors‚ consent; land titles; asset inventory; plant specific issues; inter-agency issues and transition supply contracts.

Republic Act 9136 or Electric Power Industry Reform Act (EPIRA) of 2001 mandates the sale of 70 percent of Napocor generating assets before the Open Access and Retail competition could be implemented.

PSALM had earlier targeted to sell 70 percent of the total Napocor’s generating assets in Luzon and Visayas by middle of 2006.

But based on original plan, PSALM should have sold the 70 percent by the end of 2005.

At present, PSALM, entity created under the EPIRA to handle the finances and the privatization of Napocor assets, has sold only 14 percent of the state-owned power firm’s generating assets.

PSALM has so far privatized six plants with total combined proceeds of $567 million or $0.932 per MW of capacity.

ERC okays new rates for Napocor

2006-07-17T05:48:00.000-07:00

The Philippine Star 07/17/2006

The Energy Regulatory Commission (ERC) has approved new rates for the National Power Corp. (Napocor) to reflect the power firm’s application for generation rate adjustment mechanism (GRAM) and incremental currency exchange rate adjustment (ICERA) for the period April 2005 to October 2005.

Based on the ERC approval, Napocor could recover from its customers new GRAM rate of P0.4170 centavos per kilowatthour (kWh), lower by five centavos from P0.4175 centavos applied by the state-run power company. This new GRAM rate in Luzon will be recouped by Napocor within nine months.

In the Visayas, ERC approved a lower rate of P0.3203 centavos GRAM recovery. Napocor applied for P0.3597 per kWh increase in this region. The ERC allowed Napocor to recover this rate in the Visayas for five months.

For the Mindanao grid, ERC allowed Napocor to recover under GRAM of P0.5048 per kWh for a recoup period of 16 months. This is lower than the P0.52.17 per kWh applied for by Napocor.

For the ICERA, the ERC approved Napocor’s deferred accounting adjustment (DAA) for debt service and operational expenses of P0.5719 per kWh in Luzon, P0.1784 per kWh in Visayas and negative P0.0155 in Mindanao. The ICERA will be recovered within eight to 24 months.

Early last month, the ERC, instead of granting automatic implementation, extended for another 45 days the resolution of Napocor’s GRAM and ICERA for the period covering April 26 to October 25 2005.

In separate rulings, however, the ERC argued that the 45-day resolution deadline set by the implementing rules should not apply since section 11 of the same rules provide only for a three-month recovery period.

But Napocor had filed for a seven-month recovery, which the ERC said would need more time to resolve. Thus, ERC extended the deadline of June 2, 2006.

Under the Electric Power Industry Reform Act (EPIRA) of 2001, the Napocor is allowed to recover its costs incurred from operations and fluctuating currency from its customers. Before Napocor and DUs were allowed to automatically recover these costs and the ERC would just review it after.

Based on the current set-up, the power generators and distributors should apply quarterly for the recovery of GRAM and ICERA.

Shell’s mother-daughter CNG station to push through this year

2006-07-14T05:14:00.000-07:00

The Philippine Star 07/14/2006

The proposed mother-daughter compressed natural gas (CNG) station project of the Shell Group will push through within the year, an energy official said.

"Shell has indicated that they could be operational in six to 12 months, as they have already addressed all issues, " Department of Energy (DOE) director Mario Marasigan said.

But Marasigan admitted that the Shell Group is still firm on addressing the issues of security before it could proceed with the project.

"It’s the mother station that has safety issues that would be difficult to disregard. Safety is related to the provision of the technology, and there were components that had to be modified to address the issues on safety," he said.

At the same time, the DOE, in view of the unforeseen delay in the construction of CNG refilling stations, is urging the Shell Group to help shoulder the interest expenses incurred by bus operators who imported CNG-run buses.

"We are working out with the partners for the (CNG) program led by the DOE for policy, and Shell to provide assistance on how to cope with the cost of money. We intend to provide them with the cost of money until they are running. They requested for such assistance from the DOE," Marasigan said

The DOE official noted that bus operators borrowed around P2.5 million to P3 million from the bank which they have to pay interest.

Marasigan said the DOE bewails the fact that CNG, which costs less than half the price of diesel, could not be utilized at a time of high oil prices.

"In view of high oil prices, we regret the fact that we could not make use of the CNG-buses. Otherwise, the price difference between CNG (P14.52 per liter) from diesel (P36 per liter) could have been seen," he said.

According to Marasigan, CNG supply from PNOC’s San Antonio gas plant in Isabela is very limited and expensive because of the long hauling. PNOC’s CNG supply would run at around P65 to P70 per liter.

"We cannot use it for commercial operation. It (PNOC plant) does not have sufficient reserve to supply the 22 CNG buses," he said.

He said there are currently 22 CNG buses and 185 more buses committed by seven bus operators. DOE is targeting the use of 200 buses.

"There have been several bus operators that applied for accreditation, but we have to put on hold their applications. Actually, we have already exceeded the initially target of 200 buses for the pilot program. We cannot give more than 200 buses, since the program only targets 200 buses," Marasigan said.

Despite the delays, DOE is targeting a minimum of 2,000 buses to a maximum of 3,000 buses running on CNG in the next 10 years.

Local Mirant unit prepares for smooth transition

2006-07-14T05:13:00.000-07:00

The Philippine Star 07/14/2006

Mirant Philippines Corp., the local subsidiary of Atlanta-based Mirant Corp., said it will continue to operate normally as it remains committed to its employees and the communities it serves.

"We look forward to a smooth and orderly transition, in close coordination with the relevant government agencies until after our auction process is completed," Mirant Philippines chairman and president Jose Leviste Jr. said yesterday.

Mirant Philippines’ parent firm announced the other day that it will sell all of its remaining assets in the Philippines and the Carribean as part of its strategy to restructure its finances after emerging from bankruptcy protection.

Leviste said Mirant’s pullout from the Philippines will not mean it would not be continuing its commitment to the country. "Our Philippine assets will continue to operate efficiently and deliver on commitments to the government, our clients and our stakeholders," he said.

According to Leviste, the divestment decision is purely a business issue. "The recent announcement that Mirant plans to divest its ownership interest in the Philippines is a corporate decision reflective of our company’s desire to deliver results to shareholders by realigning our business strategy."

He said they hope Mirant’s decision will not impact on the Philippine economy as a whole. "We remain very optimistic on the Philippine economy and the future of the country. The government has taken great strides in making the country an ideal destination for foreign direct investments."

He said there are already a number of companies that have expressed interest in acquiring the company’s Philippine businesses, among them foreign groups like AIG, One Energy, Mitsubishi, China Light & Power, Korea Electric Co., Tokyo Electric, and Kyushu Electric, as well a local investors such as the Ayalas, the Aboitizes, the Lopezes and telecom tycoon Manuel Pangilinan.

"This clearly indicates confidence in the Philippines and its economy as a whole," Leviste said.

"With the steady increase in economic activity and the subsequent rise in demand for power, we anticipate exciting and positive developments to take place in the industry in the coming years," he said.

Mirant Philippines Corp. is the country’s largest privately-owned power producer. Its assets are valued at approximately $2 billion.

With the sale of the assets, Mirant said these businesses will be regarded as "discontinued operations" starting the third quarter of 2006.

Once approved, the sales are expected to close by mid-2007. As Mirant generates cash from these sales, it plans to continue returning cash to its shareholders while maximizing the value of its net operating loss carryforwards.

Mirant has ownership interests in three generating facilities in the Philippines: the 1,218-megawatt Sual, the 735-MW Pagbilao and a 20-percent stake in the 1,500-MW Ilijan. The Philippine businesses contributed $370 million in gross earnings for the parent firm in 2005, or about half of total global earnings.

Mirant to sell RP, Caribbean assets

2006-07-13T12:37:00.000-07:00

The Philippine Star 07/13/2006

Atlanta-based Mirant Corp. will sell all of its remaining assets in the Philippines and in the Caribbean as part of the company’s overall financial restructuring coming off its recent emergence from bankruptcy.

Mirant Philippines Corp., the local subsidiary of Mirant Corp., is the country’s largest privately-owned power producer. The sale of its assets would raise approximately $2 billion for the parent firm.

A well-placed industry source said among the possible foreign buyers of Mirant assets in the Philippines are AIG, One Energy, Mitsubishi, China Light & Power, Korea Electric Co., Tokyo Electric, and Kyushu Electric. Potential local investors, on the other hand, include the Ayalas, the Lopezes, the Aboitizes, and telecom tycoon Manuel Pangilinan.

"Mirant is commencing auction processes to sell its Philippines and Caribbean businesses," the US energy firm said in a disclosure to the New York Stock Exchange.

Mirant said the sale, to be carried out through "an auction process", will still have to undergo regulatory and other approvals and consents.

Industry observers said the auction of Mirant ‘s assets will be far more attractive than the sale of the National Power Corp.’s power generating assets and could affect the ongoing privatization of the state-owned power facilities. "Competition for potential buyers will be tough as Napocor and Mirant assets would be put on the auction block at the same time."

With the sale of its assets, Mirant said these businesses will be regarded as "discontinued operations" starting the third quarter of 2006.

Mirant has tapped Credit Suisse as its financial advisor for the sale of the Philippine businesses while JPMorgan will serve as financial advisor for the sale of the Caribbean businesses.

Mirant has ownership interests in three power generating facilities in the Philippines: 1,218-megawatt Sual, the 735-MW Pagbilao and a 20-percent stake in the 1,500-MW Ilijan. The Philippine businesses contributed $370 million to the parent firm’s adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) in 2005.

With its decision to sell its Philippine businesses, Mirant has likewise adjusted its plan to recapitalize. The new recapitalization scheme will now consist of a $700-million term loan for which Mirant has obtained a commitment from Credit Suisse. The term loan will be prepayable at par.

Energy Secretary Raphael P.M. Lotilla said Mirant’s decision to sell its prime assets was not entirely unexpected given the financial condition of the mother company in the US, which has prompted the latter to come up with a strategic plan to enhance shareholder value after emerging from bankruptcy protection in the US in January.

A few months ago, Mirant Philippines had already started divesting its assets by selling its entire Visayas-based power plants to Metrobank Group’s Global Business Holdings Inc. Prior to the sale, Mirant Philippines owned 50 percent of Mirant Global Corp., a joint venture company, with the balance held by Global Business Holdings and First Metro Investment. Mirant Global operates the Toledo coal and diesel-fired plants in Cebu, the Panay diesel power plant in Iloilo City, and a Mindoro diesel plant.

Lotilla said the Philippine government, for its part, is ensuring that the buyers of these assets are qualified to perform the obligations of Mirant Philippines to Napocor, which include the buyer’s maintenance of the IPP (independent power producers) contracts attached to the assets on sale.

The energy official added that the government still believes that operations in these plants remain profitable and looks forward to keen interest among investors.

Lotilla also pointed out that the pull-out of Mirant’s businesses will not affect the country’s economic condition.

"Higher expected economic growth supported by rising foreign direct investments demonstrates that investor confidence remains intact and will help sustain the profitability of these plants," Lotilla said.

"Investors remain upbeat on the country’s investment climate following an improved fiscal position arising from the surplus registered in April, strong macroeconomic fundamentals and better-than-expected first quarter performance of corporations," he said.

It could not be determined though if the buyers of Mirant’s assets will continue the commitment to help the government in its rural electrification program. Late last week, Mirant and the Department of Energy signed an electrification project which aims to energize 55 barangays in Mindanao. Mirant has committed to energize 500 barangays nationwide up to 2009.

On the sale of Mirant‘s plants in the Visayas, Lotilla said the entry of new investors unsaddled by Mirant’s financial woes has helped make prospects for expansion of generating capacity in the Visayas more realizable.

"There is a sense of excitement in the power sector generated by Mirant’s decision to sell its businesses in the Philippines. Beyond acquiring Mirant’s Philippine assets, major international and domestic players see new opportunities for expansion. The announcement has ended the uncertainty hanging over Mirant’s participation in new power projects. Hobbled by financial challenges, the US mother company of Mirant is not in a position to finance expansion projects in the Philippines. But other major players who are not suffering from such a handicap see their possible acquisition of Mirant’s Philippine assets as a take-off point for acquiring additional generation capacity either through new or expansion projects or the acquisition of existing plants and assets of Napocor," Lotilla said.

Lotilla noted that the most recent proof that ownership changes like this have an overall positive effect is Mirant’s sale of its assets in Panay and Cebu in the Visayas. The new owners led by Metro Global are looking at additional projects which would support the economic and power demand growth in these two major islands, he said.

He added that the transfer of the Caliraya-Botocan-Kalayaan (CBK) generation plant by its operators which included Argentine firm IMPSA, to two very reputable Japanese companies Sumitomo and J-Power also provides a good example. "The CBK joint venture is now well-positioned to build additional capacity and to acquire Napocor assets."

In the same disclosure, Mirant said it will also undertake a "Dutch auction" tender offer for up to 43 million shares of Mirant’s common stock for an aggregate purchase price of up to $1.25 billion.

Mirant’s shareholders will be given the opportunity, subject to certain conditions, to sell all or a portion of their shares of Mirant common stock to the company at a price not less than $25.75 and not more than $29 per share. The tender offer will commence tomorrow and will be funded through a combination of cash on hand and cash distributed to Mirant upon completion of a term loan to be entered into by Mirant’s Philippine businesses.

Proceeds for the tender offer will come from available cash on hand of $885 million and cash to be distributed to Mirant upon completion of the $700-million term loan to be entered into by Mirant’s Philippine businesses. The remainder of the term loan will be used to pay off existing debt in the Philippines.

Aside from the Philippine businesses, Mirant will also be selling its net ownership interest in the Caribbean which comprises an aggregate 1,050 MW. The ownership includes controlling interests in two vertically-integrated utilities: 80-percent interest in Jamaica Public Service Co. Ltd. and 55-percent interest in Grand Bahama Power Co. Mirant also owns a 39-percent interest in the Power Generation Co. of Trinidad and Tobago (PowerGen), and a 25.5-percent interest in Curacao Utilities Co. In 2005, the Caribbean businesses contributed $156 million in adjusted EBITDA.

"Our strategic plan reflects our continued commitment to enhance shareholder value, both through the return of cash to our shareholders and through our continuing US business," Mirant chairman and chief executive officer Edward R. Muller said.

ERC issues new rules for retail power market

2006-07-12T07:18:00.001-07:00

The Philippine Star 07/12/2006

The Energy Regulatory Commission (ERC) has adopted new rules for the competitive retail power market in preparation for open access.

The commission said it has issued the so-called Code of Conduct for the Competitive Retail Market Participant (CRMP) which include the retail electricity suppliers (RES), the local RES, the distribution utilities (DUs), entities duly authorized to operate in the economic zones, and the contestable market.

"The ERC adopted the Code of Conduct to gain the confidence of electricity consumers in the retail electricity market and to ensure non-discriminatory access to regulated electricity services," ERC chairman Rodolfo B. Albano Jr. said.

The code sets the standards of behavior in marketing electricity service at the retail level.

Albano said the new code will also detail the marketing responsibilities and contractual obligations of the participants, as well as the complaint handling procedures for customers.

Under the code, the participants and their representatives are enjoined to observe confidential handling of information provided by the customer in connection with his application for electricity service.

The code will also require the issuance of a disclosure statement to the customer to ensure honesty, fairness and transparency by the competitive retail market participants in dealing with the customer.

In marketing its services, the RES, among others, must observe truthful advertising; avoid misleading the customers; provide the contact information of the ERC in marketing collaterals and advertisements to allow a customer to make clarifications on the information contained therein; and have marketing representatives with proper identification, full product knowledge and who are well-informed on the code and factual in his sales presentation.

"The ERC hopes that the electricity providers participating in the competitive retail electricity market will faithfully comply with the code to gain the trust and confidence of the end-consumers," Albano said.

Thai group backs out of TransCo bidding

2006-07-12T07:18:00.000-07:00

The Philippine Star 07/12/2006

Electricity Generating Authority of Thailand (EGAT) will no longer be bidding for the National Transmission Corp. (TransCo) this September, a reliable industry source said.

"They do not believe in this kind of exercise. Besides there are conditions which they perceive to become a problem in the future," the source said.

The source said one of the concerns raised by prospective bidders of TransCo is the condition within which the winning bidder will apply for its own franchise.

"It would be a problem. It would be very expensive especially if the application will come on an election year unless the winning bidder will have lots of money to spare," the source pointed out.

Another possible problem, the source said, is the 60-40 percent ownership sharing between Filipino and foreign bidders.

But the source admitted that EGAT’s former Filipino partner will still hold discussions this week to mull their other options.

"They would meet to see if they would still be bidding for TransCo. They want to make sure that they would still have time to negotiate with new partners," the source said.

According to the source, the former Filipino partner of EGAT, will now be tapping a foreign fund manager as its new partner. "We cannot disclose yet but this would involve a foreign bank."

EGAT was earlier reported to have submitted the highest bid for TransCo when the Power Sector Assets and Liabilities Management Corp. (PSALM) auctioned off the concession contract of the transmission highway about two years ago.

PSALM, in-charge of disposing Napocor generation and transmission assets, earlier said there are seven groups eyeing to participate in the bidding of TransCo this September.

Industry sources earlier said EGAT was reportedly be joined by Citra of the Salim Group to handle the technical aspect while Northeast Development and Acquisition Corp. (NEDAC) will be in charge of the financial side.

Sources said another group that signified interest for TransCo consists of Japan’s Tokyo Electric Corp. and US-based Trans-Electric (for technical); and San Miguel Corp. and Morgan Stanley (for financial).

The other group, sources said, is reportedly composed of First Pacific Co. Ltd. (financial) and Trans-Grid of Australia (technical).

Another group is composed of Hydro Quebec for the technical aspect and SNC Lavalin to be in charge of the financial requirement of the consortium.

Singapore Power Corp., the lone bidder during the two previous biddings conducted by PSALM for TransCo, has reportedly decided to take the sideline this time. However, Concepcion Industries, which has plans of bidding for TransCo, has reportedly been wooing SPC to provide its technical expertise to the group.

DOE issues rules on non-power uses of geothermal energy

2006-07-11T07:53:00.000-07:00

The Philippine Star 07/11/2006

The Department of Energy (DOE) will draw up new guidelines for small-scale and non-power application of geothermal energy, the country’s top energy official said.

Energy Secretary Raphael P. M. Lotilla said this is part of the government’s overall thrust to increase the country’s renewable energy-based capacity by 100 percent in the next 10 years.

These non-power applications include the development of geothermal sites of state-owned PNOC-Energy Development Corp. (PNOC-EDC) into eco-tourism spot.

"Included in our long-term plan is to consider all of our geothermal facilities as possible sites for eco-tourism projects of the government. The Department of Tourism can coordinate with us, for instance, by putting up hot spring resorts and mud-stream massage facilities," PNOC-EDC president Paul Aquino said.

Another non-power related activity that could be done in the geothermal sites is "drying".

"The heat of the return condensate could be utilized for drying purposes (dried food, fish)," Aquino said.

Aside from the non-power related geothermal development plan, the DOE will also push for the optimization of existing geothermal facilities to attain the goal of increasing the geothermal power capacity of the country.

The government will also offer geothermal sites for development to prospective investors through the Philippine Energy Contracting Rounds (PECRs).

Based on the Philippine Development Plan, the DOE will increase the capacity of geothermal power by another 1,200 megawatts (MW) by 2013 from the existing 1,923 MW capacity.

Over the next 10 years, the country will need over P87 billion for geothermal sector. Out of the total amount, P49 billion will come from the government and the remaining P38 billion expected to be contributed by private investors.

PNOC-EDC operates nine geothermal steamfields with an aggregate capacity of 1,145 megawatts accounting for about 60 percent of the country’s total installed geothermal capacity. Since its venture into the power generation business in 1997, it has significantly increased its contribution to the country’s overall power generation.

The company presently operates four power plants, which were built through the build-operate-transfer scheme. These are in Bacon-Manito in Luzon, four in Leyte, two in Southern Negros and Mt. Apo in Mindanao.

In addition to the sites already being developed by the company, the DOE estimates that 35 sites with up to 1,600 MW of potential capacity remain available for development in the Philippines.

Mirant vows to energize 55 barangays with solar power

2006-07-10T07:04:00.000-07:00

The Philippine Star 07/10/2006

Mirant Philippines Foundation Inc. has signed an agreement with the Department of Energy (DOE) for the electrification of 55 remote barangays in the provinces of Aklan, Masbate, Northern Samar, and Palawan using solar photovoltaic (PV) systems.

Jose Leviste Jr., Mirant Philippines chairman and president, said the memorandum of agreement (MOA) will also involve the Taytay sa Kauswagan, Inc., an Iloilo-based microfinance institution.

"Mirant has partnered with the DOE to undertake this World Bank and Global Environment Facility-supported rural power project (RPP) using a sustainable solar market package (SSMP) approach," Leviste said.

Leviste said the program, dubbed Project Access (Accelerating Community Electricity Services Using Solar), supports the goal of President Arroyo’s administration to achieve full barangay electrification by 2008.

"It is an honor for Mirant to partner with the DOE, headed by Secretary Raphael Lotilla, and other private sector groups on such a worthwhile project that will spread the benefits of electrification to our fellow citizens in the remotest parts of the country," said Leviste. "This will certainly jump-start local economic activity and improve the quality of life of its beneficiaries."

According to Leviste, Project Access is consistent with the commitment of US-based Mirant Corp.’s chief executive officer Edward R. Muller to President Arroyo of continuing support to the country’s rural electrification initiative.

Based on the MOA, Mirant Philippines Foundation along with the World Bank will provide the initial resources needed to start the project.

The DOE, on the other hand, will be in charge of implementing the program and overseeing the technical component.

To date, Mirant, in partnership with the DOE, has energized over 1,000 barangays nationwide in 33 provinces, benefiting over 1.5 million individuals at a cost of over P1 billion under its Barangay Electrification Assistance for Countryside Development program (Project Beacon).

Mirant Philippines, a wholly owned subsidiary of Atlanta-based Mirant Corp., is the largest private producer of electricity in the Philippines with over 2,000 megawatts of generating capacity. It owns and operates the 1,218-MW Sual power plant in Pangasinan and the 735-MW Pagbilao power station in Quezon. It also has a stake in the 1,200 MW Ilijjan natural gas project in Batangas.

Energy Secretary Raphael P.M. Lotilla, for his part, is urging other independent power producers to follow the lead of Mirant.

"We are very pleased with Mirant for their commitment to support Project Access by providing the needed assistance for the electrification of these 55 barangays. We encourage other private companies to follow the lead of Mirant to further help enrich the lives of our people living in the rural areas," he said.

Lotilla said Mirant will provide P55 million for the electrification of these barangays using the SSMP scheme, a component of the DOE’s Rural Power Project.

Taytay sa Kauswagan, on the other hand will provide credit and micro financing facilities amounting to P30 million to qualified consumers for the acquisition of solar PV systems.

With the signing of the MOA, it is hoped that this kind of project could be duplicated in other unenergized remote areas as Lotilla noted that it is becoming more and more difficult to reach the target of energizing 49,145 barangays in the country due to government’s financial constraints.

As of May this year, the country’s barangay electrification level stood at 94.04 percent. With the concerted efforts of the government and the private sector, the provision of electricity services to the remaining 2,500 unenergized barangays will be completed by year 2008, to achieve the government’s target of 100 percent barangay electrification level.

YNN can still save its Masinloc contract, but not its $14-M bond

2006-07-10T07:03:00.000-07:00

The Philippine Star 07/10/2006

The government will not deduct the $14.14-million performance bond from the $561-million purchase price of 600-megawatt Masinloc power plant in case the YNN Pacific Consortium Inc. and its partner Ranhill Berhad will decide to deliver the downpayment before Aug. 6, Energy Secretary Raphael P.M. Lotilla said over the weekend.

"That would not be part of the $561 million," Lotilla said. The energy chief did not elaborate.

In a related development, the Power Sector Assets and Liabilities Management Corp. (PSALM) served the notice of contract termination to YNN Pacific Consortium last Friday, July 7.

"In accordance with the (asset purchase) agreement, since YNN was not able to pay the upfront payment, rentals and option price to (PSALM) on or before June 30, 2006, we are hereby notifying YNN that PSALM is terminating the agreement," PSALM president Nieves L. Osorio said in a letter to YNN.

The effective date of the termination of the asset purchase agreement with YNN, Osorio said, will be on Aug. 6, 2006.

Osorio said there is no provision in the APA that prohibits YNN consortium from paying the downpayment before the notice of termination takes effect which is 30 days after it was served.

After collecting the $14.14-million performance bond from YNN Pacific, the PSALM board decided to issue the notice of termination of the contract for the sale of the Zambales-based coal-fired power plant.

Osorio said PSALM had adopted the necessary measures to ensure that the government’s interests and credibility were protected by requiring a performance bond and then forfeiting on it when YNN did not meet its deadline.

PSALM forfeited the $14.14-million performance bond after YNN failed to meet the June 30 deadline to deliver the $227.54-million upfront payment.

YNN submitted the highest bid of $561.74 million for the Masinloc thermal plant in Zambales.

The only other bidder, First Gen Corp., submitted a bid of $274.85 million, which was 30 percent below the government’s reserve price of $388 million and less than half of YNN’s bid.

Meralco customers warned vs bills payment scam perpetrators

2006-07-10T07:02:00.000-07:00

The Philippine Star 07/10/2006

The Manila Electric Co. (Meralco) is urging its customers to be wary of unscrupulous individuals volunteering to pay their electric bills for them.

Meralco issued this warning after an individual was nabbed issuing a stolen and fake manager’s check in paying for the bill of another customer.

"We received information that there are cases of persons preying on our customers who are usually outside the branch office. While the customers wait to pay their electric bills, they approach their intended victims, befriend them and volunteer to pay the customers‚ electric bills on the latter’s behalf. At times, these individuals pose as Meralco employees and offer discounts on the bill. After getting the money, these persons will pay the victim’s bill using a check with closed account or a fake or stolen managers’ check. The suspects will give the validated Meralco statement or official receipt to prove actual payment. However, these checks will eventually bounce causing the bill to remain unpaid. After a couple of days, the victim will realize that he has been cheated after receiving a notice on the returned check," Meralco vice president Elpi Cuña Jr. said.

Cuña clarified that Meralco has not authorized nor deployed anyone including its branch personnel to receive payments outside the branch office.

He added that customers must pay only at the Meralco branch office counters or through third party agents like Bayad Centers.

Another innovative way of paying electricity bills may be through the automatic debit arrangement (ADA). Through the ADA option, a customer may authorize his bank to debit the bill amount from his account on the due date and remit the payment to Meralco.

"In the event they are approached by strangers volunteering to pay their bill for them, I would advise our customers to immediately call the attention of our security people so that these individuals can be immediately accosted," Cuna said.

Spanish firms show interest in energy, infra projects in RP

2006-07-10T06:59:00.000-07:00

The Philippine Star
07/10/2006

Several Spanish firms have expressed interest in participating in built-operate-transfer (BOT) projects in the areas of renewable energy and infrastructure following President Arroyo’s official visit to Spain.

According to Trade and Industry Secretary Peter B. Favila, who accompanied President Arroyo in her trip to Spain, several Spanish firms such as Isolux-Corsan, Pro-Intec, Dimetronics and Soluziona expressed interest in participating in the Light Railway Transit (LRT) extension.

Red Nacional de Ferrocarriles Espanoles (RENFE), Spain’s national railway operator; Construccion Y Auxillar de Ferrocarles (CAF) and Soluziona expressed interest in various railway projects.

Spain’s second largest bank, Banco Bilbao Vizcaya Argentaria (BBVA) is extending financing for several projects in oil and gas exploration, hotel and resort development, information and communications technology projects, port projects, energy and other infrastructure projects.

Soluziona, which already has investments in the country, urged other Spanish investors interested in participating in Official Development Assitance (ODA) projects in Asia to set up their base in the Philippines in view of the presence of the Asian Development Bank (ADB) headquarters in Manila.

Soluziona related how they started with five employes in 1995 and have since expanded to 350 employes with projects in energy, banking and information technology.

Soluziona remains confident in the Philippine business environment and intends to expand further in Asia with the Philippines as their base.

Soluziona will bid for the North Rail project and is also exploring a partnership with taipan and retail king Henry Sy for an integrated property development complex.

Soluziona is also interested in BOT investments in the Don Piyo Intermodal Station which will be a hub for intercity and provincial bus transport and track systems.

Isolux-Corsan expressed interest in BOT railway infrastructure and construction investment projects.

It plans to participate in the bidding for LRT Line 1 South extension from Baclaran to Cavite.

Pro-Intec is interested in BOT investments in the LRT Line 1 South and Line 2 West extension, the Laguindingan Airport and Mindanao Airport Development Project in Cagayan de Oro.

It will provide a technical study grant for an agricultural/industrial project in the Cagayan Export Zone Authority.

It is also proposing a technical study grant for the fabrication of oil drilling equipment in Subic.

RENFE is interested in participating in the Iligan-Cagayan de Oro Railway project and in the North Rail project.

It will fund a E 100,000 feasibility study.

CAF, a railroad construction company, is looking at a E 33 million funding for a feasibility study on the Philippine National Railways (PNR).

BBVA signed a Memorandum of Understanding (MOU) Burgundy Global Asset Management Corporation for E250 million funding contract for BOT projects in oil and gas exploration projects in Palawan, hotels and resort development, ICT projects and the development of Port Irene in Cagayan.

BBVA also signed a Joint Declaration with WinAce Holdings Philippines, Inc. for the conclusion of an agreement for a credit line of E280 million for infrastructure and energy projects.

However, the Spanish firms expressed their concern about delays in project approvals.

Favila, however, assured them and offered the assistance of the Department of Trade and Industry as a one-stop contact to help them cut across the bureaucracy.

TransCo assets placed at P149B

2006-07-10T06:58:00.000-07:00

The Philippine Star
07/10/2006

Sinclair Knight Merz (SKM), an independent consultancy firm, has placed the net assets of the National Transmission Corp. (TransCo) at P149 billion as of end-2005, a company report showed.

Based on TransCo’s 2005 annual report, the company’s total assets reached P185.5 billon, an increase of P52 billion or 39 percent over 2004, mostly due to the revaluation of assets which was conducted by SKM.

The results of the revaluation were taken up in the books following the approval of the SKM report by the TransCo and Power Sector Assets and Liabilities Management Corp. (PSALM) boards.

SKM’s appraisal is crucial to stir up investor interest in the next round of bidding for TransCo’s privatization set this September.

The revaluation result was used by TransCo in determining its annual revenue requirement, maximum allowable revenue and effective transmission charges for the second regulatory period of 2006-2010.

The asset revaluation was in compliance with the requirements of the transmission wheeling rates guidelines of the Energy Regulatory Commission (ERC).

Net cost of assets used in operations accounted for 80.3 percent of the total assets.

Aside from the asset revaluation, various capacity additions such as Leyte-Cebu Uprating and transmission line and substation improvements caused the increase in utility assets.

The cost of uncompleted transmission lines, substations and other improvements was recorded at P20.09 billion or 10.8 percent of the total assets.

For the period under review, TransCo’s current assets were reported at P14.59 billion.

Power receivables account for 65 percent of these assets at P9.44 billion, consisting of collectibles for P3.04-billion transmission delivery service; P6.37-billion ancillary services and P29-million universal charge.

Total receivables from Manila Electric Co. (Meralco) amounted to P6.37 billion, 67 percent of which or P4.28 billion pertained to its overdue ancillary services accounts due to shortfall from its contract with the National Power Corp. (Napocor) from Sept. 26, 2002 to Oct. 25, 2004 plus imbalance charges.

The rest of the current assets consisted of P3.48 billion supplies for operation and cash and other assets of P1.66 billion. The P454-million deferred charges generally consisted of preliminary survey and investigation costs of transmission projects.

As of end-2005, the company’s net utility revenue improved by 0.3 percent to P24.29 billion from 2004’s P24.22 billion.

Total operating expenses was contained at P8.08 billion, lower by P994 million or 11 percent from a year-ago level of P9.07 billion.

The net operating income for the year under review is recorded at P16.2 billion, higher by 7.1 percent or P1.07 billion than the previous year’s level.

Napocor to deploy 10-MW genset in Masbate

2006-07-08T19:19:00.001-07:00

The Philippine Star
07/09/2006

The National Power Corp. (Napocor) will deploy a 10-megawatt (MW) generating set in Masbate in less than two weeks to normalize the power situation in the area, a top company official said.

Napocor president Cyril del Callar said the deployment of a new genset is in response to the orders of President Arroyo.

Del Callar said this move will fasttrack efforts to normalize the power situation in the island of Masbate, following a fire that damaged the state-owned power generation’s Power Barge 105 which supplies most of the island’s power requirements.

"This is the earliest possible date that the generating set can be delivered to the island. This will be supplied by General Electric (GE), one of the world’s top suppliers of electric generation sets and other equipment," he said.

He said the new genset will come on a lease basis. "This (lease contract) was done through a bidding process."

The Napocor chief said prior the bidding, the power firm scouted various sources, including private corporations, for generating sets that can be immediately deployed to the island.

"We invited major suppliers of generating sets to bid, both local and international. GE won the bid," Del Callar said.

"Barring unforeseen and uncontrollable events, we expect the generating set to be delivered by July 17, 2006 to Masbate. This will undergo the needed technical testing and synchronization," he said.

He said they expect the commissioning of the genset a week after its installation.

"We are targeting to have the generation set commissioned between July 20 - 25, 2006. But understanding the needs of the island and its people for electricity, we will do our best to have the island energized earlier than that," Del Callar added.

At present, Masbate’s power supply is provided by a land-based generation set, currently generating three MW of power. Masbate has an average demand of nine MW.

With the coming of the new 10-MW generation set, the island will be provided with its total demand, as well as back-up power needed for system reliability.

Government to auction Masinloc power plant again this year

2006-07-08T19:19:00.000-07:00

The Philippine Star
07/09/2006

Still smarting from the setback in the sale of the 600-megawatt Masinloc coal-fired power plant to the YNN Pacific consortium, Finance officials said the government is prepared to auction the power facility again this year.

Finance officials would not rule out the possibility that YNN could still come up with the $227.54-million down payment over the weekend but the asset is likely to join other power plants scheduled to be bid out this year.

"If they do not come up with the money, the termination of the contract will take effect after 30 days," said Finance Secretary Margarito Teves, who is also board chairman of the Power Sector Assets and Liabilities Management Corp. (PSALM), the agency in charge of privatizing government’s power assets.

According to PSALM president and chief executive officer Nieves Osorio, the power plant could be bid out this year along with other power assets held by PSALM.

PSALM is planning to bid out this year the 25-year concession of the National Transmission Corp., the 100-mw Pantabangan power plant and the 12-mw Masiway hydroelectric power complex, the 360-mw Magat hydroelectric power plant and the 275-mw Tiwi and 410-mw Makban geothermal complex.

Should YNN be able to pull off the payment before the termination

order is issued, however, Teves said the transaction could still push through and YNN would be the "new player" in the power industry.

Teves said YNN’s bid of $561 million for the Masinloc power plant was still "the most advantageous to the government’s interests and more than double the losing bid of $275 million."

SPEX group to conduct seismic test in N Palawan

2006-07-08T08:05:00.000-07:00

The Philippine Star
07/08/2006

The consortium of Shell Philippines Exploration B.V (SPEX), Kuwait Foreign Petroleum Co. Philippines Onshore B.V., and South China Resources Inc. will spend up to $5 million for the initial seismic exploration in service contract (SC) 60 in northwest Palawan by the last quarter of 2006.

"It’s safe to say that the SC 60 consortium will spend $3 million to $5 million for the 2D and 3D seismic exploration by November or December this year," SPEX managing director Facundo Roco said.

By the third or fourth quarter of 2007, Roco said they will be able to determine if they could proceed with the formal gas and oil exploration in SC 60. "In the latter part of next year, we will be able to confirm whether there are oil and gas reserves in the contract area."

Earlier this year, the consortium said it will invest some P1.27 billion ($24 million) to explore gas and oil prospects in offshore northeast Palawan.

The group signed SC 60 with the Department of Energy (DOE) in January to signal the start of the seismic and exploration work in the untapped oil prospects in the northeastern part of Palawan.

SC 60, converted from the Geophysical Survey and Exploration Contract 99 (GSEC 99), covers a relatively unexplored area of 1.008 million hectares.

Northeast Palawan is one of the promising sites for petroleum exploration identified by the Philippine Petroleum Resource Assessment Project Study conducted by the Norwegian Agency for Development Cooperation and the DOE.

During the seven-year exploration period of SC 60, the consortium committed to invest a minimum of $24 million or about P1.27 billion for the project. About $2 million to $3 million will be spent for the seismic study alone.

The consortium shall conduct, seismic and exploration work to find petroleum and optional exploration drilling within the first seven years.

SC 60 also includes a 25-year production term in the event of a commercial discovery of petroleum. The SC 60 venture consists of 55 percent SPEX stake, 30 percent KUFPEC Phils. and 15 percent SCR.

The consortium is a group with strong background in the upstream petroleum industry. SPEX is the lead operator of the $4.5 billion Malampaya deep water gas-to-power project in Northwest Palawan, the biggest investment so far in the country’s oil exploration sector.

Gov’t to scrap YNN contract

2006-07-07T08:37:00.001-07:00

The Philippine Star
07/07/2006

The merchant contract of the YNN Pacific Consortium will be terminated by Monday, the Department of Finance (DOF) announced yesterday after forfeiting the group’s $14-million performance bond.

The bond was ordered forfeit by the Power Sector Assets and Liabilities Management Corp. (PSALM) earlier after YNN failed to deliver the upfront payment of $227.54 million for the acquisition of the Masinloc power plant.

Finance Secretary and PSALM chairman Margarito B. Teves said yesterday that consistent with PSALM’s process, it would issue the notice of termination of contract on or before Monday, July 10.

"Termination takes effect 30 days after the notice is issued," Teves said.

He said the PSALM board had already given YNN ample time to settle payment, agreeing to extend the March 31, 2006 deadline to June 30, 2006. The condition was to raise the bond from $11 million to $14 million.

After YNN failed again, Teves said the PSALM board decided to forfeit the bond and terminate the contract.

"It was reasonable to grant them the first extension since the government had a good price at $561.7 million and was protected by the increased performance bond," he said. "But PSALM stood firm on the June 30 deadline."

According to Teves, the board has started to consider its options on when the Masinloc plant should be put on the auction block again.

"Our main concern is to ensure that the public will have ready access to power and energy at the lowest possible price," he said.

The only other bidder for the Masinloc plant was First Generation Holdings which made a bid of $274.85 million, much lower than the YNN bid and below the government’s reserve price of $388 million.

Malampaya group urged to provide more gas to support Luzon grid

2006-07-07T08:37:00.000-07:00

The Philippine Star
07/07/2006

The government is urging the Malampaya consortium to provide additional natural gas volume that could support a 300-500 megawatt (MW) new capacity needed for the Luzon grid in the next four years, the country’s top energy official said.

Energy Secretary Raphael P.M. Lotilla said the Department of Energy (DOE) is currently in discussions with the Malampaya natural gas project operators composed of Shell Petroleum Exploration B.V., Chevron Texaco and PNOC-Exploration Corp.

"We have discussed the additional power requirements for natural gas that would be needed for power in the next few years. We’re looking at enough natural gas supply to support an additional 300 to 500 MW," Lotilla said.

DOE data showed that the Philippines will need an additional 4,438 MW in new capacity additions in the next five years to meet the projected demand for power.

Projected system peak demand in the country is expected to increase from 9,827 MW in 2005 to 14,265 MW in 2010 and 19,064 MW in 2014. The projected average annual growth rate for peak demand was placed at 7.6 percent over the next 10 years.

Based on the DOE data, the projected peak demand forecasts will require a total of 9,228 MW of new capacity additions in the next 10 years. For Luzon, 7,200 MW indicative capacities are needed to fill up the demand starting 2008.

The data also indicated that of the new capacity additions required, 578 MW will come from committed projects while the remaining 8,650 MW are indicative capacity additions identified as baseload, midrange and peaking plants.

Lotilla said the government sees the importance of preparing for these power demands in the future.

"On the government side, we are stressing the need for making the additional natural gas supply available and the investments are necessary to make that additional volume available in time for the critical period in Luzon," he said.

The energy chief, however, assured that these issues are currently being addressed by the government.

"Our expectations are that those responsibilities form part of the service contract. The investments to be made would have to be determined at the technical levels, but discussions and exchanges are taking place on the natural gas requirements," he said.

The Malampaya deep water gas-to-power project supplies natural gas to three gas-fired power facilities in Luzon namely: the 1,500-MW Ilijan operated by the National Power Corp. and Korea Electric Co.; 1,000-MW Sta. Rita and 500-MW San Lorenzo by First Gas Corp. (FGC). First Gen Corp., the owner of FGC, plans to put up an additional 300-MW gas-fired facility (San Gabriel) near its existing two power plants in Batangas.

Lotilla pointed out that though the need to put up additional capacity in Luzon will be pushed back a little bit, they need to ensure that the natural gas would be there if needed.

"Our natural gas requirements for the critical period around 2010 but can be deferred to 2011 due to the peaking requirements. It was initially targeted for 2008, but due to the power development plan, we had to make some adjustments, but it does not mean there would be no requirements even before that, because in the past, we have had thinning reserves like when typhoon Caloy hit Ilijan, it resulted in damage to the main transformer and is under-going repair for almost a month. These are the things we are attending to right now, he said."

For his part, Shell country chairman Edgar O. Chua said they are recognizing the government’s effort to address the need to increase capacity due to the continuing rise in power demand.

"It is something we are looking at, and is something we have yet to finalize. In fact, we have that assignment to the DOE and so we have to get back to them for this," Chua said.

SC backs DOE on penalties imposed on erring oil firms

2006-07-06T06:44:00.000-07:00

The Philippine Star
07/06/2006

The Department of Energy (DOE) may now be able to impose penalties on erring and illegal practitioners in the oil industry as the Supreme Court (SC) ruled recently that the DOE has the right to penalize these irresponsible players.

In an order released last June 26, the SC upheld the validity of a DOE circular which penalizes abusive acts particularly in the liquefied petroleum gas (LPG) industry.

"With the Court’s imprimatur, the law enforcement agencies of the government can now confidently run after those who resort to illegal practices which cheat ordinary consumers and expose them to dangers to life and property," Eneregy Secretary Raphael Lotilla said.

The DOE circular, issued on June 2000, provides for various penalties for the offenses committed by any person or entity engaged in any and all activities involving the commerce of LPG. It was issued purposely to deter, restrain and/or penalize any and all acts of illegal, irregular and anomalous business practices in the LPG industry.

The penalties under the circular range from P500 to P10,000 per violation for each cylinder for the first and second offense. For the third offense, business closure is recommended by the local government units (LGUs).

Illegal practices in the LPG sector include underfilling, tampering, altering or modifying of cylinder through any means such as changing the valve, re-painting and re-labelling by any person or entity other than the legitimate owner of the same, unauthorized refilling of cylinder, no trade name, unbranded cylinders, no serial number, no tare weight or incorrect tare weight markings, among others.

The LPG Refillers Association of the Philippines Inc. (LPGRA) challenged the DOE circular, alleging its unconstitutionality and confiscatory nature. The group said the enabling laws, Batas Pambansa 33 and RA 8479 do not expressly penalize the acts and omissions enumerated in the DOE circular. The Supreme Court however, ruled that Batas Pambansa 33, as amended, indeed criminalizes illegal trading, adulteration, underfilling, hoarding and overpricing of petroleum products.

"The Supreme Court decision is particularly crucial at a time when the DOE has strengthened its enforcement activities by partnering with the Department of Trade and Industry (DTI), the Department of Interior and Local Government (DILG) and the LGUs," he added.

Early this year, the DOE, DILG and the DTI signed a memorandum of agreement creating a multi-agency task force for the strict enforcement of penalties against illegal and unsafe practices in the LPG industry.

Under the MOA, a Task Force LPG shall be established in each of the provinces and cities to eliminate the rampant use of underfilled, dilapidated, uncertified and unsafe LPG cylinders which pose serious threat to public safety and security. The task force is to be led by the respective governor and mayor, DILG officers through the Bureau of Fire Protection (BFP) and the Philippine National Police (PNP), the DOE and the DTI.

The inter-agency MOA is also an expansion of an earlier partnership of the DOE with the LPG industry associations in August 2000 for the conduct of inspections and info campaign drives, among others, on the subject of LPG.

Records from the DOE show that 61 percent of the LPG establishments inspected by the DOE with the DTI from January to May 2006 had been found to be selling unbranded cylinders, underfilled and defective tanks with fake seals or no tare weights markings, serial numbers and appropriate seals.

Last year, about 76 percent of the LPG establishments inspected recorded one or more violations.

Government gets hold of $14-M YNN Pacific performance bond

2006-07-06T06:43:00.000-07:00

The Philippine Star
07/06/2006

The government has the $14- million proceeds from the YNN Pacific Consortium Inc./Ranhill Berhad performance bond which was forfeited after the group failed to meet the deadline for the delivery of the 40-percent downpayment for the purchase of the Masinloc coal-firedpower plant, the country’s top energy official said.

In a press briefing, Energy Secretary Raphael P.M. Lotilla said the performance bond was released to the Power Sector Assets and Liabilities Management Corp. (PSALM) by Malayan Banking Berhad Sentul Raya and confirmed by its local unit Maybank.

"The cash is already with the trust account of PSALM, and the amount of $14 million is accounted for and was issued by a reputable international bank. Maybank was the confirming local bank," he said.

Lotilla, the vice chairman of PSALM, said the will be considered as part of the government’s privatization proceeds.

"This forms part of the privatization proceeds, and therefore in accordance to the EPIRA (Electric Power Industry Reform Act), it would be spent to pay-off the debts of Napocor (National Power Corp.)," Lotilla said.

He added the government will not go into a negotiated bid with Lopez-owned First Gen Corp., the only other bidder for the 600-megawatt (MW) Masinloc coal-fired facility.

Lotilla pointed out that First Gen’s bid was way below the government’s reserve price of $388 million.

In December 2004, First Gen submitted a bid of $274.85 million while YNN Pacific’s winning bid was $561.74 million.

According to the energy official, the PSALM board will still study the options for the sale of Masinloc although PSALM earlier said it may rebid the power facility "at the appropriate time if conditions warrant."

On the issue of forfeiting the bond, Lotilla said their action is deemed advantageous to the Philippine government.

"I also wanted to stress that the decisions that were made, it was the PSALM board acting solely on the basis of its assessment on what is advantageous for the government and the national interest," he said.

He pointed out that their decision not to extend the June 30 deadline for the payment of $227.54-million upfront cash was warranted since the 27-percent increase in the performance bond from $11 million to $14 million is already ample protection to the government.

"If you recall, the PSALM board had to make an assessment, when we decided to extend and at that time on the condition that there would be an increase in the bond from $11 million to $14 million or an increase of 27-percent on the bid bond," Lotilla said.

"Even if there was a 27-percent increase in the bid bond, the PSALM board decided to extend. And by June 30, the PSALM board again made an assessment on whether or not to close or to call on the bond, considering we also want to ensure the credibility of the privatization process is upheld," Lotilla said.

On Monday, the PSALM board served notice to the YNN-Ranhill consortium of the bond forfeiture for the group’s failure to come up with the upfront payment last Friday.

The PSALM board is chaired by Finance Secretary Margarito B. Teves. The secretaries of trade and industry, budget and management, and justice and the director general of the National Economic and Development Authority, and their representatives also sit as ex-officio members with PSALM president Nieves Osorio.

Lotilla also noted that selling the coal plant without a transition supply contract (TSC) was a major factor that bogged down the sale of the power plant.

He said that they are still waiting for the Manila Electric Co. (Meralco), the country’s largest power distributor, to firm up a TSC with Napocor.

PNOC’s geothermal unit eyes $300M from IPO in Q4

2006-07-06T06:42:00.000-07:00

The Philippine Star
07/06/2006

PNOC-Energy Development Corp. (PNOC-EDC) expects to raise $300 million from its initial public offering (IPO) scheduled on the last quarter of this year, a top company official said yesterday.

In an interview with reporters, PNOC-EDC president Paul Aquino said part of the proceeds from the IPO will finance the upgrading of the company’s two-decade-old drilling facilities.

Aquino said they are also trying to raise through the IPO some $60 million for the payment of the company’s build-operate-transfer (BOT) contracts this year.

He said they want to generate fresh funds from the public offering to veer away from new borrowings. "We’re trying to hold off any borrowing and we have to raise capital to finance the acquisition and upgrading of drilling equipment."

PNOC-EDC is the geothermal and renewable energy development arm of state-owned Philippine National Oil Co. (PNOC). It is one of the most profitable companies of the PNOC group, with a present net book value of between $800 million to $1 billion.

Based on the initial plan, PNOC-EDC will hold the IPO in September this year. But Aquino noted they have to wait for a more favorable market condition before they would push through with the capital-raising scheme. "We are expecting a market slump to last for two months and another two months for the market to consolidate. It will probably be in November or December."

Petron remits P375-M dividends to government

2006-07-05T06:57:00.000-07:00

The Philippine Star
07/05/2006

Petron Corp., the country’s largest oil refiner, has remitted P375-million worth of dividends to the government through the Philippine National Oil Co. (PNOC).

The amount represents a P0.10/share cash dividend to PNOC, which holds around 3.75 billion Petron shares – equivalent to a 40-percent stake in the company.

Petron chairman Nicasio I. Alcantara turned over the cash dividend to PNOC president and CEO Eduardo V. Mañalac.

Since the oil firm’s privatization in 1994, Petron has remitted nearly P6 billion in cash dividends to PNOC.

Alcantara said the company’s ability to consistently deliver dividends to its shareholders is a result of strategic initiatives and investments over the past few years.

These have been reflected in the company’s performance as it continued to sustain its income growth since 2001. In that year, the company posted a net income of P1.2 billion. By 2005, Petron registered a net income of P6 billion — the highest in the company’s history.

The company also remains the leader in the local oil industry with a market share of nearly 40 percent.

More than a year ago, Petron commissioned its $100-million Clean Air Act-compliant facilities, making it the only oil company capable of producing compliant fuels locally without resorting to product importations.

The company has also earmarked $300 million to construct additional refinery units that will allow it to extract high-value petrochemical streams. These investments, which will be commissioned in 2008, are expected to significantly boost Petron’s income.

"We have always aimed to increase shareholder value by pursuing business initiatives that will sustain long-term growth," Alcantara said.

"Beyond our profitability and market leadership, we continue to adhere to good corporate governance practices that are in line with global standards. We believe this is essential to our success," Alcantara said.

For the second straight year, Petron was named one of the best governed publicly-listed companies in the Philippines by the Institute of Corporate Directors (ICD). The ICD is an international organization that advocates good corporate governance.

The company also continues to be a major partner in national development through its Fuel H.O.P.E. (Helping Filipino children and Youth Overcome Poverty through Education) programs.

Petron currently has more than 5,000 scholars under its Tulong Aral program and has built 13 Petron Schools as of end-2005 in areas where venues for learning are sorely lacking.

Petron recently led a business consortium from the energy sector to build the Tulong Kapwa Gawad-Kalinga (GK)-Energy Village to help rebuild the lives of the Leyte landslide victims.

The GK-Energy Village is a community of 100 homes, a multi-purpose hall, a day-care center, and programs on livelihood, health and nutrition, youth development, and values formation.

"The Tulong Kapwa-GK Energy Village is a good example of how collective action from business, government and civil society can work in addressing some of the most urgent problems in the country," Alcantara said.

About 20 percent of Petron shares are held by about 200,000 investors. The Philippine government, through PNOC, and Saudi Aramco each has a 40-percent stake in Petron.

Philippines pushing on with sale of power assets

2006-07-05T06:55:00.000-07:00

Philippine Star
July 5, 2006

MANILA (AFP) - The Philippines is determined to push through with the sale of state-run power transmission and generation assets despite the failure of a tender for a 600 Megawatt power plant, a top official said Wednesday.

The government earlier this week cancelled the sale of the Masinloc coal-fired plant after the prospective buyer, YNN Pacific Consortium, failed to make an initial payment on its winning bid of 561.74 million dollars.

"The government's restructuring and privatization program for the power industry will not be hindered because we're moving ahead with the bidding of the assets of National Power (Corp). scheduled for this year," President Gloria Arroyo's chief aide, Eduardo Ermita, said in a statement.

He said the Masinloc case showed that "the necessary measures to ensure that the government interest is fully protected, are in place."

The government must wait for favourable conditions before attempting to sell Masinloc again, he remarked.

The government's power privatization agency has issued invitations to bid for other power assets including three hydroelectric power plants and two geothermal plants with a total of 1,172 megawatts of capacity.

Those seeking to bid for the 25-year concession to run the country's power transmission assets also have until mid-July to submit applications to take part in the public auction.

PSALM assures privatization on track despite Masinloc setback

2006-07-04T06:52:00.000-07:00

The Philippine Star
07/04/2006

The Power Sector Assets and Liabilities Management Corp. (PSALM) has assured that the privatization of other generating assets of the National Power Corp. (Napocor) will continue despite a major setback encountered in the sale of the 600-megawatt (MW) Masinloc power plant.

Masinloc was supposed to be the first big-ticket item sold by PSALM and should have been the government’s benchmark in selling a power plant without a supply contract.

PSALM vice president for asset management and electricity trading Froilan Tampinco said the company is specifically bent on moving ahead with the auction of the Napocor generation assets this year.

PSALM, the agency mandated to privatize the assets of the Napocor, made the assurance to quell unfounded speculations that the government’s privatization program for the electric power industry will be hampered because of the failure of YNN Pacific Consortium to meet the June 30 deadline to deliver the $227.54 million upfront payment. PSALM has called on the $14-million performance bond.

"The government’s restructuring and privatization program for the power industry will not be hindered because we’re moving ahead with the bidding for the assets of Napocor scheduled this year," Tampinco said

The PSALM official added that "It is incumbent upon PSALM to be at the forefront in implementing the necessary reforms in the power sector."

Tampinco’s assurance is a welcome development for bidders of the 100-MW Pantabangan and 12-MW Masiway hydroelectric power plants, the 275-MW Tiwi and 425.73-MW Makban geothermal facilities, and the 360-MW Magat hydropower plant whose sale processes are still ongoing.

He said that investors who have expressed interest in joining the bidding exercises could continue with their due diligence for these plants. The bid date for each plant package will be set by PSALM.

Seven bidders have also signified their intention to bid for the 25-year concession of the National Transmission Corp. (TransCo) slated in September 2006. Of the seven groups who have submitted their expressions of interest to PSALM, five have received their bid documents and are now starting their due diligence for TransCo.

In other development, Ranhill Berhad, the supposed partner of YNN Pacific Consortium in the purchase of Masinloc, disclosed in its local bourse that it would continue to buy out YNN Pacific.

"On behalf of Ranhill’s Board of Directors, we are pleased to announce that Bank Negara Malaysia had on 29 June 2006 approved the remittance of funds by Ranhill to Moretta Finance BV, an indirect wholly-owned subsidiary of Ranhill, pertaining to the consideration for the proposed acquisition," the company said. Ranhill is proposing to buy the entire shares in YNN at $8 million.

Napocor sees need for additional capacity in Visayas

2006-07-04T06:50:00.001-07:00

The Philippine Star
07/04/2006

The National Power Corp. (Napocor) sees a need to install additional capacity in the Visayas region soon as the growth rate in the area in the first quarter of 2006 was twice as high as the projected 5.5 percent growth in the country’s gross domestic product (GDP).

Napocor data showed that Visayas registered the highest growth in the energy sales at 11.76 percent from 1,033.26 gigawatthours (GWh) in the first quarter of 2005 to 1,158.05 million gwh in the same period in 2006.

"This is a clear indication that Visayas’ economy is improving, and that the demand for power will continually increase, necessitating the installation of additional power generating facilities," Napocor said.

According to Napocor, the main drivers of Visayas’ power demand are the industrial and commercial activities in the region.

Among the bulk power users in the Visayas are the Visayan Electric Co., Inc., Mactan Electric Co.; Philippine Phosphate Fertilizer Corp., the Central Negros Electric Cooperative, and Iloilo I Electric Cooperative Inc.

The double-digit growth in the Visayas also pushed Napocor’s overall first quarter revenues up to P36.48 billion in January to March 2006, or 25.26 percent more than the P29.13 billion it earned in the same period last year.

The Luzon grid accounted for the big chunk of the power firm’s three-month revenues at P28.17 billion, up 25.89 percent from the year-ago level of P22.38 billion. Visayas and Mindanao contributed P3.83 billion and P4.48 billion, respectively, up from last year’s P3.16 billion and P3.59 billion.

Napocor attributed the higher revenues to a 6.33 percent growth in sales volume, and to the Energy Regulatory Commission’s approval last April 13, 2005 of a power rate adjustment based on the power firm’s return-on-rate-base with time-of-use (RORB-TOU) application. In terms of volume, energy sales rose by 516.22 gwh, or from 8,156.36 in the first quarter of 2005 to 8,672.57 gwh this year. A gigawatthour is equivalent to one million kilowatthours.

According to the report, the higher sales volume can be traced to a 7.04 percent improvement in Napocor’s sales in the Luzon grid, which accounts for close to 70 percent of the power firm’s total market. Specifically, sales in the region went up from 5,491.61 gwh to 5,878.17 gwh year-on-year, due in turn to a 9.24 percent increase in Napocor’s sales to its single-biggest customer, the Manila Electric Co. (Meralco).

Sales to Meralco for the period under review stood at 3,435.75 gwh, up from 3,145.04 gwh in 2005. Apart from Meralco, other Luzon-based utilities like the Batangas II Electric Cooperative Inc., Angeles Electric Corp., and the Camarines Sur II Electric Cooperative, contributed to the higher sales in the grid. Industrial estates like Philippine Economic Zone Authority in Baguio City and the TIPCO Estates Corp. also beefed up over-all sales in the region.

Sales in the Mindanao grid grew by 0.48 percent year-on-year, or from 1,636.34 gwh in January to March 2005, to 1,628.53 gwh this year. The top customers of Napocor in Mindanao during the period were Treasure Steelworks Corp., Global Steel Manufacturing Corp., Philippine Sinter Corp., Iligan Light & Power Co., Inc., and South Cotabato Electric Cooperative II.

Vietnam firm to make biofuel from catfish fat

2006-07-04T06:50:00.000-07:00

Manila Bulletin
July 4, 2006

HANOI, July 3 (Reuters) — Vietnamese catfish processor and exporter Agifish plans to turn catfish fat into fuel to run diesel engines, a company official said on Monday.

"We are planning to commercialize the fuel based on the result of pilot tests," Agifish Deputy Director Nguyen Dinh Huan told Reuters.

Huan said Agifish has been using the fuel, made from fat left over from processing, to run pumps at its fish ponds in the Mekong Delta province of An Giang in southern Vietnam.

"The fuel is as good as diesel oil," he said.

He said samples of the catfish fuel had been sent for tests at laboratories in Ho Chi Minh City for quality checks and government approval.

The state-run Tien Phong (Vanguard) newspaper on Monday quoted Ho Xuan Thien, the chief engineer of the project, as saying the firm planned to build a 10,000-ton-per-year factory in 2007 to mass produce the fuel for domestic markets.

Thien said a kilogram of catfish fat could produce 1.13 liters of biofuel.

Vietnam produces around 30,000 tons of catfish annually, mainly for exports to the United States and Europe.

Agifish’s products range from canned catfish through pre-cooked breaded fillets to sweet-and-sour fish prepared in clay containers.

Although Vietnam is Southeast Asia’s third largest crude oil producer after Indonesia and Malaysia, it still relies on oil product imports for fuel because it lacks major refineries.

Agifish shares were quoted on Monday at 72,500 dong ($ 4.54) per share on the country’s main stock exchange, the Ho Chi Minh City Securities Trading Center, unchanged from Friday.

Masinloc attracting flock of new bidders

2006-07-04T06:49:00.000-07:00

Manila Bulletin
July 4, 2006

The 600-megawatt Masinloc coal-fired power facility, of which sale has been aborted because of the winning bidder’s failure to put up required downpayment is now attracting horde of prospective bidders should the Power Sector Assets and Liabilities Management Corporation (PSALM) set it on auction one more round.

However, the investors have one common concern that shall be considered by privatization implementers -that is for government to re-evaluate the reserve price. This is currently set at $ 388 million.

PSALM moved for the forfeiture of the $ 14-million bond deposit submitted by YNN and new partner Ranhill Power Berhad after the group failed to pay the required downpayment of $ 227.54 million on their June 30 deadline.

Since the government hints of a re-bidding of the asset at "appropriate time"; at least four interested investors have indicated fresh interest to join the auction. Two of these are American companies and the rest are Asian energy firms.

"The plant can be re-bid at the appropriate time if conditions warrant," PSALM has noted; but no specific timeframe was given on when they shall decide on this.

A source from one of the American firm stressed that "the reserve price shall be made more reasonable so it becomes attractive to buyers, otherwise if they prefer a higher price for the sale, the consumers will be burdened with expensive electricity rates and we don’t want blamed for that."

The new flock of interested buyers of the Masinloc asset are saying that the $ 561.74 million purchase price tendered by YNN Pacific Holdings may not be matched anymore when PSALM rebids the plant.

PSALM explained that the valuation on the Masinloc plant had been based on long-run avoidable cost; or the funding an investor would need to sink in as referenced on a "best entrant facility."

To date, Masinloc is considered one of National Power Corporation’s (NPC) "crown jewel" that generates earnings for its coffers and also provides one of the cheapest electricity rates to consumers.

Masinloc was deemed to have high availability and reliability as measured by its relatively low forced outage rate of 1.20 percent and 2.20 percent, chiefly in 2001 and 2002.

For lack of transmission constraints, it is likewise expected that the plant would be dispatched at its full load to the Luzon grid.

Given the need for new capacity, Masinloc also has good potential for expansion of another 300 megawatts; giving future owners "economy scale" in terms of use of common facilities and less hassle on the typically tedious process of securing sites for coal-fired power plants.

The plant currently has two units with 300-MW of installed capacity each and its useful life can be as long as 50 years.

As can be seen from the power development blueprint’s supply-demand data, even Luzon grid is now suffering from thinning reserves and this signals the need for new investments in power plants, otherwise, the country will be plunged into a new round of crisis.

NPC posts 25% growth in energy sales

2006-07-04T06:47:00.000-07:00

Manila Bulletin
July 4, 2006

The level of revenues generated by state-owned National Power Corporation from delivered electricity to customers jumped by a significant 25.26 percent due to higher selling rates and increase in demand.

Data from its sales and services group indicated that its energy sales yielded P36.48 billion from January to March as compared to P29.13 billion in the same period last year.

The Luzon grid cornered the biggest chunk of the sales with revenues hitting P28.17 billion, higher by 25.89 percent from the previous year’s P22.38 billion.

Visayas and Mindanao similarly contributed to the revenue jump with P3.83 billion and P4.48 billion, respectively; as against their posted earnings of P3.16 billion and P3.59 billion last year.

"The higher revenues are atttributed to the 6.33 percent growth in NPC’ sales volume," the power firm said; adding that the other factor rested on the Energy Regulatory Commission’s approval of its bid for a higher rate on return base (RORB) which effectively pulled up its generation charges starting last year.

Power spot market starts operation today

2006-06-23T07:53:00.000-07:00

The Philippine Star
06/23/2006

The country’s wholesale electricity spot market (WESM) will start virtual commercial operations today, Philippine Electricity Market Corp. (PEMC) president Lasse Holopainen said, in time with the fifth-year anniversary of the passage of the Electric Power Industry Reform Act (EPIRA) of 2001.

Energy Secretary Raphael P.M. Lotilla said PEMC had actually commenced with its test live dispatch operation (LDO) last June 19 with 25 registered generators and 170 customers consisting of private utilities, rural electric cooperatives, industrial and commercial companies, and government offices.

"The new dynamic and competitive market would surely necessitate adjustment in the way we do business in order to complement and meet the requirements of various clients and stakeholders," Lotilla said. "Despite many challenges, quality of service should not be compromised but instead we should continue to provide better performance, surpassing mediocrity and recklessness in decision-making," he said.

The WESM is the second electricity spot market in the region after Singapore, and the first in a developing Asian country.

When the PEMC, the WESM’s operator and governing body, was established two and a half years ago by the Department of Energy and industry representatives, many observers expressed doubts as to whether the Philippines had the economic and technical expertise as well as the political will to implement the much needed reform measure successfully.

Holopainen, however, noted that over the last two years, the establishment of the WESM had been on-time and on-budget.

In the process of developing the market, the PEMC has also set new international benchmarks for development costs as well as market design and implementation.

The WESM, once operational, will cost generators 1.3 centavos per kilowatthour (kwh), a fraction of the charges of any other electricity market in the world. The WESM is also designed as a locational marginal pricing (LMP) market, considered the most modern and accurate of market designs. A LMP market tracks the true economic cost of electricity to 600 points of delivery in Luzon and the Visayas.

"This design allows for complete pricing transparency and unprecedented efficiency in the dispatch of generation assets, allowing policy makers, industry players and observers real-time information to make decisions," Holopainen said.

Under the WESM set-up, electricity is offered and bought on an hourly basis, with the price of electricity reflecting the true cost of power at each interval.

This set-up should allow for the appropriate response from electricity users that will not only lead to short-term efficiency gains, but also a more robust industry in the longer-term. "Other electricity markets, such as PJM in the US, have achieved generator efficiency gains of up to 35 percent," Holopainen said.

Holopainen said the WESM will have a fundamental impact on electricity reserve costs, generator costs, demand-side management as well as privatization of government assets and future greenfield power plant projects.

"The country as a whole benefits from the competitive pressure and market discipline the WESM brings to the industry," he added.

ERC seen to okay Napocor petition for rate adjustment

2006-06-23T07:52:00.000-07:00

The Philippine Star
06/23/2006

The Energy Regulatory Commission (ERC) is likely to approve a lower rate for the recovery of the National Power Corp.’s latest incremental currency exchange rate adjustment (ICERA) and generation rate adjustment mechanism (GRAM) applications, an ERC official said.

"It’s hard to predict what the ERC’s decision will be, but normally we approve the petitions but the approved rates are always lower than what Napocor files. We can say that the approved rates will be lower that what they filed," a ranking ERC official said in an interview.

The ERC official said the commission would release the decision on the two Napocor rate increase applications by the middle of next month. "We will have until mid-July to decide on Napocor’s petitions. The mid-July deadline is already the end of the 45-day extension we implemented."

In separate decisions released early this month, the ERC, instead of granting automatic implementation, extended for another 45 days the resolution of Napocor’s GRAM and ICERA applications for the period covering April 26 to Oct. 25, 2005.

Under its GRAM application, Napocor pushed for the approval of its deferred accounting adjustment charges of P0.4175 per kilowatthour (kwh) for the Luzon grid, P0.3597 per kwh in Visayas and P0.5217 per kwh for Mindanao over the seven-month period. These price adjustments are recoverable in 12, six and 18 months, respectively.

At the same time, Napocor, under its application for ICERA, urged the ERC to approve its adjustments for debt service and operational expenses of P0.1410 per kwh in Luzon, P0.1997 per kwh in Visayas and P0.0373 per kwh in Mindanao and for actual payments of capacity and infrastructure fees of P0.4486 per kwh in Luzon, P0.0205 per kwh in Visayas recoverable in 24 months.

Napocor filed the petitions on April 18, 2006 and could have automatically implemented them on June 2 this year had not the ERC invoked the GRAM and ICERA implementing rules.

The additional generation cost and currency exchange rate would have been reflected by all concerned distribution utilities since under the law, generation cost is a direct pass-through to consumers.

In separate rulings, however, the ERC argued that the 45-day resolution deadline set by the implementing rules should not apply since the same rules provide only for a three-month recovery period.

But Napocor had filed for a seven-month recovery, which the ERC said would need more time to resolve. Thus, ERC extended the deadline of June 2, 2006.

TransCo bid winner needs to secure franchise

2006-06-21T06:07:00.000-07:00

The Philippine Star
06/21/2006

The winning bidder for the 25-year concession of the National Transmission Corp. (TransCo) will be required to obtain a congressional franchise to operate the transmission company, which is considered a public utility, the Power Sector Assets and Liabilities Management Corp. (PSALM) said yesterday.

PSALM president Nieves Osorio said securing a franchise will be one of the prior conditions to complete the TransCo lease-contract transaction.

The asset management firm is already preparing all the necessary procedures and requirements as it is set to bid out the TransCo concession in September this year.

This as the Energy Regulatory Commission (ERC) released yesterday the decision on the final determination on the so-called smoothed maximum allowable revenue (SMAR) for five years, or for the period 2006-2010.

The approved SMAR, however, was far lower than what TransCo has applied at least for the next four years.

On the first year or in 2006, ERC approved P35.611 billion as against TransCo’s application of P34.9 billion, an increase of P642 million.

But in the succeeding years, or from 2007 to 2010, ERC approved a much lower SMAR for TransCo. The final determination on MAR, however, is better than the draft determination earlier approved by ERC which was set at a flat revenue of P27 billion for the five-year period.

For the five-year period, the difference of the MAR approved by the ERC as against the MAR applied by TransCo is P120.74 billion.

TransCo manager for strategic planning Ed Orencia said they would present the ERC decision to management next week.

"We will decide what to do with the decision, whether to file a motion for reconsideration or accept the decision next week," he said.

The SMAR is one of the areas being looked at by interested investors in bidding for the TransCo lease contract. So far, three prospective investors from Canada, Australia and Thailand that have expressed keen interest in participating in the bidding for TransCo’s concession.

On the franchise, Osorio said under the concession agreement between TransCo and the concessionaire, the transmission company will retain the legal title to all the transmission assets, sell sub-transmission assets to distribution utilities, and take over the business if the concessionaire defaults.

Malaysians buy out YNN partners

2006-06-21T06:06:00.000-07:00

The Philippine Star
06/21/2006

Malaysian power utility firm Ranhill Bhd plans to cough up more than $230 million to take control of the Masinloc power plant in Zambales.

In a Reuters report from Kuala Lumpur yesterday, Ranhill said that it had bought out its partners in the YNN Pacific Consortium Inc., which successfully bid $561.7 million in December 2004 for the 600-megawatt coal-fired plant.

Ranhill said it had paid only $8 million to buy out YNN, but the move now leaves Ranhill responsible for making the initial $227 million payment to the Philippine government for the Masinloc plant.

The $227-million payment must be made by June 30, Ranhill said, adding that it would also need to contribute $3 million in working capital into YNN, which will run the plant.

YNN must settle the remainder of its $561.7 million bid for the Masinloc plant over the next seven years, through 14 equal semi-annual payments, at an interest rate of 12 percent.

"Ranhill may be required to advance additional funds to YNN in the future, the quantum of which can only be determined later," the company said.

It would fund the $8 million acquisition price, the $227 million initial payment and the $3 million in YNN working capital from internal funds or borrowings, the firm added.

The government had planned to sell some 31 power plants by the end of last year, but political instability and investor doubts about profitability in the sector meant it failed to sell any in 2005.

The plants, with rated capacity of 4,335 megawatts, account for about one-third of total Philippine generating capacity. Just six of them have been sold, or 11 percent of the targeted generating capacity for sale.

National Power Corp., is banking on raising $4 to $5 billion from the sale of its plants and by leasing its electricity grid to cut its debts, which are equivalent to about a third of the country’s annual gross domestic product.

YNN spokesperson Gary Makasiar said the consortium is currenty conducting a roadshow to raise fund for the downpayment.

"We are talking with European and American banks for financing. Ranhill is now the majority owner of the consortium. We do not want to lose the $14 million bond so we are trying as much as we can to come up with the downpayment," Makasiar said.

In end-December 2005, PSALM had asked YNN 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. 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 Ranhil president and chief executive officer Tan Sri Hamdan Mohamad.

Osorio said they expect Ranhill and YNN to complete within the three-month extension all financial arrangements relating to Ranhill’s investments in YNN.

Ranhill has tapped 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.

Osorio said International Finance Corp., the investment arm of the World Bank, has also expressed keen interest to extend financial assistance to Ranhill in case it wants to extend the capacity of Masinloc in the future.

The proposed acquisition of YNN Pacific by Ranhill is in tandem with the Malaysian firm’s corporate vision of increasing Masinloc’s generation capacity to 1,000 MW by 2009.

1-month extension of 1% tariff cut on oil imports mulled

2006-06-20T06:33:00.000-07:00

The Philippine Star
06/20/2006

The country’s economic managers are looking into the possibility of extending the implementation of the one percent tariff cut on petroleum imports up to next month, a ranking energy official said.

Department of Energy (DOE) director Zenaida Monsada said the impact of the tariff reduction on imported fuels would be felt up to the end of this month only.

"The economic managers (led by Department of Finance and DOE) are reviewing the trigger levels for the tariff reduction. We are now checking if there is still a possibility of lowering the rates, and yet remain revenue neutral (for the government) – the triggers that we have are based on what the DOF wants. We are still haggling if it can be lowered and yet still be revenue neutral," Monsada said.

Every one percent cut on tariff on imported fuel products results to about P2.5 billion in estimated foregone revenues for the government monthly. The revenue impact would also depend on the volume of oil that the oil firms will import.

Monsada said the tariff reduction is among the mitigating measures being implemented by the government to cushion the impact of rising crude prices on the consuming public, as the tariff cut is one thing directly affecting public transport.

"It’s actually the economic managers that proposed the review, as they want to mitigate the high and increasing oil prices, but the tariff rate is just one of the schemes – which are focused on the public transport, apart from the "Tindahan Natin," school feeding program, among others," she said.

President Arroyo announced last week that the price of diesel will not increase this month because of the lowering of the tariff on petroleum products by one percent.

But Monsada noted that with the rate the price of crude is moving in the international market at the moment, there is a possibility that the one percent tariff cut would be lifted anytime soon based on the trigger level set by the DOF.

"We are now looking if we can lower the trigger to maintain the one percent discount. It is possible that diesel could be lifted if we would consider the average in the first half of June," she said.

She said the review of the trigger points should be completed within the month so as not to remove the discount being enjoyed by the public transport groups.

According to the DOE official, if changes would be approved on trigger levels, it would be reflected in the guidelines. "We may have to revise the guidelines to accommodate any change, if there would be any," she said.

Dubai crude averaged at $65.38 per barrel as of June 15, while the average price of MOPS-based unleaded gasoline stood at $84.06 per barrel. The average price of MOPS-based diesel as of June 15 was at $88.47 per barrel.

Consistent with the Executive Order 527 signed by President Arroyo last month, trigger prices were set as part of the guidelines for the implementation of the new EO.

Based on the guidelines, one percent tariff rates shall be imposed on crude and petroleum products should the average price of both Dubai crude and Mean of Platts Singapore (MOPS) – based diesel in the last two weeks reach $75 per barrel and $88 per barrel, respectively.

On the other hand, the two percent tariff rates shall be imposed on crude and petroleum products should the average price of both Dubai crude and MOPS – based diesel in the last two weeks reach $66 per barrel and $88 per barrel, respectively.

Zero tariff rates, meanwhile, shall be levied on crude and petroleum products should the average price for both Dubai crude and MOPS – based diesel in the last two weeks reached $85 per barrel and $88 barrel, respectively.

The tariff adjustments will only be implemented upon certification issued by DOE to the DOF and the Bureau of Customs that the trigger prices for both crude and diesel have been met.

3 small players tie up to cross-market their alternative fuel products

2006-06-20T06:32:00.000-07:00

The Philippine Star
06/20/2006

Three of the country’s major independent oil players-Eastern Petroleum Corp., Flying V and Seaoil Philippines – formed yesterday a joint venture to intensify efforts to promote and cross-market their alternative fuel products.

In a press conference, Eastern Petroleum Corp. (EPC) chairman Fernando Martinez, who is also the chairman of the Independent Philippine Petroleum Companies Association (IPPCA), said the initiative – dubbed as "Sugod-Karga na, mga Kapatid" – is aimed at integrating and broadening the choice of new, cleaner energy to the motorists now reeling from successive oil price increases.

"The uniting of the three oil players pools almost 300 stations nationwide as outlets for the three alternative fuel products, thus broadening each other’s offerings while making them available to more motorists throughout the country," Martinez said.

EPC is pushing for the use of autogas or liquefied propane gas (LPG) for the transport sector particularly in taxi fleets.

Flying V, on the other hand, is more into the promotion of coco-methyl ester blend on diesel while Seaoil is strongly supporting the use of ethanol as gasoline additive blend.

Martinez said EPC is planning to put up 20 auto LPG gas refilling stations this year.

By next month, he said they would be putting up National Conversion Center in Pasig that could convert an average of 100 vehicles per day into gas-powered vehicles. LPG for transport, he said, has been widely accepted in Europe, South Korea and Japan for being economical, cost-efficient and environment-friendly fuels.

According to Martinez, EPC is now in the process of tapping funding institutions like the Development Bank of the Philippines (DBP) to finance this project.

Seaoil president Glenn Yu said ethanol-blended gasoline, on the other hand, has been developed from sugarcane and is seen to reduce toxic gas emission by 22 percent.

Flying V chairman and CEO Ramon Villavicencio said at five percent coco-biodiesel blend, the Philippine economy stands to register savings or value-added to country’s resources by P3.1 billion through export substitution which can be used either to lower price of diesel or to boost the agricultural sector.

The three small independent players also urged the lawmakers to pass the Biofuels Act. "This is a major step toward achieving independence from 100-percent imported fossil fuels," he said.

The officials from the three independent oil firms also urged the country’s Big Three oil companies – Petron Corp., Pilipinas Shell and Chevron Philippines – to help lead the way in promoting quality fuel products including alternative fuels like ethanol and coco-biodiesel products.

Tripartite body proposes bid cap of P62,000/kWh for WESM

2006-06-19T07:02:00.001-07:00

The Philippine Star
06/19/2006

A tripartite committee composed by the Department of Energy (DOE), the Philippine Electricity Market Corp. (PEMC) and the Energy Regulatory Commission (ERC) has proposed a price ceiling or a bid cap of P62,000 per kilowatthour (kWh) to apply during the commercial operation of the country’s wholesale electricity spot market (WESM).

The ERC is currently asking concerned parties to comment on the price cap.

According to the ERC, industry’s comments on the initial bid cap should be submitted on or before June 19 this year.

The ERC said that cap was proposed by a committee which was created for the study and adoption of certain market mitigating measures to be implemented in the WESM.

All interested parties are invited to submit their comments to the initial bid cap on or before June 19, 2006.

Aside from setting the ceiling, one of the committee’s goals is the adoption of initial bid caps or a ceiling for price offers at the WESM in order to limit or reduce possible instances of excessive increases in market prices.

This is an additional mitigating measure and will be put in place before WESM commences its Luzon commercial operations in end June 2006.

"This tripartite committee will address market price contingencies that may arise during the initial operations of the WESM when institutional mechanisms to address these contingencies are still untested.These contingencies, though remote, may include excessive increases in market prices. The committee is therefore expected to apply pre-emptive measures as needed during the early stages of WESM," Energy Secretary Raphael P.M. Lotilla said.

Lotilla also stressed that the formation of the tripartite committee was initiated to safeguard consumers against any extreme price volatility which could occur during the first few months of WESM operations.

"While we do not expect extreme pricing volatility in the first year of market operations, it is prudent to be cautious," said PEMC president Lasse Aznar Holopainen. "These additional measures are intended to address the eventuality of fuel price spikes on system problems that may occur. These are really an added safety feature over and above those already built into the system and the WESM rules, which govern the day to day trading behavior of the participants and prevent collusion, withholding of energy and other forms of anti-competitive behavior."

Under the resolution which created the committee, the DOE, ERC and PEMC will jointly monitor price volatilities, identify price-related contingencies and recommend measures to mitigate extreme price conditions if these do occur during WESM’s first year of operations.

"The electric power industry stakeholders can rest assure that the ERC will always do its best to support healthy competition in the spot market in order to promote customer choice of their electricity provider and to encourage active participation by local and foreign investors," according to ERC Chairman Rodolfo B. Albano Jr.

The committee, composed of the DOE secretary, ERC chairman and the PEMC president, is also tasked to implement regular and efficient information sharing system as well as a direct feedback mechanism to effectively address contingencies if they arise.

The tripartite committee is separate from the WESM Market Surveillance Committee (MSC), which also monitors the market for any unfair competition.

PTT Phils to invest P4B over 4 years

2006-06-19T07:02:00.000-07:00

The Philippine Star
06/19/2006

PTT Philippines Corp. (PTTPC), formerly Subic Bay Distribution Inc. (SBDI), will pour in some P3.5 billion to P4 billion worth of investments in the Philippines starting this year up to 2009, a ranking company official said.

During the launching of PTTPC as the new corporate name of SBDI over the weekend, PTT Public Co. Ltd. of Thailand executive vice president for commercial and international marketing oil business group Artasith Pothiapinyanvisuth said they are planning to transfer one of their existing lubricant blending plants in Thailand to the Philippines.

PTT also changed the name of Subic Bay Fuels Co. (SBFCI) to PTT Philippines Trading Corp. (PTTTC) and will be tasked to source products from Thailand, Singapore, Korea and Japan. It will also sell products to companies located in the Subic Bay Freeport one, Clark Special Economic Zone and other economic zones in the country.

The PTT official said they have yet to identify an area in Metro Manila where to locate the lubricant plant. But he said they would spend about P1 billion for this project.

He said they are also planning to put up a liquefied petroleum gas (LPG) plant with a capacity of 5,000 metric tons (MT) to 10,000 MT.

The LPG storage plant is seen to go on commercial operation by 2008 or 2009 in time for the LPG production in Thailand.

"We see an opportunity for us to sell LPG to the Philippines which imports its LPG needs," he said.

The PTT executive said they expect the construction of a five-million liter depot in Cebu to be completed by October and to start commercial operation by November this year. This oil terminal will allow PTT to cater to the petroleum market in the region.

He said part of the five-year plan is the putting up of an ethanol plant as part of its contribution to the promotion of the use of alternative fuels in the transport.

PPTPC president Siripong Phoungpaka said they would be spending about P500 million this year. A portion of this budget will go to the construction of 50 new retail gas stations all over the country. To date, PPTPC has 16 gas refilling stations. In the next five to 10 years, they expect to put up 100 to 200 stations nationwide.

Phoungpaka said they also want to introduce the new style of service station similar to what they have in Thailand which they call "one-stop-shop" stations. These stations have unique features like banking facilities aside from the usual locators.

He said they are also looking at the possibility of putting up service stations in the South, North Luzon and Subic/Poro point expressways.

But he said they have yet to resolve the issue of leasing a land. "We are willing to invest but the problem is how to get the land," he said.

PTTPC’s storage facilities are located in Subic Bay and Clark Field with combined capacity of three million barrels.

Phoungpaka said the expansion program in the Philippines is part of the overall strategy of PTT Group to go global. PTT has extensive experience in petroleum, petrochemical and exploration with market value of more than $24 billion as of end-2005.

"PTT policy now is to go global and we have to expand in Southeast Asia including the Philippines," he said.