Outright sale of Agus complex pushed

The government has been urged to proceed with the outright asset sale of the Agus-Pulangi hydropower complex in Mindanao, noting that any other forms of privatization will not be economically feasible and may just result in the increase in power prices on the island.

Ernesto Pantangco, president of Philippine Independent Power Producers Association (Pippa), said proposals putting the facility under an operation and maintenance agreement prior to its sale would not work.

“You’ll be operating and maintaining a plant that is dilapidated. As such, there is no incentive to make investments in improving the power plant,” Pantangco said.

The proposal to have the facility under a rehabilitate-operate-and-maintain contract would also not work, he noted, because under such agreements, the period that would be given to recover investments in the Agus-Pulangi hydropower complex would not be enough.

Thus, the hydropower facilities will then become more expensive to maintain as opposed to just owning the power complex, rehabilitating the units and spreading the recovery of the investments costs over a longer period, Pantangco said.

Instead, the group is proposing the outright sale of the hydropower complex and that it should come with long-term power supply contracts to make the asset more attractive to investors.

“What we are proposing is for the government to execute for Agus-Pulangi long term (power supply) contracts with escalating tariffs approaching market level,” Pantangco said, noting that this would also allow the government to finally reflect the true costs of electricity in Mindanao over a certain period.