Sale of power barges vital, says PSALM

MANILA, Philippines—The Power Sector Assets and Liabilities Management Corp. (PSALM) needs to sell right away the four diesel-fired power barges so it can reduce the burden of stranded contract costs on power consumers.

In a text message to the Inquirer, PSALM president and chief executive Emmanuel R. Ledesma Jr. said there was no other option but to sell Power Barges 101, 102, 103 and 104, despite the proposals made by the private sector, the latest of which was to put in place a wholesale electricity spot market in Mindanao.

By having a trading platform, private sector proponents said, power generators are assured of a market for the electricity they will generate even without long-term power supply contracts.

According to Ledesma, bidders for the second round of the auction scheduled on August 15 this year will have the opportunity to propose changes in the sale parameters.

A prebidding conference will be held next week.

“We will evaluate those with a view to enhancing the value of the barges. Plan B is we still bid out the barges again under structures allowed by law. That’s our mandate and we’ll pursue it to reduce the burden of stranded debts for consumers,” Ledesma told the Inquirer.

Ledesma expressed confidence that the government would be able to privatize the four power barges, noting that at least one bidder has come to the attention of PSALM because of his intent to bid for the barges under the terms of the previous auction.

Ledesma said that the state firm has the option to undertake a negotiated sale since “there seems to be very strong interest” from ACTA Power Corp.—a joint venture between the Ayala Group’s AC Energy Holdings and the Phinma-led Trans-Asia Oil and Energy Development Corp.

The first auction conducted by PSALM on May 16 was declared a failure after only ACTA Power submitted an offer. Prior to the first bidding round, at least seven groups had expressed interest to participate in the power barges, including San Miguel Corp. and First Gen Corp.

The reluctance of the private sector to acquire the power barges stemmed from what it called a “difficult” business environment in Mindanao.

Several groups had expressed their apprehension in selling electricity in Mindanao, where rates remain lower than the true cost because the government continues to control 81 percent of the power-generation business in Mindanao.

Industry sources earlier expressed concerns that Mindanao consumers would not be able to support a generation rate that would make the operation of the barges viable, as evident in the experience of the Aboitiz-led Therma Marine with its two barges in Mindanao.

But the government remained adamant in transferring these barges to the private sector, hoping to avert an expected 200-MW power supply shortage in the summer of next year. It is thus crucial for these facilities to be in place by February 2013, PSALM said.