PSALM places more assets on auction block

State-run Power Sector Assets and Liabilities Management Corp. (PSALM) plans to bid out starting November this year two government-owned contracted capacities as part of its asset management strategy.

PSALM president Emmanuel R. Ledesma Jr. told reporters on Tuesday that PSALM planned to place on the auction block the independent power producer administrator (IPPA) contracts of the 640-megawatt Unified Leyte geothermal facilities and the 150-MW Casecnan hydropower plant.

“We are drafting the structure that will maximize participation of various industry participants,” Ledesma added.

PSALM hopes to turn over the IPPA contracts to prospective investor groups within the first quarter of 2013.

The government agency is working on dividing the contracted capacities of the Unified Leyte complex to prevent market dominance by a single firm and to make the facility financially viable.

“We are still working on [the Unified Leyte IPPA contract] but we intend to divide [the contracted capacity] into two or three contracts which, in turn, would allow more bidders to participate and allow PSALM to maximize the proceeds that may be generated from the privatization,” Ledesma had said.

Given the large generating capacity of the Unified Leyte geothermal complex, PSALM said that there might not be that many companies left to take on the IPPA contract without breaching the so-called market cap on power generation in the Visayas.

Meanwhile, those that may be allowed to acquire the Unified IPPA without breaching the cap might not have enough financial muscle.

Under the Electric Power Industry Reform Act, a company or group of related companies is barred from owning, operating or controlling more than 30 percent of the installed generating capacity of a grid or 25 percent of the country’s total installed capacity.

Meanwhile, the Casecnan facility in Nueva Ecija is a combined irrigation and hydroelectric power project and is the first multi-purpose build-operate-and-transfer project in the Philippines.

However, the Department of Energy noted in a report that there was one possible major hitch in the privatization of this IPPA contract as the facility’s ownership may still revert to the government through the National Irrigation Administration (NIA) instead of the IPP administrator, unlike in other IPPA contracts.