Changes in Malaya plant bidding terms likely (Conversion to LNG eyed)

By Myrna M. Velasco – February 19, 2017, 10:01 PM

from Manila Bulletin

The bidding terms of reference for the privatization of the 650-megawatt Malaya thermal power plant will likely be adjusted based on the action point set by Energy Secretary Alfonso G. Cusi that the winning bidder has to convert the asset into a liquefied natural gas (LNG) facility.

“Secretary Cusi asks the winning bidder to convert it (Malaya) into LNG plant. That will be a material change in the terms, so there might be a need to go through the entire bid process again,” Finance Undersecretary Bayani H. Agabin disclosed in an exclusive interview with the Manila Bulletin. Agabin acts as alternate for Finance Secretary Carlos G. Dominguez III who is the chairman of the PSALM Board.

He noted that the matter is still being discussed with asset-seller Power Sector Assets and Liabilities Management Corporation (PSALM), which earlier set the bid submission deadline on March 8 this year.

Four investor-groups have advanced interest on the asset including AC Energy Holdings, Inc. of the Ayala Group, PHINMA Energy Corporation, APT Global, Inc., and Riverbend Consolidated Mining Corporation. San Miguel Energy Corporation was disqualified due to late submission of its letter of interest (LOI) on to joining the auction.

PSALM Officer-in-Charge Lourdes S. Alzona indicated that “in the draft transaction document, already included is an option to operate and convert the plant.”

She divulged that in an earlier discussion with the energy secretary, he proposed to PSALM “that Malaya be made an LNG plant as a condition to its privatization.”

Alzona admitted that with such instruction from Cusi, PSALM may need to re-calibrate some terms in the facility’s divestment. “Following this directive, there is a need to determine the timeline required for the plant’s operation and later the conversion to LNG,” she said.

The Malaya plant is considered one of the government’s energy security assets, with it being called for dispatch as must-run unit (MRU) when power supply in the Luzon grid breaches critical level.

For the plant’s MRU function in the system, the rules of the Wholesale Electricity Spot Market (WESM) prescribe that such unit shall be identified and instructed “on real-time or scheduled basis by the system operator (the National Grid Corporation of the Philippines) to either: Come on-line; or provide additional energy on a particular trading interval but the dispatch of which has to be set “out of merit.” Technically, it is designed to address system security requirements.