By Myrna M. Velasco – September 23, 2018, 10:00 PM
from Manila Bulletin
First Gen Corporation conveyed that it is willing to go back to the negotiating table with state-run Philippine National Oil Company (PNOC) on a “practicable cost proposition” on its target to purchase the latter’s banked gas.
According to company chairman Federico R. Lopez, “we are always open to talk,” and there is even greater compelling reason for such after the PNOC management secured a mandate from its board for it to negotiate for a price that will be lower than the US$6.616 per gigajoule cost benchmark of the Ilijan gas plant.
First Gen had been the most “avid bidder” in the last two auctions that the state-run firm had already undertaken on its banked gas, an asset drawn to its charge via a government-to-government transaction sealed under the Arroyo administration.
Even for PNOC, it has that reciprocal belief that First Gen is the most likely buyer given its solid gas-fired power fleets, but “a mutually acceptable cost” is a major item that the relevant parties would need to agree on.
The aggregate selling price that PNOC had crunched for its 97 petajoules of banked gas asset had been at $600 million to US$650 million, but the final sale price shall depend on what it could eventually corner in the negotiations with a willing buyer.
First Gen Board Director Richard B. Tantoco noted that the banked gas could be utilized for electricity generation at the company’s 414-megawatt San Gabriel power plant.
“It could be for San Gabriel… instead of drawing from the existing agreement of the other plants, can draw on this,” he said, referring to any portended off-take (purchase) deal that the Lopez firm may eventually cement with the state-run company.
The banked gas, he explained, could be an added fuel supply for the San Gabriel plant, instead of just the ones tied up to the existing contracts of the Lopez group’s Santa Rita and San Lorenzo gas plants.
Beyond that, Tantoco emphasized that “this banked gas from PNOC will allow us to help government burn stranded asset and then offer the much-needed relief to consumers.”
The San Gabriel plant is now covered by a power supply agreement that had been underwritten by power utility giant Manila Electric Company (Meralco); and had already secured also the approval of the Energy Regulatory Commission.
The power plant, which first came on stream latter part of 2016, had its capacity traded in the market “on a merchant basis,” but the Meralco-underpinned PSA had been batted for so the asset could lean on a more stable revenue stream.