PSALM taps ADB for study on sale of CBK, Casecnan plants

By Myrna M. Velasco – December 6, 2019, 10:00 PM
from Manila Bulletin

State-run Power Sector Assets and Liabilities Management Corporation (PSALM) is tapping the Asian Development Bank (ADB) to frame a study that will shape the structural mode of privatizing the 150-megawatt Casecnan and 728MW Caliraya-Botocan-Kalayaan (CBK) hydropower plants.

Irene Joy Besido-Garcia

PSALM President Irene Joy B. Garcia

“We are seeking the assistance of ADB to look at the technicalities of that. And hopefully by next year, we will be able to decide on a privatization structure. In terms of chronology (of asset divestment), we will target CBK first,” PSALM President Irene Joy Garcia said.

The ADB study on the hydro plants’ sale will start early part of next year and will likely be concluded over six months. And the next step will be for the government firm to formally structure the divestment plan for the hydro facilities.

“We’re working precisely at the timeline now – exactly what is the extent of their scope of coverage – if it includes everything that we need for purposes of privatization. For instance, the minimum bid price – we also need to do that, so we are fine-tuning the scope of coverage of that study so that by next year, we can start the study,” Garcia qualified.

Of the hydropower plants, she admitted that privatizing the Casecnan plant might tread on a more complicated terrain because of the “shared ownership arrangement” that the facility has with the National Irrigation Administration (NIA) – especially when turnover happens at the lapse of its build-operate-transfer (BOT) contract in 2021.

“The power plants – they have different structures, so it’s important that we structure it well. Whatever is the current scenario – that’s what we need to sort out in the structures,” Garcia emphasized.

In the case of the Casecnan plant, she explained “there is a back-to-back agreement between NIA and NPC (National Power Corporation), then transferred to PSALM the 60% (share). So by virtue of EPIRA (Electric Power Industry Reform Act), we step into the shoes of NPC and we’re supposed to get the 60%.”

The PSALM chief executive qualified the agreement covers NIA ownership in the Casecnan asset – and that is a different type of deal that PSALM has with all the other NPC plants already privatized.

Garcia thus noted “that’s why there is a need to study because like that arrangement, it’s not a carbon copy of any arrangement, so we need to see how to best structure the privatization. Obviously, we need to carve out that 60%, but how do you carve it out? How do we divide the asset – is it going to be an identification of what are the irrigation assets versus what are the power assets?”

She further emphasized that by simply looking at the agreement, “there is really no implementing provisions on exactly how to divide the 60:40 ownership arrangement, so that’s what we need to work out.”

For the CBK plant, the executive of the asset-seller firm indicated that it would likely be sold to just one buyer, but that may still change depending on the final recommendation of the ADB study.

“We will do the study first, and once there’s already that list of recommendations, we will plug that into the usual privatization parameters,” she added.