Gov't Sees $850-M Savings from IPP Cost Reduction

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Byline: MYRNA M. VELASCO

The government claimed that it can generate savings of up to $850 million (roughly P44 billion at current peso-dollar exchange rate) from bids to reduce cost of the National Power Corporations (NPC) contract with fuel suppliers and independent power producers.

The Department of Energy (DoE) and Power Sector Assets and Liabilities Management Corporation (PSALM) noted that the numbers were run based on the net present value of the assets being operated by private power generators.

Energy Secretary Vicente S. Perez, who was mandated by Malacanang to head the extended review of the IPP contracts, noted that the government has so far, negotiated 16 contracts, including the Navotas and Pagbilao plants of Mirant Corporation; and Subic bunker-fueled facility of Enron Corporation.

Aside from this, PSALM also hammered out earlier a compromise deal with US firm Philippine Geothermal, Inc. (PGI) for the terms of a new steam supply agreement for the Tiwi and Makiling-Banahaw geothermal plants.

The settlement, that would result in $200 million savings for the government, is expected to put to rest the longstanding dispute between NPC and PGI which arose from the formers refusal to renew their 25-year service contract which expired six years ago.

The new steam supply arrangement, stretching until year 2021, shifts all development and market risks as a burden for the US firm. …