The Power Sector Assets and Liabilities Management Corporation (PSALM) which is tasked to privatize the government’s power assets under the Electric Power Industry Reform Act (EPIRA)has apparently honed its skills in selling...decommissioned power plants.
On April 17, PSALM announced it has sold the decommissioned 225-MW Bataan Thermal Power Plant in Limay, Bataan through a negotiated sale to Rubenori Inc., a local scrap metals trading firm, for $2.859 million. The amount was reportedly above the reserve price set by the PSALM board.
The sale is for the structures, the plant or whatever is left of it, unusable auxiliary equipment and accessories and dilapidated parts but excluding the underlying lot.
This was the third successful disposal of decommissioned plants after the 200-MW Manila Thermal and the 54-MW Cebu II power plants were sold off on April 25, 2009 and January 22, 2009, respectively, to scrap dealers.
Scheduled to be sold off this year are other decommissioned power assets including the 104-MW Aplaya, the 22.3 MW General Santos diesel and the 850-MW Sucat thermal power plants.
If PSALM follows the same tack it employed in disposing of the Bataan plant, it should find no difficulty in attracting potential buyers. However, the sale of these essentially heaps of scrap metal does not count as part of the power asset disposal required by EPIRA for the power industry open access regime to kick in.
What are more problematic to dispose are those power assets that are still operation—or can still be theoretically rehabilitated to its peak output. These include the 600-MW Calaca coal-fired power plants and the Bacman I and one of the Bacman II modular plants.
For the case of Calaca, we have noted previously that the sale was stymied by PSALM’s insistence that the potential investors meet its reserve price which may not be realistic. Our estimated reserve price based on published accounts for this plant would even approximate the cost of putting up a new plant from scratch so that any level-headed investor would simple balk at the bidding requirements.
The last “winning” bidder simply walked away and forfeited some $14 million bond, when it realized that the plant was in far more sorry condition than expected, and would stand to lose more going forward if it has to operate the plant.
The 110-MW Bacman I geothermal power plant has been operating at very low loads while the 20-MW Cawayan plant, one of the two modular plants of Bacman II, has been shut since 2005 reportedly owing to poor maintenance and lack of funds for critical spare parts. Any engineer would tell you that equipment that is not used and maintained properly for some time rapidly deteriorates in performance and condition.
We have been insisting time and again that it would be in the best interest of PSALM and the power industry if these assets are sold immediately. The benefits that would be realized in privatizing the power assets according to EPIRA far outstrips whatever any short-term loss PSALM incurs by pricing these asset attractively to investors.
The recent sale of the Bataan decommissioned plant should point the way to the right direction in privatizing the remaining power assets of the government.
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