Philippine utility at risk of loss
The Philippines’ Power Sector Assets and Liabilities Management Corporation (PSALM) has forecasted up to $ 500 mm in losses to be incurred by the National Power Corporation (NPC) if its 10-year power supply agreement with Manila Electric Company (Meralco) is terminated.
PSALM president Edgardo del Fonso noted the computed financial implication would come in the form of increased
stranded costs for NPC and value loss from its power plants. He noted that the projection would run from the proposed
termination of the supply at this period of the year until its expiration in December 2004.
The loss in value of the NPC assets alone, the PSALM official said, would be to the tune of $ 200 mm and the other $
300 mm would be factored in as increase in NPC's stranded cost. "That is the extent of what we would be losing if we
will terminate the contract now… we run the figures until the end of contract term in 2004, both the
government and the consumers would burden these costs," he said.
The companynoted even if the existing supply agreement would be converted into a transition supply contract (TSC),
the fact remains that Meralco's offtake from the state owned power firm would still be reduced. However, Meralco vice
president treasurer Rafael L. Andrada said the Meralco consumers should be given a break, and this can only be
achieved if its contracted independent power producers (IPPs) would be allowed to run at minimum energy quotient
(MEQ), or at the level of guaranteed offtake, which is 83 %.
He said the computed P 0.60 per kWh reduction in Meralco rates can be felt by its customers immediately, while the
supposed NPC losses, would only come at a later time. He also questioned the basis of PSALM's computation, as he
noted that with the proposed TSC, the utility firm would still be buying part of its supply from NPC.
Meralco earlier announced its intention to terminate its supply agreement with NPC, with the end view to just convert this into a transition supply contract, which is mandated under the Electric Power Industry Reform Act.
