By Myrna M. Velasco
Published: August 19, 2013
The private sector who will take over the operations of the liability-ridden Albay Electric Cooperative (ALECO) will also be “acquiring headaches” as it will not necessarily be allowed to pass on in its electricity tariffs the P4.0 billion worth of debts it will assume.
This was clarified by ALECO acting general manager Veronica T. Briones, stressing that the tariff application set for electric cooperatives only account for the capital expenditure (capex) allocations or the amount invested to improve the utility’s service delivery to customers.
“As to debt repayment by the investor, there would be no adjustment or increase (to be factored in) in ALECO rates,” she said.
Briones added that for the capex, the cost recovery via the electricity tariffs “will depend on the amount invested” as well as “the number of years to recover and the total sales per kWh (kilowatt-hour) to be evaluated and approved by the ERC (Energy Regulatory Commission).”
Even without factoring in the “assumed debts,” it was noted that ALECO will still need to apply for higher rates for investments that are necessary to improve its operations.
So far, San Miguel Corporation was the lone bidder in the anticipated privatization of the debt-laden electric cooperative. The two other bidders – Aboitiz Power and Manila Electric Company (Meralco) – have backed out.
In a formal correspondence to the Bids and Awards Committee, the Aboitiz group raised questions on the legality of the electric cooperative’s interim board of directors as well as on the implications of the privatization process to a pending case at the regional trial court.
Meralco, on the other, lost its appetite after evaluating the debt burden that was mandated to be “prepaid” by the private sector taker.
Under SMC’s proposal, it adhered to the P4 billion debt prepayment terms, plus it will make immediate capital outlay of P514.1 million primarily to resuscitate ALECO’s operations. Of the amount, P250 million will be infused for the utility’s three-year rehabilitation plan which shall also cover the installation of new transformers and other equipment. The rest will be for separation benefits of employees; board funding and security fee.
The offer, under the Private Sector Participation (PSP) scheme, will be for the private investor to manage ALECO for 25 years – on top of the debts assumption.
It is big puzzle for now how the private investor will recover the “debt prepayment” it will make to the electric cooperative’s creditors, since the established tariff glide path for ECs may not necessarily account for such – and as based also on the prescribed building blocks. source
This was clarified by ALECO acting general manager Veronica T. Briones, stressing that the tariff application set for electric cooperatives only account for the capital expenditure (capex) allocations or the amount invested to improve the utility’s service delivery to customers.
“As to debt repayment by the investor, there would be no adjustment or increase (to be factored in) in ALECO rates,” she said.
Briones added that for the capex, the cost recovery via the electricity tariffs “will depend on the amount invested” as well as “the number of years to recover and the total sales per kWh (kilowatt-hour) to be evaluated and approved by the ERC (Energy Regulatory Commission).”
Even without factoring in the “assumed debts,” it was noted that ALECO will still need to apply for higher rates for investments that are necessary to improve its operations.
So far, San Miguel Corporation was the lone bidder in the anticipated privatization of the debt-laden electric cooperative. The two other bidders – Aboitiz Power and Manila Electric Company (Meralco) – have backed out.
In a formal correspondence to the Bids and Awards Committee, the Aboitiz group raised questions on the legality of the electric cooperative’s interim board of directors as well as on the implications of the privatization process to a pending case at the regional trial court.
Meralco, on the other, lost its appetite after evaluating the debt burden that was mandated to be “prepaid” by the private sector taker.
Under SMC’s proposal, it adhered to the P4 billion debt prepayment terms, plus it will make immediate capital outlay of P514.1 million primarily to resuscitate ALECO’s operations. Of the amount, P250 million will be infused for the utility’s three-year rehabilitation plan which shall also cover the installation of new transformers and other equipment. The rest will be for separation benefits of employees; board funding and security fee.
The offer, under the Private Sector Participation (PSP) scheme, will be for the private investor to manage ALECO for 25 years – on top of the debts assumption.
It is big puzzle for now how the private investor will recover the “debt prepayment” it will make to the electric cooperative’s creditors, since the established tariff glide path for ECs may not necessarily account for such – and as based also on the prescribed building blocks. source
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