PSALM wants to debit Malaya’s operating cost from P4.4-billion MBP to attract investors

By Lenie Lectura- December 4, 2019

https://businessmirror.com.ph/2019/12/04/psalm-wants-to-debit-malayas-operating-cost-from-p4-4-billion-mbp-to-attract-investors/

THE Power Sector Assets and Liabilities Management Corp. (PSALM) is asking the Commission on Audit (COA) to allow it to deduct the operating cost of the 650-megawatt (MW) Malaya Thermal Power Plant from the P4.48-billion minimum bid price (MBP) in order to make the power asset more attractive to investors. 

“The next step is for us is to go to COA and get a discounting process, a mechanism for discounting the minimum bid price. If we keep on holding the plant and we keep on not being able to privatize it, there is a cost to run that,” said PSALM President Irene Besido-Garcia.

 PSALM declared a failure of the second round of public bidding because there was only one bid. Pursuant to the bidding rules, PSALM then proceeded to go through the process of negotiated sale with the lone bidder, DM Wenceslao. 

 The MBP was set at P4,481,796,017. However, DM Wenceslao’s bid offer was below the MBP. Thus, PSALM was constrained to also declare a failure of the negotiated sale.

 “We are telling COA if it is possible [to make] the cost for operating that plant…a discounting factor so that I can bring down the price and it’s going to be more attractive to other bidders. If I cannot bring down the price, it is useless to do another bidding,” Garcia pointed out.

The cost to operate the plant, which is already way past its commercial life, is P400 million to P500 million. The amount includes fuel, real-property taxes, among others. “Hopefully, we would be allowed to subtract that amount from the MBP. We can never really tell how much amount the market is willing to pay so we need to keep on trying,” the PSALM official said.

PSALM had strictly followed the COA guidelines in coming up with the P4.4-billion MBP.  

“Unfortunately, that is quite high for the perspective of the private sector who will be bidding. It is important for us to go in to the process of bidding because that will tell you if the market is really willing to pay that amount. While we didn’t like the outcome because of the failed bidding, it told you that the market is not willing to pay for P4.4 billion for that power plant,” she added.

The Malaya plant, located in Pililla, Rizal, is currently operational and being dispatched as a must-run unit. Per the Department of Energy’s direction, once privatized on an “as is where is” basis, Malaya is no longer required to be run as an MRU.  There are two units but only Unit 2 is working.