PSALM to ask ADB to craft privatization scheme for CBK and Casecnan plants

By Lenie Lectura - December 9, 2019

https://businessmirror.com.ph/2019/12/09/psalm-to-ask-adb-to-craft-privatization-scheme-for-cbk-and-casecnan-plants/

THE Power Sector Assets and Liabilities Management Corp. (PSALM) will ask the Asian Development Bank (ADB) to craft the best privatization scheme for the Caliraya-Botocan-Kalayaan Hydroelectric Power Plant (CBKHPP) and Casecnan  multipurpose hydropower plant.

“We’re going to start studying the two because as you know, the power plants, they have different structures. It’s important to structure it well. We are seeking the assistance of ADB to look at the technicalities of that. Hopefully, by next year, we will be able to decide on privatizing the structure in terms of chronology. We will target CBK first before Casecnan,” said PSALM President Irene Joy Garcia.

The CBK hydro facility consists of the 22.6-MW Caliraya in Lumban, 20.8-MW Botocan in Majayjay and the 684.6-MW Kalayaan I and II in Kalayaan, Laguna.

J-Power and Sumitomo Corp. of Japan operate the CBK power plants.

The 140-MW Casecnan project was built following the signing of a build-operate-transfer contract between the National Irrigation Administration (MA) and California Energy Casecnan Water and Energy Co. Inc. in 1994.

CE Casecnan’s contract with the government will lapse on April 5, 2022, while that of J-Power will end on February 7, 2026.  The Casecnan asset is 60 percent owned by PSALM and 40 percent by  the NIA.

Garcia said there are concerns raised over the ownership of Casecnan.    “Under the current agreement, it’s really the NIA. However, there is a back-to-back agreement between NIA and NPC, [to] transfer to PSALM the 60 percent.

By virtue of Epira (the Electric Power Industry Reform Act), we step into the shoes of NPC and were supposed to get the 60 percent. That’s precisely why there is a need to study. We need to see how do we best structure the privatization. Obviously, we need to carve out that 60 percent, so how do you carve it out? How do you divide the assets? Is it going to be an identification of what are the irrigation assets and what are the power assets? If you look at the agreements, there are really no implementing provisions on exactly how to sort of divide the 60-40, so that’s what we need to work on,” explained Garcia.

She added that PSALM has yet to determine the scope of ADB’s assistance, i.e., if the study on the said power assets includes the minimum bid price, among others.

“It’s like a consultancy assistance from ADB. What is the extent of their scope of coverage, if it includes everything we need for purposes of the privatization? We are fine-tuning…the scope of the coverage of the study of ADB, so that by next year they can start the study. I’m not very certain how much time they need, but I’m thinking [it’s] six months before they come up with the study.    Once there is a list of recommendations, we will plot that into the privatization… structure,” said the PSALM official.