PSALM pins hopes on COA to cut Malaya plant bid price

By Lenie Lectura - December 30, 2019

https://businessmirror.com.ph/2019/12/30/psalm-pins-hopes-on-coa-to-cut-malaya-plant-bid-price/

THE Power Sector Assets and Liabilities Management Corp. (PSALM) is waiting for a “positive response” from the Commission on Audit (COA) on its request to lower the P4.48-billion minimum bid price (MBD) of the 650-megawatt (MW) Malaya Thermal Power Plant.

“We plan to commence another round of bidding for Malaya early next year once we get a positive response from COA regarding our letter,” said PSALM President Irene Besido-Garcia in a text message.

To make the power asset attractive to investors, PSALM earlier recommended to COA to deduct the operating cost of the Malaya power plant from the MBD.

Garcia said the cost to operate the plant, which is already way past its commercial life, is P400 to P500 million. The amount includes fuel, real-property taxes, among others. That amount is seen as behind the tepid response to earlier biddings.

“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 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.

However, DM Wenceslao’s bid offer was below the MBP. Thus, PSALM was constrained to also declare a failure of the negotiated sale.

Garcia said they had asked COA to consider the possibility of discounting the cost for operating that plant, “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.”

PSALM, she said, had strictly followed the COA guidelines in coming up with the P4.48-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 into 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 P4.48 billion for that power plant,” she added.

The Malaya plant is located in Pililla, Rizal. It has two units but only Unit 2 is working. Unit 1 bogged down since last year.