PSALM sees DOF okay for ADB role in hydropower privatization

By Lenie Lectura -February 19, 2020

https://businessmirror.com.ph/2020/02/19/psalm-sees-dof-okay-for-adb-role-in-hydropower-privatization/

THE Power Sector Assets and Liabilities Management Corp. (PSALM) is expecting within the month the Department of Finance’s go-ahead for its plan to tap the services of Asian Development Bank (ADB) in the sale of two hydropower assets.

PSALM President Irene Joy Garcia, in a text message, said ADB is ready to extend its help in crafting the best privatization scheme for the CBK-Hydroelectric Power Plant (CBKHPP) and Casecnan multipurpose hydropower plant.

However, PSALM needs to first secure DOF clearance.

“Last January, I had a meeting with ADB Director of Energy Division, Mr. Andrew Jeffries. ADB is ready to engage its consultants to do the study on CBK and Casecnan once it is able to complete the process for approval by DOF. Technical assistance projects go through DOF. We expect that DOF will give the go signal within this month,” Garcia said.

The PSALM Board is chaired by the finance secretary.

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, meanwhile, was built following the signing of a build-operate-transfer contract between the National Irrigation Administration and California Energy Casecnan Water and Energy Company 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 National Irrigation Administration (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 the Electric Power Industry Reform Act (Epira), Garcia added, “we’re step into the shoes of NPC and we’re 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.”

Garcia explained: “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.”