ADB, PNOC ink deal on LNG advisory services

By Czeriza Valencia (The Philippine Star) | Updated February 1, 2018 - 12:00am

www.philstar.com/business/2018/02/01/1783276/adb-pnoc-ink-deal-lng-advisory-services

MANILA, Philippines — The Asian Development Bank (ADB) will be advising the Philippine National Oil Co. (PNOC) on the liquefied natural gas (LNG) hub project in Batangas which is planned to be carried out with private sector participation this year. 

ADB announced that a transaction advisory services agreement was signed between Takeo Koike, officer-in-charge of ADB’s Office of Public-Private Partnership (OPPP), and Reuben Lista, president and CEO of PNOC. 

Under the agreement, OPPP will advise and assist PNOC in all aspects of the project including the award and execution of the final project project agreements. 

The project, which would cost up to $2 billion, will consist of a regasification terminal, storage, power plant and other related infrastructure. 

Due to the imminent depletion of domestic gas reserves at the Malampaya gas field in Palawan, which provides a substantial amount of power supply in the country, PNOC is developing  sustainable gas supply strategy through the establishment of an LNG hub in Batangas.

ADB said the project is in line with its “increasing focus on environmentally sustainable infrastructure and private sector participation.” 

 “The Philippines’ first LNG hub will help in ensuring long-term energy security to the Philippines and source a cleaner energy resource,” said Siddhartha Shah, principal PPP specialist. 

“It will also increase energy access and create new demand in the power, transportation, and industrial sectors in Luzon and in neighboring islands,” he added. 

State-run PNOC has received several unsolicited proposals for the project, some of which are from three foreign firms: Korea Electric Power Corp., Lloyds Energy Group and China National Offshore Oil Co.

PNOC said bidding out the project is also an option if none of the unsolicited proposals meet government requirements.

First Gen dangles ‘reverse proposal’ on LNG project

Published January 31, 2018, 10:00 PM By Myrna M. Velasco

https://business.mb.com.ph/2018/01/31/first-gen-dangles-reverse-proposal-on-lng-project/

The “unsolicited proposal” tendered by First Gen Corporation to state-run Philippine National Oil Company (PNOC) takes a “reverse track,” because instead of the Lopez firm joining the government-underpinned liquefied natural gas (LNG) project, it has instead invited the latter to be its partner on its blueprinted LNG import facility.

That was divulged by the chair of the Technical Working Group (TWG) of PNOC, basing it on correspondence that they have had with the Lopez firm.

The PNOC official qualified though that “we still consider their offer as part of the unsolicited proposals we received for our LNG project … but it is just a different mode from what we have had intended for our planned facility.”

The source added that “the offer of First Gen has not been opened yet,” as the state-run company is still evaluating the third “unsolicited proposal submission” – and that is from Lloyds Energy Group.

The energy executive emphasized that two offers were “returned,” but one of them came up with a revised ‘unsolicited offer’ and submitted it just several hours from the time its original tender had been given back.

“The process of our evaluation depends on ‘first on time’ submission,” the source added, noting that the first investor-groups that lodged their offers will also be priority on the evaluation and review queue.

Meanwhile, on First Gen’s LNG import facility project, this has been on its blueprint 3-4 years ago already, but it got stalled for some time on its selection of strategic partners.

Company executives previously indicated that they have been in talks with prospective Asian and European partners, but until now, there had been no “tie up deal” cemented so far.

The Lopez firm crunched tentative investment cost of US$1.0 billion for the LNG regasification and import terminal, at a capacity of 5.0 million tons per annum.

On that scale, company executives reckoned that the facility would be able to support the fuel needs of the existing plants in the country, plus the anticipated “new builds” in the sector.

Post the productive years of the Malampaya gas field, it is anticipated that gas-fired electricity generation will now be left generally into the hands of the Lopezes as the Ilijan plant is now mulled for conversion into a diesel-fired power facility.

PSALM’s debt-servicing obligation pegged at P1.47 trillion from 2001 to 2017

By Lenie Lectura - January 31, 2018

https://businessmirror.com.ph/psalms-debt-servicing-obligation-pegged-at-p1-47-trillion-from-2001-to-2017/

The Power Sector Assets and Liabilities Management (PSALM) Corp.’s debt servicing for the period covering 2001 to 2017 has reached P1.47 trillion.

Of the amount, the principal debt payments hit P567.7 billion during the period. Maturing Independent Power Producer (IPP) obligations reached P555.7 billion. Interest payments and other charges stood at P346 billion.

Debt service is the amount PSALM had agreed to pay for a number of periods during the lifetime of its loan.  Under the Electric Power Industry Reform Act, PSALM is the government agency tasked to repay the debts of the National Power Corp. (Napocor).

In 2017 alone, PSALM settled a total of P73.3 billion in financial obligations, broken down into P55.9- billion debts and IPP obligations, and P17.4-billion interest. Aside from the P73.3-billion debt servicing in 2017, PSALM has paid P10 billion to the Bureau of the Treasury for its advances to PSALM in 2016 that was utilized to bridge the financing gap.

As of 2017, PSALM’s financial obligations went down to P466.2 billion, which registered a decrease of 7.9 percent from 2016’s level of P506.3 billion and a decrease of 62.4 percent vis-à-vis the 2003 level of P1.24 trillion.

Funds in settling PSALM’s assumed financial obligations are sourced from collections from its power generation, privatization proceeds and universal charge. To date, the privatization proceeds that PSALM realized stood at P528 billion, while the collection from the stranded contract cost portion of the universal charge reached P56.9 billion.

The bulk of PSALM’s financial obligations are foreign denominated, with a huge portion based in US dollars. Any devaluation of the peso against the US dollar from time to time contributes to the surge in financial obligations.

The commissioning of new power plants at that time also led to the spike in the debts’ interests.

The corporation’s financial-management strategy is instrumental in the sustained decline of its financial obligations,  PSALM said.

PSALM’s financial obligations peaked to P1.24 trillion in 2003, from P831 billion in 2000.

“The servicing of PSALM financial obligations in the total amount of P1.47 trillion could have entirely wiped out the 2000 figure it assumed from Napocor, had there been no complex and inevitable factors resulting in its increase through the years,” the state firm said.

These factors, PSALM is referring to, include the commissioning of new power plants between 2001 and 2006 to prevent the power shortage that paralyzed the country in the 1990s until early-2000, refinancing or new loans to fill the gap when maturing obligations fall due, and the vulnerability of PSALM’s assumed loans to foreign-exchange fluctuations.

“Despite these factors affecting the corporation’s financial obligations, the level was significantly trimmed down to its level today. It is projected that with PSALM’s continuous privatization efforts, including the sale of real-estate assets, collection of universal charge and power-generation proceeds, its financial obligations will further decrease substantially when the corporate life of PSALM ends in 2026,” it added.