ZAMCELCO investor wants to junk PSA with Alcantara firm

By Myrna M. Velasco

The Romero-led private investor in Zamboanga City Electric Cooperative Inc. (ZAMCELCO) has formally asked the Energy Regulatory Commission (ERC) to have its power supply agreement (PSA) with the Alcantara-owned Western Mindanao Power Corporation (WMPC) be formally withdrawn.

Zamcelco update (April 2019)

The joint venture of Crowninvestments Holdings Inc. and Desco Inc. said the junking of the power supply deal is warranted given that “conditions precedent” under the PSA had not been satisfied yet.

The impending divorce between the parties stemmed from the contested billing relative to the supply pact – in which WMPC forwarded a billing of P460 million on electricity supplied from October 2018 and January 2019; but it was in turn slapped with an “overbilling” by Crowninvestments-Desco amounting to P441 million.

According to the external counsel of the joint venture, Atty. Joshua Gilbert Paraiso of PJS law firm, the motion for withdrawal of the PSA was officially lodged with the ERC on April 1 this year.

He qualified that the conditions precedent for the contract to be effective should have been one: a) the approval of the ERC on the PSA; b) the engagement of investor-management contractor; and c) for ZAMCELCO to attain a rating of “A” to be bestowed by the National Electrification Administration.

“The terms and conditions for the PSA to become effective have not been met,” Paraiso averred. The case is set for hearing by the ERC this Thursday (April 25).

In a related development, JV Crown-Desco authorized representative Joseph Omar Castillo indicated that they will inject P1.3 billion capital expenditures (capex) to upgrade the facilities and network of ZAMCELCO, the second biggest power distributor in Mindanao grid.

He qualified that the amount will cover installation of meters, replacement of antiquated substations as well as refurbishment of overloaded transformers.

“We did technical audit to find out what’s the capital upgrade needed, so we learned that four substations need immediate rehabilitation, transformers needed to be replaced immediately because they are overloaded and there are 18,000 defective or no meters at all – that’s out of 120,000 customers, so that’s almost 10-percent,” he said.

The JV in investor-management contract (IMC) formally entered ZAMCELCO in January this year after posting a winning bid of P2.5 billion. Of the total amount, P1.2 billion had been utilized to settle debts with power suppliers that include Alsons Power Group, Power Sector Assets and Liabilities Management Corporation (PSALM), San Miguel group and Enfinity plus its debts with the National Electrification Administration. (NEA).

“We paid P1.2 billion debt to suppliers as of June 30, 2018 because that’s provided under the contract. When we came in, we paid properly invoiced obligations, including the debts to NEA and PSALM,” he stressed.

The balance of P1.3 billion had been reserved for capital outlay, with Castllo emphasizing that the allocation for the next 18 months will be P670 million –or the extent of capital spending from mid-2019 to end-2020.

“We’ve identified needed budget for replacing facilities and rehabilitation of substations. So far, the technical team of the JV has identified over P670 million of capital requirements much needed in replacement of key facilities and rehabilitation of substations,” he emphasized.

The Zamboanga power utility currently suffers from having very high system loss of 23-percent and average daily outage of 52 instances on various feeders at one-hour interval each because of equipment failures.