Chinese firm backs out Malaya nego deal

Published March 11, 2021, 3:23 PM

by Myrna M. Velasco

A Chinese firm has already dropped out of the Malaya thermal power facility negotiated sale, but four others are still in the running, giving hopes to state-run Power Sector Assets and Liabilities Management Corporation (PSALM) that its long-wished for privatization of the 650-megawatt facility (inclusive of its underlying site), could finally be successful. From the initial list of five prospective bidders – foreign firm China Gezhouba Group Co. Ltd. already dropped out from the roll of prospective bidders.

The four remaining interested bidders are Filipino companies – chiefly Sta Clara International Corporation, VBB Trucking Trading and Consultancy Services Inc., Fort Pilar Energy Inc. and AC Energy Philippines.

The deadline for submission of offers will be on April 23 this year, at 12:00 noon, based on the invitation to bid (ITB) notice sent out by PSALM to interested parties.

The asset-seller firm just recently provided a venue for the prospective buyers to raise questions and concerns relating to the ‘negotiated mode’ of divestment for the Malaya asset.

Following that process, PSALM President and CEO Irene Besido-Garcia noted that “we welcome the inputs and comments from the interested parties on the terms of the negotiated sale process.”

PSALM President Irene Joy Besido-Garcia

She stressed that the active participation of the qualified bidders in the pre-negotiation conference “makes us very optimistic that they will participate in the offer submission deadline this coming April.”

The Malaya plant is a major privatization undertaking pursued by PSALM under the Duterte administration, but despite the series of auctions last year, that targeted sale never prospered. That then prompted PSALM to place the asset on a negotiated deal arrangement.

The prescribed minimum offer price (MOP) always proved contentious to the interested buyers; hence, the Board of PSALM opted to bring that down several times – from a high of P4.8 billion in the initial round of competitive bidding then to the level of P1.845 billion in the forthcoming negotiated process for the facility’s sale.

When Luzon grid had been on the edge of supply shortfalls in recent years, the Malaya plant has always been depended upon by the country’s major power system as a “must-run unit” (MRU), or the generating asset that it can immediately schedule for dispatch when there is sudden surge in demand in the grid.

PSALM qualified that the plant “is currently operational and being dispatched as MRU by the National Grid Corporation of the Philippines.”
But once privatized, the state-run company qualified that the generating asset will no longer be used as MRU facility – because discretion on its operation will already depend on the preference of the buyer.

On the proceeds to be fetched from the asset’s divestment, the government-run firm emphasized that it shall be “used to augment funds needed to settle PSALM’s financial obligations.”