Aboitiz unit is highest bidder for Tiwi-Makban

MANILA, Philippines - Aboitiz-owned AP Renewables Inc. on Wednesday offered the highest bid for the 747-megawatt Tiwi-Makban power plants, with the government announcing that a successful sale would mean achievement of a privatization level mandated by law. AP Renewables bid $446.88 million, beating the $368.44 million offered by First Luzon Geothermal Energy Corp., which is wholly owned by Philippine National Oil Co.-Energy Development Corp. The Power Sector Assets and Liabilities Management Corp. (PSALM) said a sale would push the privatization level to around 70% or 2,000 MW of the country’s capacity. "The sale of Tiwi-Makban actually sets the trends for open access already according to PSALM’s view," PSALM president Jose C. Ibazeta said. SN Aboitiz Power president Luis Miguel O. Aboitiz said there remained hurdles with respect to the geothermal supply contract attached to Tiwi-Makban. Apart from the power plants, the sale includes steam field facilities and a geothermal resources sales contract between PSALM and Philippine Geothermal, Inc., which is now known as Chevron Geothermal Philippines Holdings, Inc. "The issue on the geothermal service contract is very complicated as it is linked to the price of coal; so as coal prices go higher, the plant gets less competitive," Mr. Aboitiz said. "Right now, we cannot stay with the current contract, it has to be renegotiated," he added. The contract runs to 2021. Mr. Aboitiz, however, said this would not immediately affect power rates, as there is a set price for the first four years. The Tiwi and Makban power plants were first put up for sale in 2005 but the auction was cancelled to accommodate changes to the bidding procedures. The Tiwi facility is located in Albay province while the Makban complex straddles Laguna and Batangas provinces. Both generate power from steam. They are situated south of Metro Manila and account for some 20% of power in the Luzon grid. The sale of National Power Corp. assets is mandated by the Electric Power industry Reform Act of 2001, with the 70% floor one of the requirements for the declaration of open access. Open access will allow consumers to choose their electricity supplier, which would effectively result in competitive power prices. - BusinessWorld