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CONSUMERS WARY OF PAYBACK TIME The Philippine Star Power plants and other energy assets have recently been selling like hotcakes, with investor sentiment in the sector largely receiving a boost from the robust economic expansion we've been seeing in recent months. Another plus factor is obviously the fact that if the brisk demand for electricity will continue, a power shortage is inevitable a few years down the road; and a government who's been hard-pressed to bring back fiscal order isn't likely to be its savior. So who do we look to for help? It looks like the once-vilified independent power producers are back in the picture and most likely, will be in the limelight again in the coming years. Two big coal-fired power plants which for many years attracted controversies rather than revenues for government Masinloc and Calaca were sold recently at prices as if they were brand new. There were also other small ones which were won by either First Gen or Aboitiz Power, but that would be too taxing to enumerate. Suez-Tractebel of Higher than brand-new cost Based on the Power Sector Assets and Liabilities Management's latest assessment, assets that it had so far sold have fetched an average price of almost $1.5 million per megawatts, which is higher than the cost to build something from scratch. Of the total generating capacity of 4,335.7 megawatts that was up for privatization, 42.7 percent had been sold; by yearend, this figure is expected to be closer to 50 percent. Proceeds from the sale of 12 of the power plants sold so far have totaled $2.71 billion. Last month, the government successfully sold its controlling stake in PNOC Energy Development Corp., the country's largest geothermal company in terms of capacity. It was won by a consortium led by First Gen at a price of P58.5 billion, substantially higher than the government's P45-billion asking-price. Bulk of the proceeds are intended to go directly to the national government, unlike the other power assets whose revenues are allotted to pare down debts of state utility National Power, as provided by law. With the way things are going, what more can a seller in this case, the government ask for? Apparently, nothing more. Judging from the timeline for the disposal of other power assets, the government is selling almost everything as if there is no tomorrow. Up next Several days ago, the auction for the Palinpinon geothermal plant and the I am told that under the law, selling geothermal plants should include the steam component, something that could be seen as a problem because steam is being supplied by PNOC-EDC which just recently was privatized. On December 12, up for sale is another crown jewel the billion dollar National Transmission Company. But before you start adding up all the clinched and upcoming sales, it is now timely to note that Napocor's debt stands at a staggering $7.2 billion, the result of a combination of factors that included low capital infusion from government, wrong decisions in the past and whatever else you want to put in including, if one believes what others are saying, anomalies. Servicing debts Bulk of the Napocor debt will mature between 2009 and 2011. PSALM has highlighted the fact that it is necessary to privatize the Transco concession because this is where the big money for repayment will come from. Failure to raise funds from the power asset sale would mean consumers having to pay for the so-called universal charge again, and that would definitely be a disaster for all of us. If I were the seller, I'd certainly be on cloud nine, happy that I've been delivering more than what has been asked, and relieved that I now have the money to pay debts that piled up. A big joke on consumers? But I am a consumer, and it worries me a lot that investors are buying these assets at substantial premium. Logic dictates they would want their money back and much, much more. Whatever formula would be used in the future to determine power rates, the high cost of acquisition is definitely a big factor. And to consumers, that could only mean high power rates several years from now. In short, whatever gains were achieved by the current government in disposing these power assets at higher than expected prices, we, the consumers will bear the brunt in the future. Interestingly, that would coincide with the scenario that new capacity must be put up meaning new power plants built to avert a costly power shortage. Add these two together plus probably include a third one which is the universal charge should remaining asset sales be a disaster and that could be a perfect recipe for higher power rates. So whoever declared that restructuring the power sector and opening it up to more private sector participation would lower electricity rates seems to have just made a big joke. Oh well, I hope I'm wrong on this one. 3rd RFV Friendship Golf Congratulations to the I had a big surprise in my not so illustrious golfing career when I got the class B trophy by holing a miracle chip shot in the notorious 18th hole of Pag-usapan Natin at IBC-TV 13 Watch Pag-usapan Natin, a segment of the IBC-TV 13 news program News Tonite, from
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