Philippines Geothermal Project
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[br] July 31, 2008 – AP Renewables Inc, an affiliate of Aboitiz Power Corp (PSE: AP), has won the bidding for the Tiwi-Makban geothermal complex, the Philippines government said.
AP Renewables had placed an offer of $446.88 million for the 289-megawatt (MW) Tiwi geothermal power plant in Tiwi, Albay and the 458.53-MW Makban geothermal power plant in Laguna and Batangas, at an auction held on July 30. The only other bidder, First Luzon Geothermal Energy Corp of the Lopez-controlled Energy Development Corp, had offered $368.44 million for the two geothermal plants.
According to the privatization agency Power Sector Assets and Liabilities Management Corp (PSALM), AP Renewables will be officially declared the winning bidder after the bid documents submitted by the company are verified for accuracy, authenticity and completeness. The document verification is to be completed within the next 30 days. If the bid is approved, AP Renewables will need to pay 40% of the bid amount within the next nine months and make the rest of the payment in installments spanning the next seven years, PSALM president Jose Ibazeta said.
Philippine Daily Inquirer quoted Aboitiz Power’s vice president Luis Miguel Aboitiz as saying that the company had crossed one hurdle and would have to undertake negotiations with Chevron Geothermal Inc, which maintains and operates both the geothermal facilities, for a steam supply agreement. The steam sale agreement, which is valid up to 2021, has to be modified so that the formula used to compute the price can be negotiated, Aboitiz added.
According to Aboitiz, if AP Renewables is able to reach an agreement with Chevron Geothermal, the company will need to drill more wells in the steam fields so that Chevron Geothermal is able to supply additional steam after the potential rehabilitation of various units of the plants. The drilling of additional wells may require additional investments of more than $100 million, Aboitiz added.
However, AP Renewables will not have to find a market for its electricity output, since PSALM has attached a total of 475 MW in power supply contracts to the Tiwi-Makban sale, according to ABS CBN News Online.
With the sale of Tiwi-Makban, PSALM has reached a privatization level of 68.78%, Ibazeta pointed out. PSALM has to achieve a privatization level of 70% by the end of the year to implement open access, which would allow power consumers to choose their own suppliers, thereby increasing retail competition in the power market and bringing down energy prices. PSALM hopes to reach a privatization level of 73% by October, according to ABS CBN News Online.
Alternatio Cirqui, EconomyWatch.com Energy Correspondent
