Philippines: Meralco evaluates bids challenging Citicore offer

Philippines: Meralco evaluates bids challenging Citicore offer

On June 28, Meralco invited solar power developers to challenge the offer
made by Citicore as required by the rules issued by the Energy Regulatory
Commission (ERC) on competitive selection process (CSP). It set the deadline
for submissions on July 25.

"BAC [Meralco's bids and awards committee is] currently assessing if
submissions complied with qualifying requirements," said Lawrence S.
Fernandez, Meralco vice-president and head of its utility economics, when
asked about the outcome of selection process.

Citicore offered to Meralco the output of its three solar power plants,
namely: Next Generation Power Technology Corp. (NGPTC), First Toledo Solar
Energy Corp. (FTSEC) and Silay Solar Power, Inc. The plants are in
Mariveles, Bataan; Toledo, Cebu; and Silay, Negros Occidental.

Under the deal, the plants are to deliver at least 75 megawatts (MW) up to
85 MW from the first to the fifth years of a 20-year contract. From the
sixth to the 20th year, the supply was placed at 85 MW. The contract date is
to start upon the approval of the ERC.

The offered price at P3.5 per kWh is subject to a 1.5% annual escalation
beginning from the second to the 10th contract years, and 1% from the 11th
to the 20th contract years. In both cases, the escalation is applied to 100%
of the offered price.

In its invitation for price challenge, Meralco said an offer made by a
challenger should be under the same terms and conditions of the power supply
agreement (PSA) provided by the distribution utility, except for the
financial proposal.

Should Meralco not receive any expression of interest by 4:00 p.m. of July
10, it will declare a failure of the price challenge process. The company
did not immediately reply whether there would be a second round of price
challenge.

A previous PSA reached between the utility and two solar power developers
had become the "reference" for new projects that have no guaranteed
feed-in-tariff (FiT).

Under the government's FiT scheme, solar power investors were awarded a rate
of P8.69 for every kilowatt-hour they export to the electricity grid. The
installation target for that scheme had been fully subscribed.

Based on Meralco's previous two PSAs with separate solar power developers,
the reference rate should be within a range of P4.69 to P5.39 per kWh. The
distribution utility is awaiting approval from the ERC for the two separate
power supply deals.

Last week, Citicore said a certificate of compliance had been awarded to
FTSEC and NGPTC after they had completed the necessary permits and
requirements to operate their respective power generation facilities.

NGPTC secured its certificate on July 6, while FTSEC obtained its own on
July 18. The certification proves that a power plant meets applicable
regulations, making it safe to switch on and operate. Existing rules require
the ERC certificate to operate a new power generation facility.

Meralco's controlling stakeholder, Beacon Electric Asset Holdings, Inc., is
partly owned by PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT
Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in
BusinessWorld through the Philippine Star Group, which it controls.

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Link to Original Article:
http://www.bworldonline.com/content.php?section=Corporate&title=meralco-eval
uates-bids-challenging-citicore-offer&id=149010

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com