 The Independent Power Producer Administrators (IPPAs) are qualified private sector independent entities that will administer and manage the contracted energy from the Energy Conversion Agreements (ECAs) and Power Purchase Agreements that the National Power Corporation entered into with the IPPs. The IPPAs will be appointed through public bidding to be conducted by PSALM.
An opportunity to trade in the WESM without the expense of building a brand new plant
The IPPA process provides successful bidders a way to enter the Wholesale Electricity Spot Market (WESM) for a minimal capital outlay. The approach adopted provides the administrators an opportunity to trade in the WESM without the expense of building a new plant.
The Sual and Pagbilao structure, for example, enables the administrators to pay the monthly fees, both for the opportunity to trade, and the payments for the physical assets, out of cash flow. Thus, no upfront financing is required. This structure was also adopted for the San Roque and Bakun/Benguet hydros.
This is a unique way to enter the WESM. The assets are relatively new, high-quality plants that were built and are well maintained by the best IPP developers in the world. The IPPAs will have most of the benefits of being owners of generating stations, including controlling the fuel and its dispatch, trading, and contracting of the plant, but without maintenance costs or capital upgrades.
Also, many of the risks of owning a plant are explicitly managed through the contract. If there is an extended outage, for example, there is up to a 90% discount on the monthly fees, while PSALM continues to bear force majeure risks.
Role of IPP Administrators
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Among the tasks that the appointed IPPAs handle are:
Unfettered ability to trade the IPP energy output in the WESM.
Unfettered ability to procure their fuel requirements (coal plants only).
Guaranteed revenues for the first few years through the assignment of Transition Supply Contracts (TSCs) (thermal plants only).
Freedom to enter into bilateral contracts and seek other markets for the balance of their contracted capacities and energy.
Freedom to enter into other forms of financial hedging instruments if desired to manage their position in and exposure to the market. |
Who May Qualify as IPP Administrator
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- International and local companies that are financially and technically qualified.
- Financially qualified international and local companies whose affiliates are technically qualified.
- IPP sponsors.
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List of IPP Plants in Luzon for Transfer to IPP Administrators
| IPP NAME |
CONTRACTED CAPACITY MW |
IPP SPONSOR |
LOCATION |
| Luzon Grid: |
|
|
|
| HEDCOR/NMHCBenguet Mini Hydros |
30.75 |
HEDCOR/Amlan Power Holdings |
Benguet |
| Pagbilao Coal 1&2 |
700 |
TEAM Energy/THERMA Luzon |
Pagbilao, Quezon |
| Sual Coal Units 1& 2 |
1,000 |
TEAM Energy/San Miguel Energy Corp. |
Sual, Pangasinan |
| Casecnan Multi-Purpose Hydro |
140 |
National Irrigation Administration |
Casecnan, Nueva Ecija |
| Bakun Hydro |
70 |
AEV-NMHC-Amlan Power Holding |
Benguet, Ilocos Sur |
| San Roque Multi-Purpose Hydro |
345 |
Marubeni-Kansai/Strategic Power Corp. |
San Manuel, Pangasinan |
Ilijan Natural Gas
Combined Cycle |
1,200 |
Kepco Ilijan Corp |
Ilijan, Batangas |
| Kalayaan I & II |
684.60 |
J Power |
Kalayaan, Laguna |
| Botocan |
20.80 |
J Power |
Majayjay, Laguna |
| Caliraya |
22.60 |
J Power |
Lumban, Laguna |
The initial phase of IPPA appointments covers only the contracted energy output in the Luzon Grid since the WESM is not yet operational in the Visayas and in Mindanao.
The first stage of IPPA appointments covered the contracted capacities of the Sual and Pagbilao coal-fired thermal power plants. For these plants, PSALM entered into “back-to back” contracts with the IPPAs where the energy offtake from the ECAs will now be managed and traded by the IPPAs in the WESM. Obligations, such as fuel procurement, which were formerly the responsibilities of National Power, have been transferred to the IPPAs to manage. A number of risks were also transferred with the agreements, but PSALM will continue to bear key risks that the IPPA cannot manage, such as Government, force majeure, and extended outage risks.
The back-to-back contracts include the transfer of ownership of the power station to the IPPAs at the end of the ECA cooperation period.
Following the tender for the Sual and Pagbilao capacities, the tender for the San Roque, Bakun, and Benguet mini hydroelectric power plants were successfully conducted on 15 December 2009.
Having been successful in using a back-to-back contract for the selection and appointment of Administrators for these coal and hydroelectric plants,the next IPP contract to be tendered involve the contracted capacity of the 1200-megawatt Ilijan Natural Gas-Fired Power Plant. The Ilijan Plant comes complete with a Gas Supply and Purchase Agreement.
It is the objective of PSALM to achieve, through open and competitive bidding, the transfer of the management and control of at least 70% of the total energy output of the IPP power plants under contract with National Power to the IPPAs by 2010.
This means that the open access condition will be met and the next stage of the evolution of the WESM can commence. An IPPA will be in an excellent position to benefit from open access with flexibility and control over the trading of the assets. |
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