23 Sep 2020
The Power Sector Assets and Liabilities Management Corporation (PSALM) was constrained to declare a failure of the third round of public bidding for the sale of the 650-megawatt Malaya Thermal Power Plant and its underlying land in Pililla, Rizal (MTPP), after none of the pre-qualified bidders submitted a bid.
Deadline for submission of bids was at 12:00 noon today. The minimum bid price for the MTPP for this third round of public bidding is P2,188,400,000.00, which is substantially lower than the minimum bid price during the second round of public bidding on 22 November 2019 at P4,481,796,017.00.
The two pre-qualified bidders were Panasia Energy, Inc. (Panasia) and AC Energy Philippines, Inc. (AC Energy).
At 11:29 AM, Panasia submitted to PSALM a letter indicating that it decided not to submit a Financial Bid. Pan Asia said that "[G]iven the significant amount of the Reserve Price provided under SBB No. 11 dated September 11, 2020, the purchase of the Assets is not financially viable for PANASIA".
At 11:51 AM, AC Energy submitted to PSALM a letter expressing regret that it will not be able to participate in bidding. AC Energy explained that "[I]n our attempt to meet the Minimum Bid Price, we have factored in all the possible material considerations. Unfortunately, despite the said efforts, we are unable to meet the same."
PSALM President and CEO Irene Besido-Garcia explained "The PSALM Board already rationalized and lowered the minimum bid price of Malaya in the hope that the bidders would be encouraged to submit their bids. It is regrettable that despite the reduced minimum price, still no bidder submitted a bid." On the next course of action for PSALM, Atty. Garcia said, "We will need to get Board approval to immediately commence the negotiated process of privatization. PSALM must exhaust the available legal process to dispose Malaya because we are incurring substantial losses in continuously maintaining it."
Based on the losses for the last 10 years (2010 to 2019), the average annual net loss of PSALM in maintaining the Malaya facility is P1.207 billion. It was declared a "must run unit" in 2014. The average annual net loss of PSALM if based on the years that it is running as a must run unit (2015 to 2019) is P556.2 million.
The minimum bid price that the PSALM Board set for the third round considered various factors such as the book value of the plant and its underlying land, the zonal value of the land, the substantial losses continuously incurred by PSALM in maintaining the Malaya plant, marketability impacted by the Covid-19 pandemic, and electricity demand.
In 2019, PSALM conducted two rounds of bidding for the sale of said assets which were declared "failed" due to lack of interested bidders. It can be noted that PSALM proceeded to a negotiated sale with the lone bidder of the then second round of bidding but it was also declared a failure because the bid offer was below the minimum bid price set for the assets.
Proceeds from the sales of all PSALM assets are utilized to settle maturing obligations and minimize the Corporation's borrowings.
Corporate Communications Division