Asian Energy Advisors

News stories today remind me that VECO and an IPP (yet to be determined) are likely to be signing a new power supply contract sometime around mid-year this year. It looks like it will be a 25-year deal for 200 MW coming from a new plant to be built on Cebu. I’m not involved in this transaction, at the moment, so I can muse about it from both sides with no bias.

The bidders list looks like:
Mirant Global Corporation
Kepco-Salcon Power Corporation
Applied Research Technologies Philippines Inc. (Artech)
Pacific Manufacturing Resources (PMR)

I have zero information on this deal - I haven’t even seen the solicitation material. But this will be the first major contract to be signed where the parties will have substantial information on the design of the new wholesale electricity spot market.

Coming at it from the perspective of a California market veteran, I would have to speculate that some of the issues that one or both sides will find themselves mulling over and which have not heretofore been traditionally-critical issues in the Philippine market include:

• Energy Substitution Rights (there are several different aspects to this)
• Step-in rights
• Dispatching Flexibility of owner (again, several aspects to this including value of ancillary services)
• Allocation of transmission congestion risk

There’s monetary value (often calculated with uncetainty analysis) to these items and they will affect the give and take in the pricing negotiations - implicitly if not explicitly. In California we had to address the valuation of these items (as well as several others) when the State begain looking at adding or taking them away from existing contracts.

I’m trying to put together an informal, half-day or less workshop on some lessons-learned in the California contract renegotiations over the past four years as the state and its counterparties faced the transition to a nodal-based congestion management system and the correction of certain market abuses and buyer risks - with discussions on how they apply here in the Philippines.

I’ve offered this to one of the private utilities (they are intested) at a cost that covers my travel expenses only (out of Davao City). I’ll offer this to anyone else on the same basis - so if you’re interested, let me know.