Two firms decline bidding for 650-MW Malaya power plant

On its third attempt, the Power Sector Assets and Liabilities Management Corp. (PSALM) failed anew to sell the 650-megawatt (MW) Malaya Thermal Power Plant (MTPP) and its underlying land in Pililla, Rizal.

The state firm has declared the auction a failure after none of the prequalified bidders submitted a bid.

The minimum bid price for the MTPP for this third round of public bidding is P2,188,400,000, 51-percent lower than the previous offer price set at P4,481,796,017.

The two prequalified bidders were Panasia Energy Inc. (Panasia) and AC Energy Philippines Inc. (AC Energy).

Panasia submitted to PSALM a letter indicating that it decided not to submit a financial bid.

“Given the significant amount of the Reserve Price provided under SBB 11 dated september 11, 2020, the purchase of the Assets is not financially viable for Panasia,” Panasia told PSALM.

AC Energy, meanwhile, submitted to Psalm a letter expressing regret that it will not be able to participate in bidding.

“In 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,” it said.

PSALM, according to its President and CEO Irene Besido-garcia, will proceed to a negotiated bid process.

“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,” Besido-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,” Besidogarcia added.

Based on the losses from 2010 to 2019, the average annual net loss of PSALM in maintaining the Malaya facility is P1,207,000,000. 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 P556,200,000.

As a “must run unit,” it is called by the National Grid Corp. of the Philippines to run and provide security capacity during shortage in electricity supply caused by power plant outages to ensure system reliability of the luzon grid.

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 borrowings.