Sep 192014
 

http://wikileaks.org/cable/2007/08/07MANILA2945.html#
Reference ID Created Released Classification Origin
07MANILA2945
2007-08-30 22:09
2011-08-30 01:44
UNCLASSIFIED
Embassy Manila

VZCZCXYZ0006
OO RUEHWEB

DE RUEHML #2945/01 2422209
ZNR UUUUU ZZH
O 302209Z AUG 07
FM AMEMBASSY MANILA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8062
INFO RHEBAAA/USDOE WASHDC IMMEDIATE
RUCPDOC/USDOC WASHDC IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
RUCNNAF/NORTH AF NEA AND SOUTH ASIAN COLLECTIVE IMMEDIATE
UNCLAS MANILA 002945

SIPDIS

STATE FOR EEB/IFD/OIA, EB/ESC AND EAP/PMBS
STATE PASS USAID FOR AA/ANE, AA/G
STATE PASS EXIM, OPIC AND USTR
USAID FOR AA/ANE AND AA/EGAT
DOE FOR TOM CUTLER
TREASURY FOR LMOGHTADER
TREASURY ALSO FOR OASIA
USDOC FOR 4430 ITA/MAC/ASIA & PAC/KOREA & SE ASIA/ASEAN

SIPDIS

E.O. 12958: N/A
TAGS: ENRG PREL EFIN EAID EINV RP
SUBJECT: Energy Privatization Catapults Forward

REF: A) MANILA 00170 B) 06 MANILA 01411 C) 04 MANILA 06068

——-
Summary
——-
¶1. Chances have improved that the Philippine Government will soon
reach its legally mandated goal of privatizing 70% of its electric
power generation capacity. If the sales take place as scheduled,
private ownership will reach 50% by the end of 2007 and the open
access provisions of Philippine legislation can be implemented.
Competition can be expected to increase and prices to fall. The
need to lower government debt and a shortfall in revenue collection
are helping strengthen the political will necessary for the sales.
End summary.

———————
Pushing Privatization
———————

¶2. The Arroyo administration, bidders, and interested observers
were crestfallen in February after the fourth failed attempt to sell
the state transmission company, TransCo. Arroyo then replaced the
president of the Power Sector Assets and Liabilities Management
Corporation (PSALM – the entity in charge of the sell-off) with Jose
Ibazeta, a no-nonsense, U.S. educated MBA with extensive business
experience, and moved the results-oriented ex-general Angelo Reyes
from the Department of Environment and Natural Resources to push
privatization as the Energy Secretary.

¶3. In July, Arroyo urged Congress to amend the Electric Power
Industry Reform Act of 2001 to lower the 70% power asset
privatization threshold for the implementation of “open access” to
30%. Open access allows consumers using at least 1 MW of energy to
negotiate their own contracts with power generation companies. For
several years the privatization level has hovered around 11%, but in
July U.S. giant AES purchased a 600MW coal-fired plant, boosting the
privately-owned power assets to 25%.

¶4. The President’s son, newly elected House Energy Committee Chair
Mikey Arroyo, filed an amendment to the law on August 22, lowering
the open access threshold from 70% to 30%, a target which could
easily be met this year. Auctions are scheduled to sell a 600MW
coal-fired plant and two hydroelectric plants with 250MW of capacity
before year-end. If these additional assets are sold on time, this
will boost the amount of generation assets privatized to 50%.
Ibazeta told Econoff he expects the 70% legal threshold will be
reached before the Arroyo bill can be passed.

——————————————— —
Transmission Company on the Block for Round Five
——————————————— —

¶5. The apparent government commitment to privatization and the
credibility of Power Sector Assets and Liabilities Management
Corporation President Jose Ibazeta seem to be attracting more
corporate interest in the fifth round of bidding on the 25-year
transmission company (TransCo) concession. In part as a result of
Ibazeta’s Singapore/London/Hong Kong road show in June 2007, nine
consortia have submitted letters of intent, non-refundable fees, and
executed confidentiality statements for bidding packets. The
prequalification deadline is September 21 and the bid submission
date is December 12.

——-
Comment
——-

¶6. The Arroyo government is showing increased seriousness about the
privatization of the power sector. While there will likely be
further bumps on this road, we expect them to meet the 70% target in
2008 and implement open access. Together with the state of the art
wholesale electricity market already implemented in the Philippines,
this could result in a much more vibrant energy sector with
increased competition and lower prices – crucial to improving
Philippine competitiveness.

¶7. Post will continue to report on the privatization process of
generating and transmission assets on a continuing basis on the
Intellipedia. The Intellipedia pages can be found at:
www.intelink.sgov.gov/wiki/ Electric_Energy_Sector_Privatization
_in_the_Philippines and

www.intelink.sgov/wiki/TransCo_Privatization. Numerous linking
pages provide background on the energy sector. Clicking the “Watch”
link at the top of a page will sign users up for notification when
the page is updated.

   

 

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