MANILA, Philippines — The Department of Energy (DoE) believes that conducting another round of renegotiations over the independent power producer contracts entered into by previous administration may have a negative impact on the country.
Energy Secretary Jose Rene Almendras explained that there was a study on whether the renegotiations are legal and “the findings at that time was these are contracts that will have significant complications to Philippine sovereign guarantee and credibility.”
The House of Representatives earlier proposed to conduct another round of renegotiations on the government’s contractual obligations with IPPs and Power Sector Assets and Liabilities Management Corporation president Emmanuel Ledesma said the firm is open to renegotiate to further generate savings.
Ledesma said renegotiations will “put closure to public criticisms over the alleged onerous contracts with the remaining 19 IPPs.”
However, Almendras holds a different view and noted that, “we have to accept the fact that there are certain commitment made by previous governments that we cannot simply just throw out because there will be repercussions to now and in the future.”
Government generated savings of $2.94 billion in nominal terms, or $1.028 billion in discounted present value in 2003 after renegotiating 35 IPP contracts.
The Joint Foreign Chambers issued a statement in 2008 cautioning the government against reviewing anew the IPP contracts even if it will result to lower rates to the end-users.
“Threats of yet another round of contract reviews and renegotiations with independent power producers will cast doubt on the stability of policies and regulatory rules and on the integrity of investment promotion programs in the Philippines,” it said.
It added that “it becomes a major disincentive to investors intending to build the required additional power generation capacities or to participate in the government’s privatization program.”
The JFC said it will also “hurt many private investments that have already been brought in at government’s enticement. Competitive pricing is vital to a healthy and competitive economy.”
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By: James A. Loyola
Source: Manila Bulletin, Nov. 5, 2011
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