Salcon Power in Philippines
By Violeta P. Corral, PSIRU-Asia www.psiru.org, July 2009
Salcon PowerPanay Diesel I & III (Salcon Power) / 146 / - / 146
Naga Coal 1 & 2 (Salcon Power) / 110 / - / 110
Naga Diesel 1 (Salcon Power) / 38 / - / 38
Naga LBGT 1 & 2 (Salcon Power) / 55 / - / 55
Bohol Diesel (Salcon Power) / - / 22 / 22
SUBTOTAL / 313MW / 22MW / 335MW (2%)
SPC Power Corporation (SPC), formerly Salcon Power Corp, is a venture company owned by members of the Salcon Consortium, which entered into a 15-year rehabilitation, operation, maintenance and management agreement (ROMM Agreement) with National Power Corporation (NPC) in March 1994 for the 203MW Naga Power Plant Complex in Cebu. SPC’s subsidiaries include Bohol Light Company Inc, which is engaged in the business of supply and distribution of electricity; SPC Electric Company Inc and SPC Light Company Inc, which design, construct, install, commission, rehabilitate, maintain, manage, operate and invest in power generation/distribution plants and related facilities, and Salcon Island Power Corporation (SIPC).[1] Salcon Philippines Inc used to be the Philippine subsidiary of Salcon Pte Ltd of Singapore, a leading international water and wastewater engineering specialist with over 25 years of experience; Salcon Pte divested its shares in SPC in February 2006.[2] Salcon Power reported earnings of PhP 482.4M in 2008, up 84.7% from PhP 261.2M in 2007 on the back of a foreign exchange gain of PhP 266.5M from the company's dollar-denominated assets. The company's improved performance translated to an 11% return on investment in 2008 from 6.4% the preceding year.[3]
Key Stats and Ratios[4]
Q1 (Mar '09) / Annual (2008) / Annual (TTM)Net profit margin / 29.47% / 41.12% / 39.47%
Operating margin / 41.15% / 61.69% / 58.44%
EBITD margin / - / 64.00% / 61.12%
Return on average assets / 8.14% / 11.55% / 12.14%
Return on average equity / 9.76% / 13.54% / 13.98%
Employees / 263 / - / -
55MW Naga Land-Based Gas Turbine (LBGT) – LBGT will be bid out by PSALM on 16 September 2009, after a failed first round in April 2009. LBGT is located in Cebu I Power Plant Complex and has a ROMM-ECA contract with Salcon Power which expired in May 2009. [5]
146MW Panay (I & III) & 22MW Bohol Diesel – SPC gave the highest offer of US$5.86M for the three diesel power plants in November 2008. SPC opted to pay the full purchase price.[6] The plants were turned over to subsidiary Salcon Island Power Corporation (SIPC) in March 2009 despite a deferment sought through a TRO by local officials.[7] Upon orders of the Office of the President, the National Power Corporation (NPC) will continue to subsidize the electricity generated by the plants and supply fuel to SIPC at a subsidized rate, an agreement reached with local government officials purportedly to prevent a possible power shortage on the island and postpone higher electricity rates expected with the privatization.[8]
200MW Naga Coal-Fired – KEPCO Philippines Holdings (a wholly-owned subsidiary of KEPCO) bought Salcon Pte’s shares and went into joint venture with SPC (KSPC) for the construction and operation of a 200MW coal power plant in Naga, Cebu.[9] KSPC is developing the “Visayas Base Load Power Project” which is conceptualized under a new scheme of a merchant power plant, on a build–own–operate basis, characterized by the execution of power sales contracts with distribution utilities and electric cooperatives, instead of purchase power agreements with NPC. Under this concept, the generating company is responsible for the whole construction, operation, and maintenance of the plant, including fuel supply — without any Philippine government guarantees. ADB is set to approve a US$120M loan to KSPC for the project.[10] Once completed, the plant will supply power to six electric cooperatives that have signed sales contracts for 120MW of power.[11]
Bohol Light Company – In August 2000, Salcon Power – in consortium with Salcon International and Pure and Palm Inc – acquired the Provincial Electrical System (now Bohol Light Company Inc) which used to be owned and ran by the Provincial Government of Bohol.[12]
NOTES:
3
[1] http://www.google.com/finance?q=PSE:SPC; http://www.psalm.gov.ph/news/NewsItem20060005.htm; http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ric=SPC.PS; http://www.naga-cebu.com/index.php?option=com_content&view=article&id=48&Itemid=60
[2] http://www.wallstraits.com/IntelliSort/stockreport.php?code=B04
[3] Salcon Power Corp. Reports Earnings Results for the Full Year of 2008, 05/1/2009 http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ric=SPC.PS
[4] http://www.google.com/finance?q=PSE:SPC
[5] http://www.psalm.gov.ph/news/NewsItem20080071static.html; http://www.psalm.gov.ph/news/NewsItem20090020static.html
[6] The other bidders for the plants were Therma Power-Visayas (a Philippine corporation owned by the Aboitiz Power Corp), and Trans-Asia Oil and Energy Development Corp of the Philippine Investment Management Inc (PHINMA). The Panay Diesel Power Plant facility consists of the 36.5MW Panay 1 and the 110MW Panay 3. Panay 1 was commissioned in 1979, while Panay 3, which is also known as the Pinamucan Diesel Power Plant, was relocated from its Batangas site after the expiration of the BOT contract with Enron Power Development Corp in 2003. The plant was transferred to its present location to prevent a potential near-term power shortage and to provide voltage stabilization in the island of Panay. The Panay 1 and 3 diesel plants are the only land-based facilities of NPC in the island; they are peaking plants that provide ancillary services such as backup power, load following, system frequency, and voltage regulation. The Bohol Diesel Power Plant, NPC's first diesel plant in the country's Jewel Island, was originally constructed together with the 1.2MW Loboc hydro plant to provide electricity to nearby towns. Consisting of four 5.5MW identical generating units, the Bohol facility continues to operate as a peaking and voltage-regulating plant. http://www.psalm.gov.ph/news/archives%202008/NewsItem20080043.htm; http://www.psalm.gov.ph/news/NewsItem20080076static.html; http://www.psalm.gov.ph/news/archives%202008/NewsItem20080063static.html; http://www.psalm.gov.ph/news/archives%202008/NewsItem20080063static.html
[7] PSALM received a Temporary Restraining Order (TRO) seeking to defer the bidding for the Bohol plant upon the petition of Tagbilaran Mayor Dan Neri Lim. The TRO was issued by Judge Venancio Amila of the Regional Trial Court of Bohol. Citing Sec. 78 of EPIRA which provides that only the Supreme Court may enjoin the implementation of the provisions of the EPIRA, the PSALM Board decided to proceed with the bidding; the bidders were properly informed of the TRO. PSALM had contemplated further legal action to preserve the integrity of the government’s power privatization program.
[8] Consumers have been warned to expect higher electricity rates when the power plants are privatized; Local government officials and consumer groups have earlier called for the deferment of the transfer of the Panay plants to SIPC over concerns that this will aggravate the power shortage in the region or result to higher power rates. SIPC will charge electric cooperatives the current NPC rates until the WESM starts its operations in Visayas. The NPC subsidy will also take effect until a new power supply agreement will be reached by SIPC and electric distributors on the island and until the Energy Regulatory Commission approves new power rates. IN: NPC subsidy to ensure low rate despite takeover, Nestor P. Burgos Jr. http://www.thenewstoday.info/2009/03/20/npc.subsidy.to.ensure.low.rate.despite.takeover.html
[9] Salcon management warns workers' union: strike will endanger tight power supply in Cebu, March 20, 2008 http://www.sunstar.com.ph/static/ceb/2008/03/20/news/salcon.management.warns.workers.union.strike.will.endanger.tight.power.supply.in.cebu.html
[10] http://www.adb.org/Projects/project.asp?id=43906; http://www.adb.org/Documents/Environment/PHI/43906/43906-PHI-SEIA.pdf; http://www.adb.org/Documents/IPSAs/PHI/43906-PHI-IPSA.pdf
[11] KEPCO starts construction of 200-MW plant, 13 December 2007 http://www.philippine-builder.com/news/top-stories/108-kepco-starts-construction-of-200-mw-plant.html
[12] The Undistributed Powers: Power Plays in Distribution Utilities, Freedom from Debt Coalition (FDC), Philippines (forthcoming)