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Friday, September 20, 2002
DBP urges LGUs to study investing in power plants
LOCAL government units need not panic every time their internal revenue allotment (IRA) is cut s they can easily generate greater income by generating their own power.
The Development Bank of the Philippines (DBP) is now calling on local government units to consider the best alternative source of income: building a local government-owned generation plant.
Bonifacio Tamayo, DBP Vice President for Mindanao, said that building a power plant can be capital-intensive but it promises greater income for cities and municipalities in less than nine years, an assurance that the national government's IRA alone cannot provide.
Tamayo, in an earlier interview, said that DBP now has an available loan portfolio for LGUs who want to invest in power generation using new and renewable energy sources.
In fact, he said that DBP is now negotiating with the Compostela Valley Province to fund its proposed establishment of a 2 megawatt power plant which costs P200 million.
Tamayo said DBP officials are finalizing the deal with Compostela Governor Jose Caballero along with Japanese International Cooperating Agency (Jica) Consultant Teruo Fukuda to pilot the project.
Tamayo said that the bank has decided to promote the power generation investment for LGUs after it noted the success of local government of Dinagat Island.
DBP first funded a 0.35 megawatt power plant project in Dinagat Island, Surigao Province.
Tamayo said that a study has shown that a local government needs to spend at least P100 million to build a one megawatt power plant but can reap high investment returns in less than nine years.
He said the LGUs will have to spend only two percent of its gross income from the plant to sustain its operation and maintenance which will last for about 40 years.
While spending this much, Tamayo said that LGUs will only use 63.5 percent of their annual revenues as payment for the loan while earning about P13 to P14 million every year from the plant.
"If they will just pay 63.5 percent of their gross sales they will be able to pay it (loan) in 12 years.
After paying the loans to the bank, all revenues would already go to the LGUs. There's no problem about viability because they can earn yet pay their loans at the same time," he said.
Tamayo said that even if DBP offers a commercial interest rate of about 9 to 12 percent, the LGUs can still "make good" in repaying their loans using the income from the power plant.
Tamayo said that power investment offers a better option for LGUs to boost its income by losing dependence on IRA.
The city government of Davao already advised its departments to implement austerity measures in preparation for the expected cuts in its IRA.
City Administrator Leo delos Santos has earlier said the city can absorb to as much as P25 million in cuts but it would have to implement stringent measures to all its departments if the cut would reach P50 million.
Tamayo said that if a lot of LGUs will invest on power generation, it will help increase power supply in Mindanao which has already consumed about 850 megawatts of the total 1,500 megawatts generated.
Earlier, Guido Alfredo Delgado, former president of National Power Corporation, said that the lack of power plants in Mindanao has resulted to a continuing reduction of its power capacity.
Delgado warned that if Mindanao will not be able to build power plants soon it could experience a power crisis comparable to that in the early 1990's which resulted to the establishment of the Independent Power Producers during the Ramos administration.
The passage of the Omnibus Power Bill effectively relieves the government-owned Napocor of the responsibility to build more power plants leaving that aspects to private investors or the IPPs.
Adolfo Mirasol, the unit head of Napocor Southeastern Mindanao, earlier claimed that Mindanao might face a power crisis as early as 2008 if no contingency measures are adopted by the government. OCE |
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