ADB plans loans to small Philippine power groups

The Asian Development Bank (ADB) is planning to provide up to $100 million in loans to Philippine electric co-operatives to help them prepare for a retail open access electricity market by 2009, a bank official said.
There are about 119 electric co-operatives who could use the loans, ranging between $50 million to $100 million, Yongping Zhai, ADB principal energy specialist infrastructure division for Southeast Asia, told reporters over the weekend.
The Manila-based bank is expected to complete a study related to the loans in about eight months. Under a retail open access market, consumers - including industrial, commercial and residential users - are free to choose their respective power supplier depending on cost and service efficiency.
The move to introduce an open access market is part of the power restructuring programme under the Electric Power Industry Reform Act of 2001, which allows small power distributors to be directly connected to the main grid.
Zhai said the ADB would first provide a technical assistance grant of $1 million to the state-run National Electrification Administration (NEA), which will act as the loan agent, before the end of the year prior to extending loans to the electric co-operatives.
"So far, we have only one operation with NEA. The project is to support the rural co-operatives to strengthen their distribution system and help them be ready in participating in the wholesale electricity market," Zhai said.
"That's in our pipeline already for this year," Zhai said. Zhai said the ADB may provide peso-denominated loans to the power agency to shield the electric co-operatives from the impact of foreign exchange fluctuations.
Under the power sector reform law, the NEA is tasked to assist electric co-operatives in operating and competing under a deregulated electricity market, particularly under an open access market.
The law also states that the NEA should act as a guarantor of loans to strengthen the technical capability and financial viability of small electric co-operatives operating across the Philippines' 7,100 islands.