PPA: What’s this all about?

1
RPs MARCH TOWARDS ENERGY INDEPENDENCE
24 August 2004
2
OUTLINE OF PRESENTATION

• Power Sector Reforms
• New Power Sector Structure
• Privatization
• Open Access Retail Competition
• Other Power Sector Reforms
• Power Supply-Demand Profile (National, Luzon,
  Visayas, Mindanao)
• NPC Financial Status
• Update on the Oil Industry
• Energy Independence Agenda
• Energy Mix
• 5-Point Plan
• Legislative Agenda
• TransCo Franchise Bill
• Natural Gas Bill
• Renewable Energy Bill
• LPG Bill
• Conclusion

3
Investments in infrastructure energy provide
the greatest multiplier effect for growth and job
creation . . . We must achieve sufficient,
efficient energy in the near term . . . to have
the capacity to meet the demands of a growing
economy . . .
- - Excerpt from P/GMAs 2004 SONA - -
4
POWER SECTOR REFORMS
5
POWER SECTOR REFORMS
Electric Power Industry Reform Act (EPIRA)

• R.A. 9136 took effect on June 26, 2001
• Provides for the
• Privatization of the National Power Corporation
  (NPC)
• Creation of Transmission Company (TRANSCO)
• Creation of Power Sector Asset and Liabilities
  Management Corporation (PSALM)
• Creation of Wholesale Electricity Spot Market
  (WESM)
• Creation of Energy Regulatory Commission (ERC)
• Establishment of Open Access for competitive
  consumers

6
POWER SECTOR REFORMS
New Power Sector Structure
Competitive generation

• Sale of NPC generation assets

Regulated transmission and distribution
Competitive retail electricity suppliers

• Unbundling of electricity tariffs for transparency

End-users

• Opening up of high voltage transmission lines for
  easy access of distributors and large consumers

• Opening up of distribution lines for competitive
  consumers

7
POWER SECTOR REFORMS
Privatization Approved Plan for TransCo

• Privatization by concession
• 25 year lease, renewable for 25 years
• Finance, operate, expand, maintain and manage
  facilities
• Attractive to investors if franchise transfers to
  Concessionaire
• PSALM to secure congressional franchise after
  selecting Concessionaire
• Purchase consideration to include deferred
  payments
• Performance-Based Rate Methodology promulgated by
  ERC in May 2003 (first PBR in the region)

8
POWER SECTOR REFORM
Transmission Sector

• Transmission Operation
• No Luzon Grid blackout since May 2002
• First ASEAN utility to be ISO 9000 certified
• System interruptions reduced by 50 since May
  2003
• Privatization via 25-year concession, renewable
  for 25 years
• PSALM currently negotiating with prospective
  concessionaires
• 5 potential investors submitted keen interest
• No fire sale
• Prioritize passage of the TransCo Franchise Bill
  after selection of concessionaire

9
POWER SECTOR REFORMS
Five EPIRA Conditions for Open Access Retail
Competition

• Approval of unbundled transmission and
  distribution wheeling charges
• Initial implementation of cross subsidy removal
  scheme
• Establishment of wholesale electricity spot
  market (WESM)
• Privatization of at least 70 of total capacity
  of generating assets of NPC in Luzon and Visayas
• Transfer of management and control of at least
  70 percent of total energy output of power
  plants under contract with NPC to IPP
  Administrators (IPPAs)

10
POWER SECTOR REFORMS
1st EPIRA Conditions for Open Access Approval
of Unbundled Wheeling Charges

• Generation and transmission functions of NPC
  already unbundled
• Need to complete the unbundling of electricity
  rates to identify and separate charges relating
  to generation, transmission, distribution and
  supply
• 76 of rate unbundling cases filed with ERC by
  DUs resolved as of June 2004
• Loan condonation for all 119 electric
  cooperatives (P18 Bn)

11
POWER SECTOR REFORMS
2nd EPIRA Conditions for Open Access Cross
Subsidy Removal Scheme

• EPIRA requires only the initial removal of cross
  subsidies in order to implement open access
• For NPC, this involves removal of inter-grid
  (e.g., between Luzon, Visayas Grids) and
  intra-grid (e.g., within the Luzon Grid)
  subsidies
• For DUs, this involves removal of inter-class
  subsidies (e.g., between industrial and
  residential classes).
• Initial year of intra-grid cross subsidy removal
  (equivalent to one-third of the cross subsidy)
  began Sept. 2003

12
POWER SECTOR REFORMS
3rd EPIRA Conditions for Open Access
Establishment of WESM

• Constitution of the Phil. Electricity Market
  Corp. Board in Nov. 03
• Demo WESM inaugurated in Dec 03
• Contract for MMS software awarded last Feb. 2004
• Price-Determination Methodology (PDM) for pricing
  of electricity traded in the WESM, approved in
  principle by ERC in March 2004
• Constitution of AGMO by Sept. 04
• Market trials for bidding of electricity to
  commence in June 05
• Target commercial operation by Jan. 06

13
POWER SECTOR REFORMS
4th EPIRA Conditions for Open Access At Least
70 Genco Privatized

• 70 NPC Luzon Visayas capacity to be privatized
  by end-2005
• Three gencos already privatized
• 3.5 MW Talomo HEP
• 1.6 MW Agusan HEP
• 1.8 MW Barit HEP
• Precedents to accelerated privatization of NPC
  assets
• Expedite NG absorption of NPC debt to secure
  consent of creditors for asset and debt transfer
• Transfer of NPC assets to PSALM /TRANSCO
• Transfer of NPC debts to PSALM
• Negotiate Transitional Power Supply Contracts
  (TSCs) with DUs
• Secure franchise for Transco privatization

14
POWER SECTOR REFORMS
5th EPIRA Conditions for Open Access At Least
70 Transfer of IPPs to IPPAs

• Transfer to IPP Administrators (IPPAs) to be
  effected on or shortly before an operational WESM
  (Jan 2006)
• Ongoing review of implementation details by PSALM

15
POWER SECTOR REFORMS
Other Reforms Undertaken Strengthening of
Electric Cooperatives

• Electric Cooperative Enhancement
• Systems Loss national average from 15.63 in 2002
  reduced to 15.08 in 2003
• Aklan showed the biggest improvement with almost
  8 reduction in systems loss
• Masbate marked 6.30 improvement
• Rule of thumb 1 reduction in systems loss ? P
  360 Mn savings to the electric cooperatives
• P/GMA Challenge to further reduce SL to a single
  digit national average before 2010
• Participation of private sector through
  Investment Management Contracts (IMC)
• Management Academy for ECs

16
POWER SECTOR REFORMS
Other Reforms Undertaken Renegotiation of IPP
Contracts

• IPP Contracts reviewed and renegotiated resulting
  in US1.03 billion savings in NPV terms

17
POWER SECTOR REFORMS
Overview of IPPs Sponsors
Total 18 firms/consortia representing 32 IPP
contracts Private sector BOT contractors in
NIA-Casecnan and PNOC-EDC projects
18
POWER SECTOR REFORMS
Other Reforms Undertaken Implementation of
Lifeline Rates
DISTRIBUTION UTILITIES HH BENEFICIARIES

• MERALCO 1,316,329
• Davao Light 77,268
• Dagupan Electric 29,289
• Cagayan Electric 28,440
• Cabanatuan Electric 17,431
• Iligan Light 16,418
• Panay Electric 14,754
• Cotabato Light 3,783
  
• TOTAL 1,503,691

50 100 kWh/month
19
POWER SECTOR
Other Reforms Undertaken Implementation of
Lifeline Rates
Rate P/kwh
Share to Total Customers
Distribution Utility
2.4091
14.48
Meralco
2.082
1.32
Cotabato Light
2.5931
20.46
Panay Electric
1.7225
16.09
Iligan Light
2.6767
15.78
Dagupan Electric
2.199
11.36
Davao Light
Ave. Lifeline Rate 2.28
Total Beneficiaries 631,525
50 kWh consumption/month
20
POWER SUPPLY-DEMAND SITUATIONER
21
TOTAL COUNTRY REQT. 5,200 MW (2008
2014)
Luzon 3,600 MW from 2010 2014
Visayas 900 MW from 2008 2014
Mindanao 700 MW from 2009 2014
22
NPC FINANCIAL STATUS
23
NPCs FINANCIAL POSITION
NPC Deficit / Obligations, in Billion
2003
2004
Consolidated NPC Deficit P66.68
P100.02 ( 1.2) (1.8)
NPC Outstanding Debt P523.79 P598.58
(9.43) (10.77)
IPP Obligations P621.26 (11.18)

• Php55.569US1

24
NPC FINANCIAL POSITION
Profile of NPC/PSALM Obligations, in Million US
Assuming no tariff increase, no privatization,
no sale of NPC assets, no debt absorption
25
NPC FINANCIAL POSITION
NPCs Results of Operations, in Billion Pesos
15
10
5
0
-5
-10
-15
-20
-25
1997 1998 1999
2000 2001
2002
-30
1997
1998
1999
2000
2001
2002
26
NPC FINANCIAL POSITION
Operating Income / Net Income
I. ACTUAL OPERATING INCOME/NET INCOME (1996
2003), in Billion Pesos
1999
1998
1997
1996
RESULTS
8.49
6.91
11.62
13.32
OPERATING INCOME/ (LOSS)
(5.95)
(3.62)
3.05
5.54
NET INCOME/ (LOSS)
2003
2002
2001
2000
RESULTS
(19.25)
(2.36)
6.84
5.44
OPERATING INCOME/ (LOSS)
(113.23)
(24.66)
(10.38)
(12.97)
NET INCOME/ (LOSS)
II. PROJECTED OPERATING INCOME/NET INCOME (2004
-2007), in Billion Pesos
2007
2006
2005
2004
RESULTS
(50.36)
(49.05)
(45.54)
(44.51)
OPERATING INCOME/ (LOSS)
(111.78)
(102.26)
(85.92)
(114.60)
NET INCOME/ (LOSS)
27
NPC FINANCIAL POSITION
Historical Effective Rates of NPC, P/kWh
4.0
3.5
3.0
P/KWH
2.5
2.0
1.5
Actual Cost
1.0
Approved
0.5
Rates
0.0
95
96
97
98
99
00
01
02
03
04
YEAR
28
NPC FINANCIAL POSITION
Highlights of NPC Operations

• NPC operations and financial condition was viable
  satisfactory until end of 1997
• Net loss started in 1998 due to the Asian
  financial crisis
• Shift from operating income to loss beginning
  2002 due to
• Reduced generation rates from P2.7623/kWh to
  P2.1913/kWh
• PPCA fixed at P0.40/kWh starting May 8, 2002
• Non-recovery of operating expenses of ineligible
  IPPs
• NPC to continue incurring operating loss unless
  reasonable recovery of actual operating costs are
  allowed
• Coal / oil prices increased significantly in the
  last 5 years

29
NPC FINANCIAL POSITION
NPC Coal Fuel Cost
AVERAGE IMPORTED COAL FUEL COST PER YEAR
C F Price, US/MT
YEAR
Masinloc Plant
30
NPC FINANCIAL POSITION
NPC Fuel Cost
AVERAGE FUEL OIL DIESEL PRICES
Price, P/Liter
YEAR
31
NPC FINANCIAL SITUATION
Action Plan

• Tariff adjustment
• NPC debt absorption by NG
• Ensure successful privatization of TransCo
  Genco assets
• Ensure privatization and management of NPC IPPs
• Provide competitive power rates
• Introduction of time-of-use tariff
• Elimination of cross-subsidy between industrial
  and residential users

32
POWER SECTOR
Future Key Milestones in Power Industry
4.5

4

3.5
3
2.5
2
Jul 09
Jul 08
Jul 07
Jul 06
Jan 06
2005
3Q 04
Aug 04
Earliest Probable Decision on RORB-TOU rate
WESM Commercial Operation
Supply Shortage (New Capacity Additions Needed)
Mindanao Open Access (?)
Luzon open access
Transco Privatization
70 of GENCO assets privatized
Visayas Open Access
PBR for Private DUs
33
OIL INDUSTRY
34
OIL INDUSTRY SITUATIONER
2003 Crude Imports by Country of Origin
35
OIL INDUSTRY SITUATIONER
2004 Product Imports Sources
36
OIL INDUSTRY SITUATIONER
Quick Glance

• Market 374 players engaged in different
  downstream activities
• Liquid Fuel Bulk Marketing 54
• Liquid Fuel Retail Marketing 286
• LPG Bulk Marketing 11
• Terminalling 3
• Bunkering 20
• Total demand 0.317 million barrels/day or 0.36
  of the world oil demand
• Supply current inventory recorded at 14,481 MB
  (or 50 days supply)
• Prevailing Domestic Prices In Metro Manila
• Unleaded Gasoline P25.35 P26.38 / liter
• Kerosene P20.14 P21.58 / liter
• Diesel P19.90 P20.75 / liter
• LPG (11kg) P331 369

37
OIL INDUSTRY SITUATIONER
Market Share of Oil Majors vs. New Players

4.3 16MBCD
14.1 45 MBCD
34.5 131MBCD
31.7 101MBCD
39.1 147MBCD
33.0 106MBCD
22.1 83MBCD
21.2 68MBCD
10.2 34 MBCD
13.6 44.5MBCD

1998 377 MBCD
2002 320 MBCD
33.5 110MBCD
32.9 107.6MBCD
34.7 114MBCD
37.3 122MBCD
21.6 71MBCD
16.3 53.3MBCD
2000 329 MBCD
1Q 04 328 MBCD
Petron
Caltex
Shell
Others
38
OIL INDUSTRY SITUATIONER
Oil as a Percentage of Power Mix
2000
2001
2003
2004
39
OIL INDUSTRY SITUATIONER
Oil as a Percentage of Energy Mix
2000
2001
2003
2004
40
OIL INDUSTRY SITUATIONER
Sectoral Oil Consumption, 2003 in MMBFOE
Source DOE, Overall Energy Balance Table
41
OIL INDUSTRY SITUATIONER
Motor Vehicle Classifications
42
OIL INDUSTRY SITUATIONER
Dubai Crude Prices / Forex, March 1984 Aug. 2004
US/Barrel
P/1
20 Aug. 2004 41.26/bbl 55.76P/1US
Oct 1990 31.52/bbl 27.75P/1US
Oct 2000 30.52/bbl 48.36P/1US
Dubai, /bbl
Jan 17, 1991 Desert Storm
Forex, P/1US
43
DOWNSTREAM OIL INDUSTRY
Oil Price Status

• International oil prices hit all-time high
• Steep demand in China and India due to increased
  economic activities
• Decreasing spare production and refining capacity
• Speculative trading activities rather than supply
  and demand fundamentals
• Terror alerts in the US
• Unresolved tax problems between Yukos and the
  Russian government
• Sabotage on Iraqi pipelines
• Government has no control over the international
  oil price surge
• Price rather than a supply problem
• Government has no resources to subsidize oil
  prices

44
OIL INDUSTRY SITUATIONER
Comparative Pump Prices, in Peso / Liter
As of August 20, 2004
45
OIL INDUSTRY SITUATIONER
International Prices / Forex
46
OIL INDUSTRY SITUATIONER
Local Oil Price Increases vs. Crude Oil Forex
Adjustment, in Peso / li
Aug 04 vs Mar 99
Unleaded Gasoline
133 inc
160 inc
Diesel
398 inc
Dubai
Jul 04 vs Feb 99
2000
2001
2002
2003
2004
1999
47
DOWNSTREAM OIL INDUSTRY
Comparison of Industry Conditions, Pre- Post
Deregulation

• Regulated environment
• Only three companies in operation All are
  refiners
• Practically all supplies were locally sourced,
  with refinery utilization reaching more than 85
• Thermal power plants (Sucat, Malaya, Tegen) were
  in full operation hence the higher demand for
  bunker fuel
• Demand mix similar to hydroskimming yield of
  Dubai which is a heavy crude
• Government Subsidy (OPSF) to stabilize prices
• Guaranteed return of 6-10

• Deregulated Environment
• Entry of new players All direct importers
• Clean Air Act requires importations of higher
  qualify fuels the quality of which local refiners
  cannot meet
• Decrease in the demand for bunker fuel, following
  decommissioning of thermal plants which modified
  the demand mix to favor importation of lighter
  crude
• No OPSF, No subsidy
• Power of Choice for consumers
• No guaranteed return

48
OIL INDUSTRY SITUATIONER
Projected Revenue from Proposed Tax Measure _at_
Additional P 2/li
49
OIL INDUSTRY SITUATIONER
Petroleum Excise Tax Rates, Selected ASEAN
Countries
PESO EQUIVALENT
TAX BASE
TAX RATE
PARTICULARS
COUNTRY
ex-factory selling price Imported goods - CIF
Value inclusive of Customs Duty
20
Petroleum products
Cambodia
Selling price Selling price Selling price
10 10 10
Kerosene Gasoline/Benzene Other crude oil
distillation products more easily evaporating
than kerosene
Indonesia
Source National Tax Research Center
50
OIL INDUSTRY SITUATIONER
Petroleum Excise Tax Rates, Selected ASEAN
Countries
PESO EQUIVALENT
TAX BASE
TAX RATE
PARTICULARS
COUNTRY
Import cost for import goods Factory cost for
domestic products
23 20 10 10 2
Gasoline (super) Gasoline (Normal) Diesel Aviation
gasoline Lubricant, hydraulic oil, grease
brake oil
Lao PDR
P8.59 per liter
Per liter
RM 0.58
Petrol
Malaysia
Sale of locally- mfd goods
170
Motor Fuel
Myanmar
Source National Tax Research Center
51
OIL INDUSTRY SITUATIONER
Petroleum Excise Tax Rates, Selected ASEAN
Countries
PESO EQUIVALENT
TAX BASE
TAX RATE
PARTICULARS
COUNTRY
P14.36/liter P13.33/liter P12.08/liter
Per liter Per liter Per liter
0.44 0.41 0.37
Premium Intermediate Regular
Singapore
P 4.92/liter P 3.18/liter P 3.04/liter P
2.38/Kg P 4.32/liter
Per liter Per liter Per liter Per Kg Per liter
Bt 3.585 Bt 2.315 Bt 2.215 Bt 2.17 Bt 3.15
Unleaded Benzene Diesel gt0.25 sulfur
content Diesel lt0.25 sulfur content LPG NGL
Thailand
Selling price
15
Gasoline of all kinds naphtha reformate component
and other components for blending petrol
Vietnam
Source National Tax Research Center
52
OIL INDUSTRY SITUATIONER
Philippine Petroleum Excise Tax Rates, Selected
Petroleum Products
Source National Tax Research Center
53
DOWNSTREAM OIL INDUSTRY
Oil Deregulation At Work

• Deregulation considered as a success in view of
• Increased players in the market providing better
  competition
• Increased new investments in bulk retail
  businesses
• Better ancillary services
• Wider access of petroleum products outside Metro
  Manila
• Enhanced consumers power of choice
• LPG safety standards need further strengthening
  through legislative measures
• To give more teeth to implement sanctions to
  violators
• To establish safety standards for consumer
  protection

54
ENERGY INDEPENDENCE AGENDA
55
ENERGY INDEPENDENCE
Primary Energy Mix, 2002 vs. 2003
Primary Energy Mix, 2002
Primary Energy Mix, 2003
Total Energy 250.8 MMBFOE Indigenous Energy
Level 52
Total Energy 268.16 MMBFOE Indigenous Energy
Level 53
56
ENERGY INDEPENDENCE
Power Mix, 2002 vs. 2003
Primary Power Mix, 2002
Primary Power Mix, 2003
Renewable Power Level 36
Renewable Power Level 42
57
ENERGY INDEPENDENCE PACKAGE
5-Point Plan

• Increase reserves of indigenous oil and gas
• Aggressively develop renewable energy potential
  such as biomass, solar, wind and ocean resources
• Increase the use of alternative fuels
• Form strategic alliances with other countries
• Strengthen enhance energy efficiency and
  conservation programs

58
ENERGY INDEPENDENCE PACKAGE
(1) Increase Oil Gas Exploration Production
Activities

• Intensive promotion of oil gas exploration
• PCR-1 launched in August 2003 offering 46
  contract areas
• 2 blocks bidded by BHP Billiton, Amerada Hess
  Occidental Petroleum
• PCR-2 to be launched in 2005
• More investments expected to be generated if
  Supreme Court reconsiders Mining Act ruling

59
ENERGY INDEPENDENCE PACKAGE
Increase Oil Gas Exploration Production
Activities

• Strengthen Philippine National Oil Company to
  take the lead in the development of indigenous
  energy sources
• PNOC Energy Development Corp. (PNOC-EDC) to
  increase geothermal capacity and become a
  geothermal world leader
• PNOC Exploration Corporation (PNOC-EC) to be
  strengthened to increase new oil gas
  discoveries
• PNOC Petrochemical Devt. Corp. to play a key
  role in the development of the petrochem industry
• PNOC Shipping Transport Corp. to modernize
  fleet thru strategic alliances with the private
  sector to bring fuel to demand centers

60
ENERGY INDEPENDENCE PACKAGE
(2) Renewable Energy Development

• To be the worlds leader in geothermal energy
• Active promotion of geothermal exploration
  through Geothermal Bid Round
• 10 prospective geo sites with 300 510 MW
  potential capacity
• Bidding extended to November 2004
• 4 Japanese, 1 American firms interested to bid

61
ENERGY INDEPENDENCE PACKAGE
Renewable Energy Development

• To be the largest wind power producer in SEA
• Launched the first ever wind investment kit for
  16 wind power areas with 345 MW potential
  capacity in June 04
• Groundbreaking of Northwinds 25MW Wind power
  project in Bangui, Ilocos Norte in April 04
• Inaugurated the first commercial 1.1 MW
  wind-diesel hybrid project in Batanes in Aug. 04

62
ENERGY INDEPENDENCE PACKAGE
(3) Alternative Fuels Natural Gas as a Fuel of
Choice

• Infrastructure development
• BatMan 1 spur lines by 2007
• LNG Terminal by 2008
• Power Sector
• Conversion of existing and decommissioned power
  plants
• Construction of greenfield power plants
• Transport Sector
• Commercial operation of CNG buses
• CNG buses to start plying major routes of Manila
  to Laguna by 1Q 05
• Local bus operators to sign purchase contracts
  for 140 units of CNG buses from China by Sept.
  04
• Establish Mother-Daughter station by 1Q 05
• Industrial
• Introduction of combined heat power systems by
  2007

63
ENERGY INDEPENDENCE PACKAGE
Alternative Fuels Biofuels for Transport

• Acceleration of the Coco Bio-Diesel Program
• Memo Circular 55 to utilize coco-based diesel on
  government vehicles signed in Feb. 04
• Program officially launched in April 04
• Commercial utilization in July 04
• Development of Ethanol as gasoline blend
• Cooperation with Thailand
• One major oil company willing to support
• Support from the Dept. of Agriculture Sugar
  Planters Association of the Phils. crucial

64
ENERGY INDEPENDENCE PACKAGE
(4) Forging Strong Strategic Alliances

• Cooperation with Thailand for possible use of
  Subic as regional storage facility
• Joint development efforts on upstream exploration
  with neighboring countries
• Russia as a new oil supplier
• Australia, China and Indonesia as primary coal
  suppliers

65
ENERGY INDEPENDENCE PACKAGE
(5) Strengthen Energy Efficiency Conservation
Programs

• DOE to push for mandatory implementation of
  nationwide energy efficiency conservation
  program
• CNG for transport buses
• Biofuels as mandatory fuel blends
• Expand scope of energy labeling to other
  appliances, vehicles, electrical devices
  equipment
• Shift to energy efficient lighting in
  residential, commercial industrial
  establishments

66
ENERGY INDEPENDENCE PACKAGE
Efficiency Conservation

• National Energy Efficiency and Conservation
  Program to be launched on 25 August 2004
• To help mitigate impact of rising oil prices
• To reduce expenditures on fuel and power
• To contribute to environment protection program
• Fuel Efficiency Conservation Program
• Voluntary Agreements (e.g., anti-idling campaign,
  carpooling, carless days)
• Partnership with leading fast food chains,
  ecozones, industries, companies
• Energy Labeling Efficiency Standards (e.g.,
  fuel efficiency rating labels in auto dealers
  showroom)
• Energy Audits Demand Side Management
• Mandatory reduction of fuel consumptions among
  government agencies

67
LEGISLATIVE AGENDA
68
LEGISLATIVE AGENDA
Towards Achieving Energy Independence

• Legislative measures critical to the countrys
  thrust of energy independence
• TransCo Franchise Bill
• Enhancement of value of transmission assets to
  potential concessionaires
• Natural Gas Bill
• Promotion of nat gas as a secure, stable and
  clean source of energy
• Promotion of competition by liberalizing entry
  and fair trade measures
• Renewable Energy Bill
• Promotion of RE resources through the provision
  of incentives
• Preferential treatment in terms of
  interconnection, dispatch
• LPG Bill
• Provision of more stringent safety standards
• Provision of stringent penalty / sanctions to
  violators
• Alternative Fuels Utilization Bill
• Promotion of wider utilization of alternative
  fuels

69
CONCLUSION
70
CONCLUSION

• Energy reforms sustain economic growth
• Market-based environment (Oil Deregulation, WESM)
• Increased investment and job opportunities
  (Privatization, IMC)
• Promote level playing field (Open Access)
• Improved efficiencies and services (PBR, Systems
  Loss Reduction)
• Power of choice for consumers (Retail
  Competition, LPG Enforcement Bill)
• On Power
• Government does not have the resources to
  subsidize power and fuel costs nor to build new
  power plants, refineries other facilities
• Private sector must be encouraged to build new
  more efficient energy infrastructure
• Power generation rates have to reflect true cost
  to attract new investments
• Under EPIRA, NPC can no longer contract new PPAs
• Power reforms take time but we have to act now to
  address the urgent power requirements

71
CONCLUSION

• On Downstream Oil Sector
• International oil price volatility is beyond
  governments control
• There is an oil price crisis NOW. Government must
  act immediately and implement short term measures
  (energy conservation) long term (energy
  independence) solutions
• On Energy Independence
• Energy independence can only be achieved through
  predictable energy policy promoting level playing
  field
• Clear transparent policy direction on the part
  of the government
• Consistency in policy among the three branches of
  government
• Continuity in policy direction since energy
  projects have long gestation period
• Implementation of critical and strategic energy
  infrastructure are key to energy independence
  (Natural Gas Renewable Energy Bills)