Victoria Verano running her family’s barbeque stand in Masbate, Philippines
Victoria Verano’s 15-year-old barbeque stand operates according to a simple recipe: good food, fired up with reliable electricity, yields a sufficient income for her family. But on the rural, remote Philippine island of Masbate, where Verano lives, unreliable yet costly electricity ate into profits for far too long. “It was very hard for us to earn money,” she remembers.
That started to change when the government introduced private-sector participation into off-grid power generation and distribution for Masbate.
IFC has supported those efforts. Together with DevCo, a multi-donor facility affiliated with the Private Infrastructure Development Group, we identified a private sector partner to bring the much-needed capital and expertise that would in turn assure reliable access to electricity. We also provided financial, technical, operational, and bidding advice, working with the government-owned National Power Corporation (NPC) and the Department of Energy (DOE).
Through public-private partnerships (PPPs), governments partner with the private sector to deliver a public service in line with strict service criteria. The government establishes the project objectives, while the private sector takes responsibility for meeting them. Payment on delivery and risk sharing help keep the private partner focused on delivering quality public services that help meet national development goals.
In advising governments on implementing PPPs, IFC focuses on the sectors and regions with the greatest needs—such as Masbate, where people earn an average income of about $2 per day. As recently as 2007, only 22 percent of Masbate villagers (about 125,000 people) had access to electricity, but even that was intermittent and expensive. Such shortage of off-grid power severely hindered the island’s development as well as individual opportunities.
Our work with the Philippine government on PPPs dates back to 2004. That year, we signed a comprehensive agreement that included helping the government prepare a regulatory framework for first-time private sector participation in 14 high-subsidy off-grid areas, draft model agreements, and design and implement a competitive and transparent process to select private power providers.
In the Masbate PPP, IFC helped attract DMCI Holdings to the project. The local power and construction company invested up to $23 million in the rehabilitation and upgrade of power generation services, which reduced the generation costs by half.
The new system resulted in substantial efficiency gains: energy loss was reduced from 27 percent to 17 percent, which translated into more affordable rates for citizens who had never before known the benefits of uninterrupted access to energy. The new, guaranteed generation capacity of 13 megawatts contributes to the government’s goal of attaining a 90 percent household electrification rate by 2017.
Improving access to power is one of our key priorities because, as illustrated in Masbate, there is a clear development imperative. Reliable electricity bolsters jobs in industry and services; it provides light to schools, hospitals and health clinics; it improves urban safety; and it helps fishermen and farmers grow, process, and store food more effectively.
With more reliable power, Verano’s barbeque-flavored recipe for success finally yielded its promise. Her family’s primary source of income now brings in enough money to meet their needs. “We bought a house with this stand. My children go to school with this stand,” she says. “We have a good life because of this business.”
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Published in September 2016