Sunday, April 02, 2006

Philippines extends power-plant payment deadline

By Dolly Aglay

MANILA (Reuters) - A Philippine state agency said on Saturday it had granted a consortium buying a power plant a three-month extension to make a payment of $227 million, which was due on Friday, as a Malaysian firm was joining the group.

Engineering and power firm Ranhill Bhd. was joining the YNN Pacific Consortium Inc, which successfully bid $561.7 million in December 2004 for the 600-megawatt Masinloc coal-fired plant, the president of the Power Sector Assets and Liabilities Management Corp (PSALM) said.

The Philippine-Australian consortium was supposed to make a payment of $227 million to the government by March 31 for the Masinloc plant in Zambales province in northern Philippines.

"PSALM expects Ranhill and YNN to complete within the three month extension all financial arrangements related to Ranhill's investments in YNN," PSALM president Nieves Osorio told a news conference.

Under the bidding rules, the government could have demanded the payment on December 2 last year, but allowed the consortium to delay payment till March 31 because of minor repairs in the plant, a source with knowledge of the delay said on Saturday.

PSALM's Osorio said she was aware there would be critics of the extension to June 30, but said it was necessary.

"By keeping the deal alive - at least for the next three months - we have a bigger chance of completing the transaction and collecting not only the upfront payment of $227 million, but, in due time, the entire bid price of $561.7 million," she said.

Osorio said the consortium had to increase its performance bond to $14 million from $11 million as a guarantee that it would not renege on its commitment to pay $227 million by June 30, and the balance of $334.7 million within seven years.

Ranhill had hired Dutch bank ABN AMRO NV to help it borrow $350 million to partly cover its investment, Osorio said.

The Malaysian firm is also in talks with the private sector operations department of the Asian Development Bank for project financing and possible equity investment, she added.


Masinloc is among dozens of power plants owned by state-owned National Power Corp. being sold by the government to cut its debt burden and attract investors to develop the energy sector.

"This is a positive development in the energy sector. I am quite surprised we got a new investor," an industry analyst said.

Manila had planned to sell some 31 power plants by the end of last year, but political instability and investor doubts about profitability in the sector meant it failed to sell any in 2005.

The plants, with rated capacity of 4,335 megawatts, account for about one-third of total Philippine generating capacity. Just six of them have been sold, or 11 percent of the targeted generating capacity for sale.

National Power is banking on raising $4-5 billion from the sale of its plants and by leasing its electricity grid to cut its debts, which are equivalent to about a third of the country's annual gross domestic product.

On Friday, the government said it would auction the 600-megawatt Calaca plant in Batangas province south of Manila on April 27

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