PSIREN

The Ambuklao and Binga hydroelectric power plants were privatized as a package through an international tender process, as part of the Philippines’ privatization program under a comprehensive sector reform law, the Electric Power Industry Reform Act (EPIRA). In November 2007, SN Aboitiz Power Benguet Inc. (SNAPB) won the Ambuklao-Binga power complex — the country's first and second hydroelectric power plants, respectively – with an offer of US$325M. The only other bidder (at US$305M) was Calaca Power Partners Co Ltd, which earlier won the 600-MW Masinloc coal-fired power plant, also under EPIRA. No power supply contract was attached to the sale, as this was not deemed to be advantageous to the prospective owner. The Ambuklao-Binga package is the fourth merchant power plant to be financed internationally in emerging economies in East Asia. SNAP Benguet completed the sale transaction in August 2008, with loans from International Finance Corporation (IFC), Norwegian Investment Bank and from six local banks. One of the responsibilities of the new owner is to rehabilitate the Ambuklao plant and make it operational to 65 MW minimum within seven years from the date of turnover. SNAPB disclosed plans to increase the combined capacity by 50 MW from 175 MW to 225 MW (30 MW for Ambuklao and 20 MW for Binga). Responsibility for the watershed management will remain with the Government.

Project sponsors
SN Aboitiz Power Benguet, Inc. (SNAPB) is a joint-venture between SN Power Invest (SN Power) of Norway and Aboitiz Equity Venture (AEV) of the Philippines. SN Power Singapore (SNPS), a wholly-owned subsidiary of SN POWER, owns a 40% equity interest in SNAPB directly and another 10% indirectly through its 16.7% equity interest in Manila-Oslo Renewable Enterprise (MORE), while AEV (through its two power subsidiaries, Aboitiz Power Corporation (APC) and Philippine Hydropower Corporation (PHC) will own a 50% interest in SNAPB indirectly through its 83.3% ownership in MORE. As a result, SNAPB is owned directly and indirectly 50% by AEV and 50% by SN Power. SN Power is a global renewable energy company, which is a 50:50 joint-venture between Statkraft, the Norwegian state-owned power company, and Norfund, the state-owned Norwegian investment fund.AEV is a publicly-listed holding and management company of the Aboitiz Group, one of the largest conglomerates in the country focusing on electricity, financial, food and transport sectors.

IFC loan
In June 2008, IFC approved a loan of up to US$100M, with additional financing from Nordic Investment Bank (NIB) and local banks to support the privatization. The total project cost was estimated around $560M. NIB loan up to $60M, local banks consortium up to $200M and the remaining amount is expected to be financed by equity and internally generated cashflow. The uses include acquisition price of $325 million and rehabilitation/refurbishment capex around $170M. IFC’s key role involves: (a) helping support the success of the Ambuklao-Binga privatization thereby helping sustain momentum and investors’ interest in the country’s privatization program; (b) facilitating the participation of foreign sponsors in the privatization program as IFC’s presence is seen as a critical safeguard from regulatory and implementation uncertainty; (c) providing longer-term financing than currently available from commercial sources to strengthen the fundamentals of the project; (d) taking the leadership role to help the project raise additional financing from other international and local financial institutions, (e) capitalizing on IFC’s experience with the previous privatization transactions; and
(f) ensuring implementation of appropriate environmental and social policies.
Labor issues
In 1999, the Philippines’ Securities and Exchange Commission mandated the Management Committee (Mancom) of state-owned National Power Corporation (NAPOCOR) to take over the management of Binga hydroelectric from China Chang Jiang Energy Corp, following the cancellation of its rehabilitate-operate-and-lease-back contract with NAPOCOR. NAPOCOR decided to take over the plant from Mancom because Mancom was not putting in the necessary work for rehabilitation projects; the siltation problem of the dam has worsened due to the lack of funds. In December 2000, NAPOCOR was set to take over the operation of Binga hydroelectric from its private contractors. Some 120 employees asked NAPOCOR management to pay them P71M worth of unpaid claims, accumulated since 1995 – ”We're like a ball being passed from one player to another. Now that the government is poised to reclaim Binga, what fate awaits us employees?” NAPOCOR vice president Froilan Tampinco replied: “We would have to find ways to pay them, including their separation pay." He denied reports that 100 employees from NAPOCOR's Sucat plant would replace 58 Binga employees and allayed fears that many of them would be displaced by the takeover. "We will definitely rehire some of them. Unfortunately, not everybody will be hired. It's also true that they will be working on a contractual basis. However, the manpower agency, run by the employees themselves, will negotiate with NAPOCOR on the terms of their employment and benefits,” Tampinco said.

(see attached doc for more info)