PSIREN

In July 2007, Masinloc Power Partners Co Ltd (MPPC) won Masinloc coal-fired with a bid of US$930M. Masinloc is located in Zambales, about 250 km northwest of Manila, and has been operational since 1998. It is the biggest power plant privatized to date under a comprehensive sector reform law, the Electric Power Industry Reform Act (EPIRA). A total 265-MW of power supply contracts was tied to the sale, representing 44% of Masinloc's rated capacity; a coal sale agreement and a program for the rehabilitation of the power plant was also signed with PSALM. Masinloc Power opted to pay the full amount of its bid in April 2008, with up to US$275M loans and equity from WB’s International Finance Corporation (IFC) and a US$200M loan from Asian Development Bank (ADB). The electricity generated from the plant will be sold through the wholesale electricity spot market (WESM) for the Luzon grid and bilateral contracts.

Masinloc Power Partners Co Ltd (MPPC), a consortium led by Singapore-based AES Transpower Pte, acquired the 600MW Masinloc coal-fired plant in July 2007. MPPC is an indirect wholly-owned subsidiary of AES Corp, a leading US-headquartered global power developer and operator in the world. In 2007-2008, IFC and ADB provided loan packages to MPPC-AES for the acquisition, rehabilitation, and operation of Masinloc. AES is one of the world’s largest power companies, with generation and distribution businesses (132 generation plants, including 15 facilities at integrated utilities) in 29 countries across five continents. Founded in 1981, AES built its first power plant in 1985 in Texas, which was also one of the first competitive power plants in the US. In the early 1990’s, as markets opened up globally, AES began generating electricity in the United Kingdom, and expanded to Argentina, Pakistan, China, Hungary and Brazil. In 1998 AES acquired a minority stake in a power plant in the first and only generation privatization in India. The AES Corporation is listed on NYSE under the symbol of “AES”; AES has 13 regulated utilities and 121 generation facilities, with total generation capacity of around 43,000MW.

This is Masinloc’s second privatization, after the winner in the first bidding was unable to close the deal. Filipino-Australian YNN Pacific Consortium Inc submitted the highest bid of US$561.74M in December 2004, topping that of the only other bidder, Lopez-led First Generation Holdings Corp (US$274.85M). When YNN failed to meet its upfront payment, PSALM called on its performance bond (US$14M) in June 2006; the contract was terminated effective August 2006. Masinloc had been bidded out without a supply contract, as negotiations between NPC and Lopez-led MERALCO distributor had bogged down at the time of bidding.

NOTES:
The 22 investor groups that expressed interest include 15 foreign companies and seven local firms. Of the 15 foreign companies, seven come from the Asia-Pacific region, four from North America, and four from the United Kingdom and Europe. http://www.psalm.gov.ph/news/NewsItem20060022.htm; http://www.psalm.gov.ph/news/NewsItem20060056.htm;
http://www.psalm.gov.ph/news/NewsItem20060059.htm; http://www.psalm.gov.ph/news/NewsItem20070169.htm;
http://www.psalm.gov.ph/news/archives%202008/NewsItem20080016.htm;
http://www.psalm.gov.ph/news/archives%202008/NewsItem20080023.htm

In November 2007, IFC approved up to US$275M loan and equity to MPPC, an indirect wholly-owned subsidiary of AES Corporation, a leading US-headquartered global power developer and operator in the world. In January 2008, ADB provided a US$200M loan to AES Corporation for the acquisition, rehabilitation, and operation of Masinloc plant. AES had intended to sell portion of the equity and introduce a minority partner in MPP very close to the financial closure. The total project cost for Masinloc coal-fired power plant is estimated at approximately US$ 1.1B – privatization bid acquisition price, funding for the debt service reserve account, transaction costs, refurbishment works over the next three years and initial working capital needs. IN: http://www.ifc.org/ifcext/spiwebsite1.nsf/2bc34f011b50ff6e85256a550073ff... http://www.adb.org/Projects/project.asp?id=41936

http://www.ifc.org/ifcext/spiwebsite1.nsf/2bc34f011b50ff6e85256a550073ff... http://www.adb.org/Projects/project.asp?id=41936

http://www.aes.com/aes/index?page=home

http://www.ifc.org/ifcext/spiwebsite1.nsf/2bc34f011b50ff6e85256a550073ff... http://www.adb.org/Projects/project.asp?id=41936

Negotiations between a joint NPC/PSALM team and Meralco for a Transition Supply Contract (TSC) were initiated in 2003. NPC/PSALM gave Meralco an initial offer of P3.60 per kilowatt-hour (kWh) which was linked to the price of fuel and other indices. This was 80 centavos less than the average regulated rate of around P4.40 per kWh in Luzon before the spot market began operations. However, no supply contract between National Power/PSALM and Meralco had been concluded at the time of the Masinloc bidding. The Masinloc plant was bid out as a merchant plant, hence the winning bidder was expected to obtain on its own a bilateral supply contracts with electric distribution utilities/electric cooperatives.

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FROM:
Masinloc Power (AES) in Philippines
By Violeta P. Corral, PSIRU-Asia www.psiru.org, July 2009