ADB Ok’s Sale Of Masinloc Power Plant

03 Aug 2005

The Asian Development Bank (ADB) has given its consent to the sale of the 600-megawatt Masinloc coal-fired power plant. ADB, together with the Japan Bank for International Cooperation (JBIC), financed the construction of the power plant in Zambales which was bid out last December.

The Power Sector Assets and Liabilities Management Corp. (PSALM), the government’s power privatization agency, disclosed that the creditor consent extended to Masinloc came along with ADB’s approval of the transfer of liabilities and eligible generation assets of the National Power Corporation (NPC) to PSALM.

“We are pleased to inform you that on July 19, 2005, the board of directors of ADB approved the government’s request for the transfer of liabilities and eligible generation assets of NPC to PSALM and all of NPC’s transmission and sub-transmission assets to the National Transmission Corporation (Transco), subject to execution and performance of the Omnibus Amendment Agreement,” stated Patrick Giraud, ADB director for infrastructure division, Southeast Asia department, in a letter to newly appointed PSALM president Nieves L. Osorio.

Giraud said the Omnibus Amendment Agreement is being finalized for execution.

PSALM is also finalizing the terms of reference for the bidding of Transco, which will be the government’s biggest privatization effort in the power sector.

“These welcome developments will boost the government’s power industry restructuring and privatization program as the creditor consent we just obtained from ADB is a positive signal that can attract more investors,” Osorio said

Since March last year, PSALM has successfully bid out six plants, generating $566.9 million, or about P31.75 billion. Masinloc was the single biggest sale made, with the highest bid price at $561.7 million offered by YNN Pacific Consortium in partnership with an Australian company.

A major condition precedent to the completion of the sale and transfer of NPC assets is the consent of NPC’s creditors. Prior to the ADB consent, PSALM had to seek the assent of creditors for the power plants it had privatized before turning them over to the winning bidders. So far, five hydro plants – Talomo in Davao City, Agusan in Bukidnon, Barit in Camarines Sur, Cawayan in Sorsogon and Loboc in Bohol – have been turned over to their new owners.

Once PSALM and YNN have completed the required conditions, the upfront payment equivalent to 40% of the purchase price of $557 million, or US$ 222.8 million, will be due.

“This, in turn, will pave the way for the turnover of the Masinloc power plant to the YNN consortium,” Osorio said. “With ADB’s consent, we have hurdled one major requirement, and we are confident that our power industry restructuring and privatization program will now proceed at a faster pace.”