01 Apr 2006
The Power Sector Assets and Liabilities Management Corporation (PSALM) has required YNN Pacific Consortium Inc. to increase the performance bond by $3 million from $11 million to $14 million.
At the same time, PSALM, the government agency handling the privatization of assets of the National Power Corporation, extended the deadline for YNN, the winning bidder for the 600-megawatt Masinloc Coal-Fired Power Plant, to deliver the upfront payment of $227 million from March 31 to June 30.
The upfront payment of US$227 Million is broken down as follows:
- 40% down payment of the Purchase Price equivalent to US$222.8 million
- Rentals of US$4,000,000.00
" - Option Price of US$740,000.00
" - For a total of US$227,540,000.352
YNN issued the performance bond to PSALM as a guarantee that it would not renege on its obligation to pay the upfront payment and later on settle the balance of $334.7 million to complete its winning bid of $561.7 million for the Masinloc power facility in Zambales.
PSALM's move to hike YNN's performance bond and extend the deadline for the delivery of the upfront payment resulted from a recent meeting with YNN officials and Ranhill Berhad president and chief executive officer Tan Sri Hamdan Mohamad and Tan Sri Majid Khan, chairman of Ranhill Power Berhad, a subsidiary of Ranhill Berhad.
PSALM expects Ranhill and YNN to complete within the three-month extension all financial arrangements related to Ranhill's investments in YNN. Ranhill is tapping ABN AMRO for its fund raising requirement. It is also talking with the Private Sector Operations Department of the Asian Development Bank (ADB) for project refinancing and possible equity investment.
YNN-Ranhill recently submitted to PSALM a copy of a letter-agreement between ADB and Ranhill dated March 27, 2006 in which ADB agreed to start its review of and due diligence on the project. Another letter, from ABN AMRO dated March 27, 2006, was also submitted confirming its appointment as sole rating advisor, sole lead manager and sole book runner for Ranhill.
Ranhill, a publicly-listed company in Malaysia engaged in water, oil and gas, power and infrastructure development, is joining the consortium. Ranhill also participated and submitted bids in the Philippine Energy Contracting Round conducted last year by the Department of Energy (DOE). Its bid to explore the Sulu Sea for oil and gas resources is currently being evaluated by the DOE.
PSALM officials, for their part, met with the officers of ADB's public sector and private sector departments to find out the process and check the feasibility of the arrangements being proposed by YNN-Ranhill. PSALM, however, said it is premature to disclose at this point the details of these meetings and the contents of the letters.
"We are aware that our critics will perceive this decision as an accommodation for YNN," said PSALM President Nieves L. Osorio. "However, we have to broaden our perspective. 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."
"We believe that the additional $3-million performance bond is enough indication of YNN-Ranhill's seriousness to push through with the deal. It is also sufficient protection for government's interests in the next three months," Ms. Osorio pointed out.