Statement of Energy Secretary Raphael P.M. Lotilla on Mirant's decision to sell Philippine power assets

12 Jul 2006

US power company Mirant Corporation late yesterday announced its plan involving the commencement of an auction process to sell its international businesses in the Philippines and the Caribbean. The move was not entirely unexpected given the financial condition of Mirant Philippines's mother company in the US, which has prompted the latter to come up with a strategic plan to enhance its company's shareholder value after emerging from bankruptcy protection in the US in January.

For its part, the Government is ensuring that buyers of these assets are qualified to perform the obligations of Mirant Philippines to the National Power Corporation, which include the buyer's maintenance of the IPP contracts attached to the assets on sale.

Government notes that operations in these plants remain profitable and foresees keen interest among investors. Higher expected economic growth supported by rising foreign direct investments demonstrates that investor confidence remains intact and will help sustain the profitability of these plants. Investors remain upbeat on the country's investment climate following an improved fiscal position arising from the surplus registered in April, strong macroeconomic fundamentals and better-than-expected first quarter performance of corporations.

In the power sector, there is a sense of excitement generated by Mirant's decision to sell its businesses in the Philippines. Beyond acquiring Mirant's Philippine assets ? which include the 1,218-megawatt coal-fired power plant in Sual, Pangasinan, 735-MW coal-fired power plant in Pagbilao, Quezon, and a 20% stake in the Ilijan, Batangas natural gas facility ? major international and domestic players see new opportunities for expansion. The announcement has ended the uncertainty hanging over Mirant's participation in new power projects. Hobbled by financial challenges, the US mother company of Mirant is not in a position to finance expansion projects in the Philippines. But other major players who are not suffering from such a handicap see their possible acquisition of Mirant's Philippine assets as a take-off point for acquiring additional generation capacity either through new or expansion projects, or the acquisition of existing plants and assets of National Power.

The entry of new investors unsaddled by US Mirant's financial woes has helped make prospects for expansion of generating capacity in the Visayas more realizable. The most recent proof that ownership changes like this have an overall positive effect is the sale by Mirant Philippines of its assets in Panay and Cebu in the Visayas. The new owners, led by Metro Global, are looking at additional projects which will support the economic and power demand growth in these two major islands.

The transfer of the Caliraya-Botocan-Kalayaan (CBK) generation plant by its operators which included IMPSA, an Argentine company, to two very reputable Japanese companies, Sumitomo and J-Power, also provides a good example. The CBK joint venture is now well-positioned to build additional capacity and to acquire National Power assets.

Strategic Communications and Partnership Division
Tel. No. (632) 9029067