SN Aboitiz Power submits highest bid for Magat plant

14 Dec 2006

The Power Sector Assets and Liabilities Management Corporation (PSALM) today proclaimed the consortium of Norway's SN Power and Aboitiz Power Corporation as the highest bidder for the 360-megawatt (MW) Magat Hydroelectric Power Plant in Ramon, Isabela.

With a bid of USD530 million, SN Power bested the USD420.9 million bid of First Generation Northern Energy Corporation vying for the Magat facility in a public auction held on 14 December at PSALM's main office in Makati City. Magat has the largest generating capacity among the operating hydroelectric power plants on the sale block.

The Magat power plant is the second facility successfully bid out by PSALM this year as it duplicated the success of the 112-MW Pantabangan-Masiway Power Complex auctioned off in September. The power complex has been turned over to its new owner First Generation Hydro Power Corporation.

"We are very pleased with the turnout of the event. Another milestone has been achieved in realizing the government's program to reform the power industry," said Department of Energy Secretary Raphael P.M. Lotilla.

The privatization of Magat is the latest in a string of encouraging developments indicating strong investor confidence in the country's energy sector. It comes in the heels of the oversubscribed public offering of geothermal energy producer PNOC-EDC, the sale of Mirant's assets to well-established Japanese energy companies poised to invest in the expansion of existing power facilities in the country, and the recent privatization of the Pantabangan-Masiway hydro power plant.

"The government will continue to work on improving the business climate and promoting healthy competition in the industry to attract more bidders for the assets of the National Power Corporation," he added.

For her part, PSALM President and Chief Executive Officer Nieves L. Osorio sees the success of the auction for the Magat facility as further motivation for PSALM to continue working hard to ensure the success of future biddings for National Power's plants.

"We continuously work on privatizing and transferring these power facilities to deserving bidders," Ms. Osorio said. "PSALM remains steadfast in its commitment to uphold the stringent requirements set in the transaction documents for the generation and transmission assets of the government."

She said that the recent signing of a transition supply contract between National Power and the Manila Electric Company bodes well for the government as this would facilitate the disposal of the plants on the auction block and make them more attractive to local and international investors.

Pres. Osorio also credited the National Irrigation Administration (NIA) which is party to the agreement with PSALM for the operation and maintenance of the dams and the other non-power components needed for the operation of the Magat power complex.

The bidders submitted their bids before the 12 p.m. deadline set by PSALM, the agency tasked to privatize the generation and transmission assets of the national government.

PSALM will declare the winning bidder upon completion of post-bid requirements and issuance of Notice of Award.

The commercial terms and conditions of the sale are contained in the Asset Purchase Agreement (APA) that is binding between PSALM and the winning bidder. SN Power will also sign a land lease agreement with PSALM and the Operation and Maintenance (O&M) Agreement with NIA.

The APA for the Magat plant requires the winning bidder to deliver at least 40% of the purchase price as upfront payment payable on or before the closing date. The balance of 60% may be paid in 14 equal semi-annual payments with an interest of 12% per annum compounded semi-annually.

The winning bidder is also required to post a performance bond equivalent to 2% of the purchase price. The performance bond will be reduced every year equivalent to 2% of the aggregate amount of the deferred payments.

The winning bidder will likewise be required to post a deferred payment security deposit equivalent to at least the next deferred payment in the form of cash, currently dated manager's check or an irrevocable standby letter of credit acceptable to PSALM.

During the deferred payment period, PSALM will turn over to the winning bidder the Magat facility on the condition that it will operate, maintain and rehabilitate the complex in the ordinary and usual course of business.

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