26 Apr 2007
The Power Sector Assets and Liabilities Management Corporation (PSALM) formally turned over control of the 360-megawatt Magat Hydroelectric Power Plant to winning bidder SN Aboitiz Power Inc. (SNAP!) last Wednesday, 25 April. At 12:01 a.m. on 26 April, SNAP! began operations of the Isabela-based power facility.
The turnover was held after PSALM received from SNAP! the USD371-million upfront payment for the purchase of the Magat power plant and 50% of the deferred payments. In effect, SNAP! paid PSALM the equivalent of 70% of the purchase price of USD$530 million.
"Thank you for helping the government," said PSALM President and Chief Executive Officer Jose C. Ibazeta as he shook hands with Mr. Erramon Aboitiz, executive vice president and chief operating officer of Aboitiz Equity Ventures (AEV), during the handover of the joint certificate of closing to evidence the actual turnover, possession and operation of the plant to SNAP! The turnover was held at PSALM's main office in Makati City.
"We are very pleased to support the privatization program of the government," Mr. Aboitiz responded. "This plant is very strategic for us. The purchase of Magat is a very important step in achieving our goals of building a renewable energy business."
Mr. Aboitiz pointed out that the hydroelectric plant is very valuable and will become even more valuable because of its large water storage, giving it the capability to provide ancillary services.
He noted plans of the Philippine Electricity Market Corp., operator of the Wholesale Electricity Spot Market, to establish a second market for ancillary services before the year ends. SN Aboitiz will participate in this market once it is established.
"We don't think you could replicate this facility today and, if you did, it would be at a huge cost," Mr. Aboitiz said.
Last Monday, 23 April, PSALM and SNAP! signed their respective closing deliverables and conditions precedent required under the asset sale contract for the Magat power facility to pave the way for the transfer of control to the consortium.
Mr. Ibazeta signed all the closing documents of PSALM that included the consents allowing the transfer of the purchased assets from the National Power Corp. to PSALM and PSALM to SNAP!; and a certification stating that PSALM has complied with all warranties as of the closing date of the sale.
Aside from the certificate of closing and the legal opinion that both parties executed, SNAP! provided PSALM its bank certification - the most important document handed over during the signing rites also held at the PSALM office. The certification informed PSALM of the amount that the consortium had deposited in its bank for payment to PSALM.
Although the balance of USD159 million is to be paid over seven years, SNAP! president Luis Miguel Aboitiz said the corporation is working on refinancing the loans of SNAP! with longer tenors and lower interest rates.
"The financial markets are very liquid and we're getting very attractive financing offers from local commercial banks," Mr. Aboitiz noted.
Mr. Aboitiz disclosed that SNAP!, together with AEV, remains interested in acquiring more power assets in the future. It is particularly keen on participating in the public bidding for the Ambuklao-Binga power plant. "We're just waiting for PSALM to make its move," he said.
AEV is the country's second largest power distributor owning five distribution utilities, and the pioneer in the development of mini-hydros.
Strategic Communications and Partnership Division |