PSALM weighs importance of Meralco contract on Masinloc sale
Manila Bulletin
May 25, 2006
The need to secure a supply contract with Manila Electric Company (Meralco) has been weighed by the Power Sector Assets and Liabilities Management Corporation (PSALM) as a significant factor for the successful conclusion of the Masinloc deal.
However, the asset liquidation firm noted that it could only help winning bidder YNN and new partner, Malaysian Ranhill Power Bhd, to secure a supply deal; but this is not being made as a condition for them to deliver their commitments in the turnover of the asset.
PSALM was scheduled to meet late in the afternoon yesterday (May 23) to decide on the fate of the amended letter of credit (L/C) submitted by YNN Ranhill.
It has been previously reported that the asset purchasers have inserted a condition in the L/C that the -million performance bond would only be rendered effective if a supply contract with the giant utility firm can be secured.
The increase in the bond was set as a condition for the new deadline extension granted by PSALM for the asset buyers to put up the required upfront payment of $ 227 million. The original performance bond amount was $ 11.2 million.
However, company vice president for asset management and electricity trading group Froilan A. Tampinco noted that when the 600-megawatt Masinloc coal-fired facility was auctioned off in December 2004, "all bidders were aware that no supply contract was attached to it – it was offered as a merchant plant."
Given such circumstances, PSALM noted that YNN and Ranhill would have to undertake aggressive marketing effort just to corner buyers for the output of the facility.
"The supply contracts with Meralco or with major electricity users are important as these will assure a committed market for the electricity that the Masinloc plant will generate," Tampinco stressed.
The prospects of commercial operation for the Wholesale Electricity Spot Market (WESM), hopefully by next month, is also seen as alternative market for buyers of the generation assets of the National Power Corporation. PSALM though stressed that "it did not offer any guarantee."
The decision for a rebidding of the facility, the company admits, would be a tough process because prospective buyers might also bat for a supply contract.
YNN-Ranhill is expected to deliver its initial payment by June 30 this year. In this course, they have tapped ABN-AMRO to raise their much-needed cash.
As the transaction moves forward, the buyers are also talking with the Private Sector Operations Department of the Asian Development Bank (ADB) for project financing and possible equity investment.
"Prior to the decision to extend the deadline for the delivery of the upfront payment, PSALM 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. These issues were addressed to the satisfaction of PSALM," Tampinco said.
The Masinloc asset sale should have been the first big-ticket privatization endeavor of PSALM until it was saddled with some dilemmas. (MMV)
May 25, 2006
The need to secure a supply contract with Manila Electric Company (Meralco) has been weighed by the Power Sector Assets and Liabilities Management Corporation (PSALM) as a significant factor for the successful conclusion of the Masinloc deal.
However, the asset liquidation firm noted that it could only help winning bidder YNN and new partner, Malaysian Ranhill Power Bhd, to secure a supply deal; but this is not being made as a condition for them to deliver their commitments in the turnover of the asset.
PSALM was scheduled to meet late in the afternoon yesterday (May 23) to decide on the fate of the amended letter of credit (L/C) submitted by YNN Ranhill.
It has been previously reported that the asset purchasers have inserted a condition in the L/C that the -million performance bond would only be rendered effective if a supply contract with the giant utility firm can be secured.
The increase in the bond was set as a condition for the new deadline extension granted by PSALM for the asset buyers to put up the required upfront payment of $ 227 million. The original performance bond amount was $ 11.2 million.
However, company vice president for asset management and electricity trading group Froilan A. Tampinco noted that when the 600-megawatt Masinloc coal-fired facility was auctioned off in December 2004, "all bidders were aware that no supply contract was attached to it – it was offered as a merchant plant."
Given such circumstances, PSALM noted that YNN and Ranhill would have to undertake aggressive marketing effort just to corner buyers for the output of the facility.
"The supply contracts with Meralco or with major electricity users are important as these will assure a committed market for the electricity that the Masinloc plant will generate," Tampinco stressed.
The prospects of commercial operation for the Wholesale Electricity Spot Market (WESM), hopefully by next month, is also seen as alternative market for buyers of the generation assets of the National Power Corporation. PSALM though stressed that "it did not offer any guarantee."
The decision for a rebidding of the facility, the company admits, would be a tough process because prospective buyers might also bat for a supply contract.
YNN-Ranhill is expected to deliver its initial payment by June 30 this year. In this course, they have tapped ABN-AMRO to raise their much-needed cash.
As the transaction moves forward, the buyers are also talking with the Private Sector Operations Department of the Asian Development Bank (ADB) for project financing and possible equity investment.
"Prior to the decision to extend the deadline for the delivery of the upfront payment, PSALM 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. These issues were addressed to the satisfaction of PSALM," Tampinco said.
The Masinloc asset sale should have been the first big-ticket privatization endeavor of PSALM until it was saddled with some dilemmas. (MMV)
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