Forfeiture of .14-M Masinloc bond seen
Monday, March 06, 2006
YNN faces difficulty raising 3 M
By MYRNA M. VELASCO
The array of stakeholders in the power industry and even those in capital markets are placing bets that the government may end up forfeiting the .14-million performance bond for the Masinloc deal as they see dim prospects for YNN Pacific Consortium raising the upfront payment of 3 million at deadline time this month-end.
"It is a higher probability that the bond would be forfeited by PSALM (Power Sector Assets and Liabilities Management Corporation)," stressed a highly-placed industry source who is keeping track of the developments in the 600-megawatt Masinloc plant sale.
Though the deadline for the submission of the 40 percent chunk of YNN’s 1.74 million purchase price has been extended from December 2, 2005 to March 31 this year, it was gathered that the winning bidder is still encountering difficulty raising money because of some critical factors that are weighed to have impact on the acquired assets’ future operations.
If ever, this will serve as a major ‘black eye’ on PSALM’s privatization mandate under president Nieves L. Osorio’s charge, as this is the first biggest generation asset of the National Power (NPC) supposedly divested.
This is also seen as a case of unsettling indication, as PSALM is showing stuck-up front that its future biddings will be swarmed by throng of investors.
YNN previously contended that they were looking forward to commercial operations of the Wholesale Electricity Spot Market (WESM) so they could have alternative market; or they shall secure supply contracts before the new deadline expires; but until now, these remain as relentless dilemma for them.
Asked if PSALM would ever give in to another deadline extension, company officials noted that it would highly unlikely; and also set caution that YNN cannot use anymore the recent regulatory and political uncertainties as reasons for not being able to pay the requisite upfront payment for their winning bid.
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"They cannot use Proclamation 1017 (State of Emergency declaration) as a reason…for now, we just want them to deliver," stressed PSALM vice president for asset management and electricity trading group Froilan A. Tampinco.
At this point, the PSALM official would not want to give any indications on the Masinloc transaction’s development, aside from saying "we’ll just wait and see…that is something worth watching out for," not showing any sign of optimism that the deal will make it through the hurdles.
As a precondition to the stretched March 31, 2006 transaction closing, winning bidder YNN recently extended the effectivity of its .14 million performance bond to August from April 7, 2006.
The company, to which the Masinloc assets will be turned over to, has an irrevocable letter of credit issued by the Bank of China (Hong Kong) Limited; and tied as a precondition for the required delivery of the first down payment for the Masinloc plant.
As set out in the asset purchase agreement, PSALM would have to schedule the deadline for the remittance of the upfront payment and closing deliverables.
PSALM noted that it issued its closing deliverables last November 25; and failure on its part to comply with its mandate under the transaction, would have allowed YNN to walk away from the deal after 30 days without risk of forfeiting the performance bond. (MMV)
posted by philpower @ 7:46 AM,
