PSALM not ready with service fee, supply contracts for Magat
Friday, December 08, 2006
By MYRNA M. VELASCO
Prospective bidders are apprehensive of pursuing their interest to join the December 14 auction for the privatization of the 360-megawatt Magat hydropower facility because the Power Sector Assets and Liabilities Management Corporation (PSALM) has not settled major commercial issues they raised until this time.
The two crucial concerns of the investors are the supply contracts to be attached to the Magat package and the prescribed service fee that shall be paid to the National Irrigation Administration (NIA) which will be a counterparty to the operation and maintenance (O&M) agreement to be signed for the facility’s non-power components.
"We can’t come up with a more realistic valuation of the asset because of these hanging concerns," one of the prospective bidders aired.
It was gathered that the asset liquidation firm promised the bidders that these information would be available only this Thursday (December 7).
"The other bid documents consisting of the Lease Contract and the O&M agreement with NIA will be released as soon as negotiations are completed and finalized," PSALM just manifested in a press statement.
The Magat facility is one of the problematic assets being set in the auction block, with bidders ascertaining that the plant’s operating life would be way shorter than the 25-year O&M deal that shall be sealed with NIA.
The only saving grace they can see is an expansion of the facility, but this is seen encumbered by the hydro plant’s siltation problem.
Meanwhile, PSALM announced that it already released to prospective bidders the Asset Purchase Agreement (APA) and Land Lease Agreement (LLA) for the facility’s sale.
The APA requires the winning bidder to put up an upfront payment for the facility which shall be equivalent to 40-percent of the offer price. This is reckoned among the winning bidder’s deliverables on or before the closing date.
Meanwhile, the balance of 60-percent shall be settled in 14 equal semi-annual payments, imposed with an interest of 12-percent per annum compounded semi-annually.
While the buyer is still making deferred payments on the balance of its purchase price, PSALM will already turn over the facility "on the condition that it will operate, maintain and rehabilitate the complex in the ordinary and usual course of business," said PSALM vice president for asset management and electricity trading Froilan A. Tampinco.
The winning bidder is similarly required to post a performance bond which is equivalent to 2.0-percent of the purchase price. This shall be reduced annually at 2.0-percent equivalent of the aggregate amount of the deferred payments.
A deferred payment security deposit shall also be submitted, which is 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.
posted by philpower @ 9:29 AM,
