Gagasan Steel buys retired power plant for $2.5M

ABS-CBN News

Posted at Feb 24 2009 01:05 PM | Updated as of Feb 24 2009 09:49 PM

Gagasan Steel Inc. is the new owner of the decommissioned 200-megawatt Manila Thermal Power Plant (MTPP), the Power Sector Assets and Liabilities Management Corporation (PSALM) said Tuesday.

In a statement, PSALM said it received a full payment of $2.5 million from Gagasan Steel for the retired power facility in Isla de Provisor in Paco, Manila.

PSALM said the power plant was sold through a negotiable sale transaction that it conducted on April 25, 2008. The purchase price covers the plant equipment, components, auxiliaries, and accessories of the MTPP, but excludes the underlying land.

Proceeds from the sale, PSALM said, will be used to settle the financial obligations of the National Power Corp. (Napocor).

PSALM said Gagasan Steel will be given six months to dismantle the MTPP building and equipment and to clean up the site. However, the period is subject to extension.

On top of these, PSALM said Gagasan Steel should secure the necessary permits, licenses, and accreditation from pertinent government agencies such as the Department of Environment and Natural Resources.

Gagasan Steel is an affiliate of Malaysia-based Gagasan Steel Sdn Berhad, and has been in operation since 2002. Among the local clients of Gagasan Steel include Napocor and the Manila Electric Co.

Aside from the MTPP, Gagasan Steel is also eyeing the retired 225-MW Bataan Thermal Power Plant, which was bid out last Friday. PSALM said Gagasan Steel failed to meet the reserve price at the third round of bidding.

The other two bidders, Krisahs Trading and Rubenori Inc., on the other hand, were unable to meet the technical requirements set by PSALM.

Meanwhile, PSALM said it will immediately enter into negotiations with Gagasan Steel pursuant to the company's privatization procedures.

PSALM has collected $2.91 billion out of $6.33 billion in total privatization proceeds generated from successful bids of generating and decommissioned plants and the National Transmission Corp.

From this amount, PSALM has utilized $1.3 billion for prepayments, $350 million for debt service, $290 million for independent power producers obligations, and $200 million for other power-related debts.