Aboitiz group bags Tiwi-Makban power complex with $447-M bid

By DONNABELLE L. GATDULA, The Philippine Star

Posted at Jul 31 2008 12:31 AM | Updated as of Jul 31 2008 08:37 AM

The Cebu-based Aboitiz group won the bidding Wednesday for the Tiwi-Makban geothermal complex with a $446.88-million offer.

AP Renewables Inc., the corporate vehicle  the Aboitizes used to bid for the 289-megawatt (MW) Tiwi geothermal power plant in Tiwi, Albay and the 458.53-MW Makban geothermal power plant in Laguna and Batangas, offered a higher bid than the only other bidder — First Luzon Geothermal Energy Corp. of the Lopez-controlled Energy Development Corp. which offered $368.44 million.

Power Sector Assets and Liabilities Management Corp. (PSALM) president Jose Ibazeta said the sale of Tiwi-Makban is crucial as this makes them closer to implementing open access, allowing big power consumers to choose their own suppliers for their requirements.

“We have reached the 68.78-percent privatization level. This is close to the 70-percent target that we have to achieve to be able to go to open access,” Ibazeta said. By October this year, PSALM hopes to hit the 73-percent privatization mark.

The PSALM chief added this will also set a trend for the sale of the independent power producer (IPP) contracts of the National Power Corp. (Napocor).

“The success of this bidding will make the sale of IPP contracts more attractive,” he said. PSALM, the entity in charge of the privatization of Napocor’s power plants and IPP contracts, will start selling the IPP contracts of the state-owned power plants by November this year.

For his part,  Aboitiz Power Corp. senior vice president Luis Miguel Aboitiz said Tiwi-Makban would be the first geothermal facility in the group’s portfolio.

Aboitiz said they are currently evaluating the payment scheme for the acquisition of  Tiwi-Makban but hinted this will mostly be raised through borrowings.

He said they have 60 to 270 days to come up with the 40-percent upfront payment to enable PSALM to turn over the plant to AP Renewables, a wholly-owned unit of Aboitiz Power which, in turn, is 75.59-percent owned by Aboitiz Equity Ventures.

Aboitiz said they are considering several options: prepay, pay in full, pay the upfront payment of 40 percent and/or take advantage of a seven-year financing scheme being offered by PSALM.

He said they are currently contemplating on availing the financial assistance being extended by PSALM to all winning bidders.

“This is an important achievement as this is the first geothermal plant bid out by the government,” Energy Secretary Angelo Reyes said.

“The successful bidding of this big-ticket plant also brings us closer to the achievement of all preconditions for open access which promises reasonable power rates for the Filipino consumer,” he added.

PSALM said  once it has verified the accuracy, authenticity and completeness of all the bid documents that the winning group has submitted, AP Renewables will be declared the winning bidder for the Tiwi-Makban auction.

The government power privatization firm will then issue the Notice of Award to AP Renewables, formally informing the consortium as the winning bidder for the sale of the plant package.

PSALM has attached a total of 475 MW in power supply contracts to the Tiwi-Makban sale, providing the power facility’s new owners with a ready market for its electricity output.

With the addition of the successful sale of the Tiwi-Makban power complex, PSALM has now sold 14 of Napocor’s 31 plants or a total 2,597.93 MW of capacity for its Luzon and Visayas generating power plants.

In another development, the PSALM board declared the sale of the 620-MW Limay combined cycle power plant a failure after it was left with only one interested bidder who submitted the documentary deliverables before the deadline.

PSALM’s bidding rules explicitly state that the bidding for a power plant is considered failed if there is only one participant in the process.

PSALM also decided to rebid the Napocor facility by the latter part of the year.