PSALM, Enron Power set to firm up buyout contract

The Power Sector Assets and Liabilities Management Corp. (PSALM) said it is likely to firm up soon a buyout contract with Enron Power Corp., the local subsidiary of US-based Enron Corp., which had recently declared bankruptcy.

Although PSALM president Edgardo Del Fonso described the talks with Enron as "still up in the air," he said the two parties have agreed on "a specific formula of payment."

Asked if PSALM was able to get a much higher discount from Enron Power, Del Fonso said the discount they got "is sufficiently attractive to us." Without revealing the exact figure, Del Fonso said they were able to get a higher than 12-percent discount.

Enron Power is the local unit of Enron Corp., one of the largest energy traders in the US. Recently, Enron filed for Chapter 11 – bankruptcy protection, a type of proceeding that allows the company to remain in control of its business while negotiating with creditors. It was touted as the biggest bankruptcy filing in America’s corporate history.

PSALM has said it is willing to assume the contracts of Enron Power provided the discount would be higher than the original offer of 12 percent.

The proposed buyout will involve two build-operate-transfer (BOT) power plants – the 105-megawatt (MW) Pinamucan-Enron oil-based power in Batangas and the 108-MW Subic-Enron 2 unit 1-8 in Olongapo, Zambales. The two plants have a combined value estimated at $250 million.

Enron Power is a contracted independent power producer of the Napocor. The contract for the Batangas plant started in July 1993 and would expire in July 2003 while the Zambales contract has a 15-year tenure and would lapse in March 2009.