IMPSA denies selling stake in CBK Power

Argentina’s power giant Industrias Metallurgicas Pescarmona S.A. (IMPSA) has no plans of divesting its stake in CBK Power Co. Ltd., the operator of a $470-million hydropower plant in Laguna, a top CBK Power official said.

"We are pleased with our operations here, it is going smoothly. The project is complete and operational. We were able to renegotiate our contract with the government and got a concession agreement," CBK Power president and chief executive officer Gerald Katz said.

There were reports earlier that IMPSA plans to sell this month its 50-percent stake in the project to power companies based in Japan and Thailand.

The National Power Corp. (Napocor) awarded in 1998 a 25-year build-rehabilitate-operate-transfer (BROT) contract for the project straddling the Caliraya-Botocan-Kalayaan (CBK) areas in the eastern part of Laguna to CBK Power, a 50-50 joint venture between IMPSA and US power firm Edison Mission Energy of California.

The project, however, commenced in 2001, after getting dragged in a controversy which involved then President Estrada.

Katz said the company’s partners are committed to continuing their operations in the Philippines although he admitted that there are indeed parties interested in IMPSA’s stake.

This, as Edison Mission has sold a substantial stake of its international operations, except that in New Zealand, to International Power Plc. for $2.2 billion.

"Obviously, with the Edison deal, there are also some interest on the IMPSA side. But any inquiries about IMPSA will have to be referred to our IMPSA office in Kuala Lumpur headed by Juan Carlos Fernandez," Katz said. Fernandez arranged the entry of Edison Mission in the CBK project.

Another source privy to CBK Power’s operations added that IMPSA is bound by its 25-year contract with the government. "A possible sale of IMPSA’s shares in the project would need an approval from the government since there is a provision in the contract that limits the ability of the operator to sell its stake in the project," the source said.

The source pointed out that even if the sale of IMPSA’s share in CBK Power pushes through, "the project will not be affected by it."

Based on news reports, at least four Japanese firms and Thailand’s Electricity Generating Corp. are eyeing the acquisition of $150-million worth of hydropower assets in the Philippines in efforts to boost their growth overseas.

The Japanese companies include J-Power or Electric Power Development Corp., a power wholesaler set to launch a $3.4-billion initial public offering; Mitsubishi Corp.; Tokyo Electric Power Co.; and Marubeni Corp.

Prior to the news report, CBK Power said it is willing to undertake the next two phases of the project’s rehabilitation program and bid for some hydropower assets to be sold by the government.

"I guess it is logical for us to undertake the rehab because it is our project. But we only have a contract for Phase II. At present, we have no plans yet to continue the rehab. We want to look at the political situation first," Katz told The STAR. "We are looking at every opportunity here."

Katz said they have completed Phase II of project in November last year. "Phase II is already operational," he said. The CBK project is expected to have a total capacity of about 790 megawatts (MW). Phase II has a capacity of 360 MW, with two units at 180 MW capacity each.

The CBK Power executive admitted that undertaking the next two phases of the project is part of the company’s long-term plan. "We have a 25-year contract with the government. We will be here for a long time," he said.

He said they are also aware of the additional power demand in Luzon in 2008. "We will likely do it. It is important because of the demand for power in the next few years," he said.

Last year, the National Government successfully renegotiated its contract with CBK Power, resulting in savings of $96 million or approximately P5 billion. This includes CBK Power’s concession to waive its right to collect from Napocor the last four installments, amounting to $26 million, due on the security deposit.

The $70-million security deposit was effectively an interest-free loan which CBK Power extended to Napocor.

Under the agreement, CBK Power agreed to waive part of its claims for capital recovery fees as well as the operation and maintenance fees on Kalayaan Stage II until Dec. 2003.

CBK Power, on the other hand, agreed to provide Napocor free of charge for any electricity delivered above the minimum guaranteed power for a period of 30 months. The agreement is subject to consent of CBK Power’s lenders.

The CBK complex is considered a critical and indispensable component of the Luzon grid.