Masinloc buyer submits $14-M performance bond

Malaysian Ranhill Berhad, the newest member of the YNN Pacific Holdings consortium, has submitted its amended performance bond of $14 million to the Power Sector Assets and Liabilities Management Corp. (PSALM).

PSALM vice president Froilan Tampinco said this signifies the Malaysian commitment to its purchase of the 600-megawatt (MW) Masinloc coal-fired power facility in Batangas.

"YNN-Ranhill submitted last April 28, their amended performance bond of $14 million whose effectivity is good until December 2006," Tampinco said.

In end-December 2005, PSALM had asked YNN, the winning bidder of Masinloc, to deliver by mid-January 2006 the $11.14-million performance bond which would be effective until August 2006.

YNN complied with the requirement in January. With the entry of the Malaysian firm and a new payment deadline set, the consortium was given a higher performance bond of $14 million.

The performance bond serves as a guarantee that the consortium would not renege on its obligation to pay the upfront payment of $227 million on or before the June 30 deadline (from the original March 31) and later on settle the balance of $334.7 million to complete its winning bid of $561.7 million for the Masinloc facility.

"We believe that the additional $3 million performance bond is enough indication of YNN-Ranhill’s seriousness to push through with the deal. It is also sufficient protection for government’s interests in the next three months," PSALM president Nieves Osorio said earlier.

According to Osorio, the government has decided to extend the delivery of the upfront payment following a meeting with YNN officials and Ranhil Berhad president and chief executive officer Tan Sri Hamdan Mohamad.

She said it expects Ranhill, a publicly-listed company in Malayasia engaged in water, oil and gas, power and infrastructure development and YNN to complete within the three-month extension all financial arrangements relating to Ranhill’s investments in YNN.

Ranhill has tapped ABN-AMRO for its fund raising requirement. It is also talking with the Private Sector Operations Department of the Asian Development Bank (ADB) for project refinancing and possible equity investment.

In an email, Ranhill officials said "the (financing) issue is currently being handled by the management."

"We are aware that our critics will perceive this decision as an accommodation for YNN. However, we have to broaden our perspective. By keeping the deal alive, at least for the next three months, we have a bigger chance of competing the transaction and collecting not only the upfront payment of $227 million but in due time, the entire price of $561.7 million," Osorio said.

So far, Ranhill has already established its strong presence in the Philippine energy industry.

Recently, it participated in the Energy Contracting Round to explore the Sulu Sea for oil and gas exploration is being evaluated by the Department of Energy (DOE).