PSALM to rebid Masinloc facility

The Power Sector Assets and Liabilities Management Corp. (PSALM) has decided to rebid the 600-megawatt (MW) Masinloc coal-fired power facility after YNN Pacific Consortium Inc. and its partner Ranhill Berhad of Malaysia failed to pay the $227.54 million downpayment last Friday.

At the same time, PSALM forfeited the $14-million performance bond posted by the YNN group.

The decision was arrived at as PSALM’s board stood firm on not giving in to another extension of the payment of the 40 percent upfront cash.

Last March, the request for an extension from the original deadline of March 31, 2006 to June 30, 2006 was granted to the YNN group to give time for Ranhill entry into YNN.

In an official statement released two days after the June 30 deadline, PSALM noted that it was the first and only extension granted to YNN. The extension was given on condition YNN increased the bid bond from $11 million to $14 million to ensure government is amply protected.

With the forfeiture of the bond, the Masinloc facility in Zambales will be open anew for re-bidding to interested parties at the appropriate time if conditions warrant.

"Meanwhile, government continues to operate Masinloc and earn from the income it generates,," PSALM said.

The PSALM board is chaired by Finance Secretary Margarito B. Teves with Energy Secretary Raphael P.M. Lotilla as vice chairman. The secretaries of trade and industry, budget and management, justice and the director general of the National Economic and Development Authority and their representatives also sit as ex officio members on the PSALM board with the PSALM President.

YNN submitted the highest bid of $561.74 million for the 600-megawatt Masinloc coal-fired power thermal plant in Zambales in a bidding held last Dec. 2004.

The only other bidder, the Lopez-controlled First Generation Holdings Corp., submitted a bid of $274.85 million, which was lower than the bid of YNN Pacific and below the government’s reserve price of $388 million.

In the same statement, PSALM said that at the time Masinloc was bid out, PSALM could not assure the bidders of buyers for the electricity produced from the plant.

The asset management firm said negotiations between (Meralco) and National Power Corp. for a supply contract attached to the plant was going nowhere. Meralco accounts for 70 percent of demand in Luzon. The winning bidder was therefore expected to obtain on its own a bilateral supply contracts with electric distribution utilities.

Lotilla, said PSALM could have forfeited the original $11 million bond last March 31. However, it was the board’s assessment that YNN gave the government a very good price of $561 million, considering that the second bid PSALM got from First Generation Holdings was only $275 million and actually less than half of YNN‚s bid and 30 percent below the government’s reserve price.

He said the decision to increase the bid bond by an additional $3 million was a result of the board’s decision to wait three more months to increase the collectible amount to 27 percent - a yield that any financial analyst would assess as a good yield over the short period of three months.

Last June 29, there were indications that Ranhill may not be able to cover for YNN’s downpayment for Masinloc when it disclosed to Malaysia’s stock exchange that board of directors has extended the deadline for first tranche of share sales agreement (SSA) with the YNN consortium by one month, or by July 31, 2006.

"Under the SSA in relation to the proposal dated June 15 2006, the conditions precedent pertaining to the acquisition of 60 percent equity interest in YNN are to be fulfilled/waived by June 30, 2006," Ranhill said in the disclosure.

A publicly-listed firm Ranhill had disclosed the other week to its local bourse that it would acquire the entire equity interest of YNN Pacific for $8 million. Ranhill said it will acquire YNN‚s 25,000 common shares for P100 per share.

Based on the disclosure, the proposed acquisition of Ranhill of YNN Pacific would be carried out in two tranches. Each tranche has conditions precedent before actual transaction is consummated.