YNN can still save its Masinloc contract, but not its $14-M bond

The government will not deduct the $14.14-million performance bond from the $561-million purchase price of 600-megawatt Masinloc power plant in case the YNN Pacific Consortium Inc. and its partner Ranhill Berhad will decide to deliver the downpayment before Aug. 6, Energy Secretary Raphael P.M. Lotilla said over the weekend.

"That would not be part of the $561 million," Lotilla said. The energy chief did not elaborate.

In a related development, the Power Sector Assets and Liabilities Management Corp. (PSALM) served the notice of contract termination to YNN Pacific Consortium last Friday, July 7.

"In accordance with the (asset purchase) agreement, since YNN was not able to pay the upfront payment, rentals and option price to (PSALM) on or before June 30, 2006, we are hereby notifying YNN that PSALM is terminating the agreement," PSALM president Nieves L. Osorio said in a letter to YNN.

The effective date of the termination of the asset purchase agreement with YNN, Osorio said, will be on Aug. 6, 2006.

Osorio said there is no provision in the APA that prohibits YNN consortium from paying the downpayment before the notice of termination takes effect which is 30 days after it was served.

After collecting the $14.14-million performance bond from YNN Pacific, the PSALM board decided to issue the notice of termination of the contract for the sale of the Zambales-based coal-fired power plant.

Osorio said PSALM had adopted the necessary measures to ensure that the government’s interests and credibility were protected by requiring a performance bond and then forfeiting on it when YNN did not meet its deadline.

PSALM forfeited the $14.14-million performance bond after YNN failed to meet the June 30 deadline to deliver the $227.54-million upfront payment.

YNN submitted the highest bid of $561.74 million for the Masinloc thermal plant in Zambales.

The only other bidder, First Gen Corp., submitted a bid of $274.85 million, which was 30 percent below the government’s reserve price of $388 million and less than half of YNN’s bid.