Petrochem firm blames Mirant for stalled plant operation

Mirant Philippines Corp. is facing yet another problem, this time with a petrochemical firm, over a power supply contract.

Metro Alliance Holdings and Equities Corp. said it had served a demand letter to Mirant Philippines to stop it from stonewalling efforts at reviving and re-operating the company’s petrochemical plant in Mariveles, Bataan.

Metro Alliance said the petrochemical plant, then owned by Bataan Polyethylene Corp. (BPC), started producing petrochemical resins in 2000. However, it ceased operations due to lack of raw materials coupled with rising productions costs.

Since 2005, Metro Alliance and its foreign investor have been conducting works for the rehabilitation of the plant, a crucial component of which is the assurance of a constant supply of power.

Metro Alliance argued that Mirant, as the owner-operator of the substation located at the premises of the plant, is in the best position to provide the necessary power.

Initially, the negotiations conducted between the new investors and Mirant were positive. But due to the financial woes experienced by Mirant’s mother company Mirant Corp., the talks fizzled out, with Metro Alliance unfortunately left hanging after having already expended a sizable sum in the preliminary re-commissioning of the petrochemical plant.

US-based Mirant Corp. is presently in the process of entertaining bids for its substantial shares in Mirant Asia Pacific, a Hong Kong based holding company which owns Mirant Philippines.

According to Metro Alliance, Mirant’s refusal to cooperate is a clear violation of the Electric Power Purchase Agreement (EPPA) in December 1999, as well as the contract of sublease covering the substation’s occupancy of the property, not to mention various agreements with the Napocor to operate the substation.

With Mirant’s adamant refusal to cooperate, Metro Alliance claims it has suffered running damages of about P300 million, and the possible pullout of its foreign investor. The present investment of both Metro Alliance and its foreign partner amounts to $100 million.

In a statement to the Philippine Stock Exchange (PSE), Mirant Philippines said their group is restricted by American law from engaging in or facilitating commercial transactions involving companies associated with Iran.

In particular, Mirant Corp. and its subsidiaries are prohibited from entering into commercial transactions with the government of Iran and entities controlled by it, subject to the risk of significant fines and jail terms.

BPC had previously confirmed that it has a definitive agreement with the National Petroleum Co. Int’l of Iran to take up a majority interest in the petrochemical facility.

Mirant issued this statement to clarify its reported refusal to supply power to BPC.

"It is a criminal act under US law for us to contract with or facilitate a transaction with Iranian-associated entities. The situation would be entirely different if BPC does not have Iranian equity," the company said.

Mirant said it has no other option at all because the economic sanctions are quite clear on what American individuals and companies cannot do.

In general, the sanctions bar any "direct or indirect" way of assisting or giving benefits to Iranian entities "wherever located," the company said.