First Gen backs out of Mirant bidding

First Gen Corp., the power generation arm of the Lopez group, announced yesterday that it has dropped its bid for Mirant Philippines Corp.’s assets.

In a disclosure to the Philippine Stock Exchange (PSE), First Gen vice president and compliance officer Victor B. Santos Jr. said "First Gen has advised Mirant Corp. that it will not participate in the bidding for the Mirant assets."

Santos said the company may want to concentrate on new projects and those assets being sold by the Power Sector Assets and Liabilities Management Corp. (PSALM).

"First Gen’s decision not to participate was a strategic one resulting primarily from First Gen’s intention to focus its efforts on various greenfield products and other acquisition opportunities that are anticipated to become available in the near future," Santos said.

First Gen has been actively bidding for National Power Corp.’s assets being auctioned by PSALM. It won the biddings for the 1.6-megawatt Agus 112-(MW) Pantabangan-Masiway hydroelectric power plant plants.

Industry sources, however, said First Gen was actually concerned about the conditions imposed on the purchase sale agreement (PSA). It plans to bid for Magat, Binga, Angat and Ambuklao hydropower facilities. It is also interested in the geothermal assets of Napocor such as Tiwi-Makban.

The company is planning to put up a 300-MW natural gas-fired power facility in San Gabriel Batangas.

First Gen was supposed to join the Japanese consortium of Marubeni and Tokyo Electric Power Corp. (Tepco) as their Filipino partner.

But after the bid submission last Nov. 24 in Singapore, Atlanta-based Mirant Corp. came up with three non-negotiable conditions on the sale of its shares in its Philippine assets.

The conditions will be part of the PSA expected to be signed on Dec. 15 this year.

One of the conditions is that the buyer first has to secure Philippines government consent on the sale.

On the employee severance package, the PSA prescribed that the buyer shall honor the policy of 2.5 months for every year of service severance package for two years.

Under the PSA, the buyer should also assume all remaining financial obligations that Mirant would not be able to settle before the closing of transaction – including P1.5 billion overpayments demanded by Napocor and real property tax payments.

Aside from the Marubeni group, it was learned that Korea Electric Power Corp. (Kepco) also led a consortium with Italy’s Suez SA and Japanese firms Sojitz and Chubu Electric to bid for Mirant assets.

The three other groups that submitted their bids were: One Energy with Tanjung Bin Sdn of Malaysia; International Plc. with Mitsui; Sumitomo Corp of Japan with AES; and, the Carlyle group.

All the bids submitted in Singapore were apparently within the range of between $2.6 billion to $2.8 billion. Sources said Mirant Corp. has a few more days to negotiate for a higher offer from the bidders.

As of March 2006, Mirant’s asset base stood at $3.2 billion from $1.3 billion as of end-2005.