The lights are still on

A lot of questions were raised when giant energy firm, Enron Corp., filed for bankruptcy protection under Chapter 11 of the US Bankruptcy Code last Dec. 3. There were also apprehensions on what will happen to its overseas operations.

In the Philippines, Enron has a holding company called Enron Power Phils. Corp. Under this firm are two major power plants managed by the Batangas Power Corp. and the Subic Power Corp. Both are build-operate-transfer projects which helped solve the country’s power crisis in the early 1990s.

Batangas Power, which runs a 110-megawatt power plant in Pinamucan, Batangas, has a 10-year BOT contract which is set to expire in July 2003. It is an independent power producer (IPP) of the National Power Corp., which means it sells its power to Napocor.

Enron wholly owns Batangas Power but owns only 50% of Subic Power, which operates a 116-MW plant inside the Subic Bay Freeport. Subic Power is also an IPP of Napocor. It has a 15-year BOT contract which will expire in Feb. 2009.

Realignment

While Enron has indeed been negotiating with Napocor for the sale of its assets in the Philippines, industry sources noted the talks were not triggered by the filing of bankruptcy of its mother company in Houston, Texas.

"Enron has been evolving into a trading company before Dec. 3," said a source. In recent years, Enron has been trading natural gas, electricity, metals and even pulp and paper instead of building power plants.

"It has become Enron’s strategy to sell all businesses that will not complement the trading businesses," the source said.

Despite the financial difficulties of its mother company, industry sources said Enron Phils. has a good chance of clinching a reasonable selling price for its two profitable power plants. "Because of the discount on the contracts, Napocor will benefit from the deal," another source said.

Should talks with Napocor and the Power Sector Assets and Liabilities Management Corp. (PSALM) fail, Enron Phils. will likely entertain other buyers intent on making their presence felt in the deregulated power market in the shortest possible time.

Psalm is a new government-owned and-controlled corporation created by the Electric Power Industry Reform Act. It is tasked to take ownership of Napocor’s existing generation assets, liabilities, IPP contracts, real estate and all other disposable assets.

Non-inclusion

"Filings for Chapter 11 reorganizations were made for a total of 14 affiliated entities. Enron-related entities not included in the Chapter 11 filing like the Philippines are not affected by the filing," said Miguel Gaffud, Jr., president and chief executive officer of BPC and Subic Power in a press statement.

It’s business as usual for both Batangas Power and Subic Power.

"Both Batangas Power and Subic Power will be able to reasonably comply with its obligations to their lenders and will certainly meet their debts repayment schedules," said Gaffud.

Even as the lights are being switched off in one of the global giants in the energy industry, Enron will always be remembered as one of the pioneer power providers in the country.