Govt to terminate YNN contract
By Likha Cuevas and Niel V. Mugas
Manila Times, Reporter
THE government will terminate its contract with YNN Pacific Consortium Inc. on the sale of the Masinloc power plant in Zambales, Finance Secretary Margarito Teves announced.
The notice of termination will be issued on or before July 10, 2006, and will take effect 30 days after as specified in the asset purchase agreement (APA) between the Power Sector Assets and Liabilities Management Corp. (PSALM) and YNN.
Teves, also the PSALM board chairman, reiterated that the $14-million performance bond is forfeited, since the winning bidder for the 600-megawatt coal power plant failed to deliver its down payment of $227.54 million to the government on June 30. This deadline was already an extension of the original deadline of March 31.
However, Teves said the government is leaving the door open for YNN’s upfront payment, if it manages to beat the grace period for the notice of termination to take effect.
“The contract does not prohibit accepting the payment. YNN’s bid of $561 million was the most advantageous to the government at more than double the amount of the losing bid. If this transaction should push through, there will be a new player in the power industry and more players mean a more competitive playing field,” Teves said.
The upfront payment represents 40 percent of YNN’s $561-million bid price during the Masinloc’s auction in December 2004. The payment had to be made by June 30 this year to allow YNN and its new partner, Ranhill Berhad of Malaysia, to acquire the plant but since the company failed to do so, PSALM forfeited the $14-million bond it posted.
The APA will be officially terminated 30 days after the notice of termination is issued.
“Like any other contract, the APA between PSALM and YNN states that we should notify the buyer in writing at least 30 days before the termination takes effect,” PSALM president Nieves L. Osorio said.
This, however, was different from an earlier statement issued by finance department that the government is issuing an extension of another 30 days.
Earlier, Teves said the government would wait for YNN to make its down payment within the 30-day grace period after June 30. If all options had been exhausted, he said the government would have to verify the possibility of rebidding the plant and “carefully study” it will be auctioned off again.
Osorio said there is no provision in the APA prohibiting YNN from making the payment before the notice of termination is served. It can still acquire the plant if it is able to deliver the $227 million before the notice of termination on or before July 10.
But she also said that there is no indication from YNN and its biggest partner, Ranhill Berhad, that they are going to make the payment.
Osorio also defended PSALM’s decision, stressing that it has “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”
The bond was originally pegged at $11 million but it was raised to $14 million when PSALM granted a three-month extension to YNN after its Australian partner left and Ranhill entered into the scene. PSALM allowed the extension, seeing its benefits to the government.
It noted that 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.
Osorio also disputed claims that the failure of the Masinloc bid relied on the absence of a supply contract with the plant, a commodity which is required by most banks to lend money to power generators.
“But as the Masinloc experience has shown, bankers are putting great importance on the power sales contracts with Meralco. At this point, we will have to assess our options as we do not intend to sell National Power’s plants at bargain prices,” Osorio said.
Negotiations for a power-supply contract between PSALM and Napocor, on one hand, and the Manila Electric Co. (Meralco) on the other were initiated in 2003 but did not progress despite the initial offer from PSALM and National Power of P3.60 per kilowatt hour (kWh), or an 80-centavo discount from the regulated rate of P4.40 per kWh then.
A total of 118 electric distributors have signed power sales contracts with the government as mandated by the Electric Power Industry Reform Act (Epira). In 2004 Meralco accounted for 75 percent of the Luzon electricity sales.
YNN submitted the highest bid of $561.74 million for the power plant when it was auctioned in December 2004. The other bidder, First Generation Holdings Corp., submitted a bid of $274.85 million, which was below the government’s floor price for the said facility.
According to PSALM, Masinloc was bid out as a merchant plant without any power-purchase agreement with any electric distributor or major electricity user attached to the facility. Prospective bidders are willing to participate in the auction even without a power sales contract that would ensure the cash flow for the said power plant
Manila Times, Reporter
THE government will terminate its contract with YNN Pacific Consortium Inc. on the sale of the Masinloc power plant in Zambales, Finance Secretary Margarito Teves announced.
The notice of termination will be issued on or before July 10, 2006, and will take effect 30 days after as specified in the asset purchase agreement (APA) between the Power Sector Assets and Liabilities Management Corp. (PSALM) and YNN.
Teves, also the PSALM board chairman, reiterated that the $14-million performance bond is forfeited, since the winning bidder for the 600-megawatt coal power plant failed to deliver its down payment of $227.54 million to the government on June 30. This deadline was already an extension of the original deadline of March 31.
However, Teves said the government is leaving the door open for YNN’s upfront payment, if it manages to beat the grace period for the notice of termination to take effect.
“The contract does not prohibit accepting the payment. YNN’s bid of $561 million was the most advantageous to the government at more than double the amount of the losing bid. If this transaction should push through, there will be a new player in the power industry and more players mean a more competitive playing field,” Teves said.
The upfront payment represents 40 percent of YNN’s $561-million bid price during the Masinloc’s auction in December 2004. The payment had to be made by June 30 this year to allow YNN and its new partner, Ranhill Berhad of Malaysia, to acquire the plant but since the company failed to do so, PSALM forfeited the $14-million bond it posted.
The APA will be officially terminated 30 days after the notice of termination is issued.
“Like any other contract, the APA between PSALM and YNN states that we should notify the buyer in writing at least 30 days before the termination takes effect,” PSALM president Nieves L. Osorio said.
This, however, was different from an earlier statement issued by finance department that the government is issuing an extension of another 30 days.
Earlier, Teves said the government would wait for YNN to make its down payment within the 30-day grace period after June 30. If all options had been exhausted, he said the government would have to verify the possibility of rebidding the plant and “carefully study” it will be auctioned off again.
Osorio said there is no provision in the APA prohibiting YNN from making the payment before the notice of termination is served. It can still acquire the plant if it is able to deliver the $227 million before the notice of termination on or before July 10.
But she also said that there is no indication from YNN and its biggest partner, Ranhill Berhad, that they are going to make the payment.
Osorio also defended PSALM’s decision, stressing that it has “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”
The bond was originally pegged at $11 million but it was raised to $14 million when PSALM granted a three-month extension to YNN after its Australian partner left and Ranhill entered into the scene. PSALM allowed the extension, seeing its benefits to the government.
It noted that 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.
Osorio also disputed claims that the failure of the Masinloc bid relied on the absence of a supply contract with the plant, a commodity which is required by most banks to lend money to power generators.
“But as the Masinloc experience has shown, bankers are putting great importance on the power sales contracts with Meralco. At this point, we will have to assess our options as we do not intend to sell National Power’s plants at bargain prices,” Osorio said.
Negotiations for a power-supply contract between PSALM and Napocor, on one hand, and the Manila Electric Co. (Meralco) on the other were initiated in 2003 but did not progress despite the initial offer from PSALM and National Power of P3.60 per kilowatt hour (kWh), or an 80-centavo discount from the regulated rate of P4.40 per kWh then.
A total of 118 electric distributors have signed power sales contracts with the government as mandated by the Electric Power Industry Reform Act (Epira). In 2004 Meralco accounted for 75 percent of the Luzon electricity sales.
YNN submitted the highest bid of $561.74 million for the power plant when it was auctioned in December 2004. The other bidder, First Generation Holdings Corp., submitted a bid of $274.85 million, which was below the government’s floor price for the said facility.
According to PSALM, Masinloc was bid out as a merchant plant without any power-purchase agreement with any electric distributor or major electricity user attached to the facility. Prospective bidders are willing to participate in the auction even without a power sales contract that would ensure the cash flow for the said power plant
posted by OlongapoCity Zambales at
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