The Masinloc plant is about 250 kilometers north of Manila and supplies electricity to the capital.
The US-based AES Corporation won the right to acquire the 660 megawatt (MW) Masinloc plant through international competitive bidding for the price of $930 million. The cost to buy, rehabilitate, and operate the plant is being financed through equity investments and subordinated loans of $400 million from US-based AES Corporation and $35 million from the International Financing Corporation (IFC). ADB’s loan of $200 million accounts for 32% of its debt. The balance is being provided by the IFC and four commercial banks.
AES has paid 100% of the purchase price to the Government to complete the acquisition in one step. It will invest $47 million in the plant’s rehabilitation, which will improve its operating efficiency and bring its environmental, health and safety performance up to global standards.
“This will save coal and reduce carbon dioxide and other emissions,” Ms. Fukaya said. “It will also diversify the electricity generation market in the Philippines, thereby promoting competition and helping reduce power rates in the long run.”
The Philippines has some of the highest electricity prices regionally. The Government embarked on a market-orientated reform program in 2001 and introduced the wholesale electricity market. AES will sell the output of the Masinloc plant through the wholesale electricity market both on a spot or 'merchant' basis and under long-term contracts. AES has considerable experience in the 'merchant' power business worldwide. As the Philippine electricity market deepens, AES intends to offer more sophisticated risk mitigation products to customers.
Masinloc is the eighth and largest power plant to be privatized out of a total of 31 plants identified to be sold. Sale of the Masinloc plant will bring in $930 million to the Government. It will help boost market confidence and encourage further privatizations of assets belonging to the state-owned National Power Corporation.
With electricity demand on the Philippines’ main island of Luzon increasing by about 11% last year, an estimated $1.7 billion is needed to finance the construction of new power plants in coming years.
Once rehabilitated, electricity output at Masinloc will nearly double and the plant is estimated to have a lifespan of 40 years.