A unit of the World Bank is expected to act in September on a proposal to lend US$105 million to SN Aboitiz Power Inc. to help finance privatization of the 360-MW Magat hydropower plant in the Philippines.
SN Aboitiz Power, a joint venture of Aboitiz Equity Venture Inc. (AEV) and Statkraft Norfund Power Invest of Norway (SN Power), won control of Magat in a 2006 privatization auction with a bid of US$530 million. In June, the Philippines’ Board of Investments declared the developer eligible for tax benefits to refurbish the project. (HNN 6/29/07)
The World Bank’s International Finance Corp. (IFC) is considering a US$105 million loan to partly finance the privatization. IFC said the total project cost is estimated at US$542 million, including the bid price of US$530 million and a provision for working capital of US$12 million.
IFC is to provide the US$105 million loan, while Nordic Investment Bank contributes a US$47 million senior loan, and a consortium of Philippine banks completes financing with the equivalent of US$228 million in peso loans.
The project cost currently is funded by equity from project sponsors, shareholders’ advances, a shareholder loan from AEV, and a deferred payment facility by the government’s Power Sector Assets and Liabilities Management Corp. (PSALM). SN Aboitiz Power is to use the proceeds from the proposed IFC financing to pay the PSALM deferred payment in full to complete the privatization process.
IFC said its development contribution includes: sharing its experience in investing in merchant hydro plants; providing long-term, flexible financing to meet project and sponsor needs; leading the consortium of lenders and mobilizing additional bank lending; and assisting in implementation of environmental and social policies in line with international standards.
Magat, which was built on the Magat River at a cost of US$83.7 million, started commercial operations in 1983 in Isabela province in the northern Philippines. The largest operating hydro project in the Philippines, it has four 90-MW units commissioned in 1983-1984.
SN Aboitiz plans to upgrade and rehabilitate the plant. Philippine officials said the project can accommodate two additional generating units for expansion. The multi-purpose earth-and-rockfill dam is used for irrigation, flood control, and power generation.