SMC puts up P1-B premium fee for Angat contract with K-Water

Manila Bulletin 
By Myrna M. Velasco 
Published: August 20, 2013 
Diversified conglomerate San Miguel Corporation (SMC) is reportedly putting up more than R1.0 billion (about US$26 million) in premium fee for the joint venture deal it has been hammering out with Korea Water Resources Corporation (K-Water) for the privatized 218-megawatt Angat hydropower facility.
Highly-placed sources noted that such will be among the major concerns to be discussed as the parties move forward with their talks on the establishment of a special purpose company  (SPC) for the Angat acquisition.
 “The premium that San Miguel will pay would amount to $26 million to $27 million, it will be treated as an escrow account. That’s the initial agreement...however, negotiations are still on-going,” a source privy to the matter has hinted.
As the parties are now reaching a deal on the joint venture, it was similarly gathered that K-Water already tapped Standard Chartered Bank as financial advisor for the Angat transaction closing.
Executives of the Korean company previously indicated that the acquisition will be financed both from equity contributions of the partners and 70-percent loan.
They are also in discussions with local banks like Banco de Oro, Rizal Commercial Banking Corporation and Bank of the Philippine Islands (BPI) for loans that will supplement the financing to be provided by Korea Export-Import Bank (K-Exim).
Once agreements are firmed up, the Angat facility turnover is to some degree a milestone for the Power Sector Assets and Liabilities Management Corporation (PSALM) given the fledgling performance it had in the past three years on the privatization of the remaining power assets.
The $440.88 million that the winning bidder will pay can also shore up the company’s balance sheet, and would significantly pare its need for additional borrowings.
The certificate of effectivity (COE) issuance is slated September 2 this year, and K-Water will have 27 days to close the deal with PSALM so final asset turnover can be enforced.
The Angat facility was considerably a “knotty privatization deal” – having gone through hurdles such as an unconstitutionality case at the Supreme Court as well as extreme oppositions from some groups.
The intervention of Energy Secretary Carlos Jericho Petilla last June was able to move things faster after PSALM hit roadblocks in its negotiations for transaction closing with K-Water.
The Korean firm lodged several conditions for it to close the asset acquisition, but this was repudiated by the Philippine energy chief when he met with K-water officials at their Daejeon headquarters two months ago.   source