San Miguel, K-Water negotiate JV for Angat

Manila Bulletin

By Myrna M. Velasco

Published: July 29, 2013

The energy unit of San Miguel Corporation (SMC) and Korea Water Resources Corporation (K-Water) reportedly kicked off serious discussions last week for a joint venture deal on the 218-megawatt privatized Angat hydropower facility.
“The parties, with their lawyers, finally sat down last week to discuss possible joint venture,” a source privy to the matter has disclosed.
The JV parameters being fleshed out, according to the source, lead to SMC cornering 60-percent shareholdings in the special purpose company (SPC) to be set up when the facility’s divestment is finally closed by K-Water with the Power Sector Assets and Liabilities Management Corporation.
K-Water will retain 40-percent equity, and that is hinged on its compliance with the Philippine Constitution’s ownership restriction on entities involved in the exploitation and development of the country’s natural resources.
The source qualified though that while the run of talks point to a highly-probable positive outcome “there is nothing definite that was agreed by parties yet… but discussions will continue.”
Industry watchers perceived K-Water’s need for a “white knight” to close its privatization deal with PSALM, but the officials of the Korean firm earlier indicated they will only tap the local partner when the facility is already turned over. They also admitted talks with the San Miguel group.
PSALM is expected to issue within this month the certificate of effectivity (COE) that will finally seal the Angat plant’s privatization. This will be the signal for the remittance of the upfront payment which is equivalent to 40-percent of K-Water’s $440.8-million winning bid.
Energy Secretary Carlos Jericho Petilla admitted to reporters during a press briefing that K-Water is also seeking government’s imprimatur for the inclusion of Angat auxiliary units 4 and 5 in the sale package.
He acknowledged though that the agencies concerned, such as the Metropolitan Waterworks and Sewerage System (MWSS) and Public-Private Partnership (PPP) Center, are studying the legal implications.
Petilla emphasized that K-Water lodged a two-pronged divestment proposal for the MWSS-owned auxiliary units of 28MW. One, will be for K-Water to buy the assets as part of the entire Angat package; and two, the government must devise a contractual arrangement that will bestow on them the “electricity generation activities” to be done at the auxiliary units.   source