SMC, K-Water reach agreement on Angat hydro plant operation

Business Mirror

Published on Monday, 12 August 2013 19:49

Written by Lenie Lectura

SAN Miguel Corp. (SMC) and Korea Water Resources Corp. (K-Water) have jointly agreed to form a new company that will operate and manage the 218-megawatt (MW) Angat hydropower plant.

In a disclosure to the stock exchange, SMC secured the green light from the board of directors for the management “to discuss, negotiate and to enter into a JV [joint venture] with K-Water.” At the same time, both will “create an entity to undertake the administration, rehabilitation, operation and management of the Angat hydroelectric power plant.

K-Water, in April 2010, won the bid to privatize the facility from the Angat Dam in Bulacan. K-Water placed a bid of $440.8 million, besting other offers from SMC, First Gen Northern Energy Corp., SN Aboitiz Power and Trans-Asia Oil and Energy Development Corp.

However, the facility has yet to be turned over to K-Water after the latter cited deterioration of the facility, which prompted the South Korean firm to demand from the Philippine government to bring down the $440- million price tag.

In a letter sent recently to the Private Sector Assets and Liabilities Management Corp. (PSALM), K-Water said “the Angat HEPP [hydroelectric power plant] deteriorated since the bid submission date mainly due to PSALM’s failure to operate it in the ordinary course of business.”

It also asked the government to pay P300 million worth of unpaid municipal property taxes by PSALM and the National Power Corp.

“This will bring a severe burden to K-Water as the municipal government signaled difficulties in the buyer’s obtaining permits and licenses until the taxes are fully paid,” K-Water said.

“The foregoing critical issues require immediate attention and close cooperation by Psalm, as a seller who implements the bidding procedures for the transaction.

“However, to our regret, Psalm did not address our concerns and questions.… Furthermore, it entered into an agreement which might infringe on our rights and obligations without informing us and has refused to provide a copy of it despite our repeated requests,” K-Water said.

K-Water also wants PSALM to grant water rights so it can “achieve the same level of benefits expected.” Moreover, K-Water questioned the exclusion of the Angat Dam’s auxiliary units four and five from the assets it will take over.

The hydroelectric plant is composed of four main and five auxiliary turbines. Units four and five are owned by the Metropolitan Waterworks and Sewerage System, which has bid out the rehabilitation of the generating facilities.   source