Government to honor CBK contract with IMPSA

The government will keep its commitment and honor the terms of the controversial Caliraya-Botocan-Kalayaan (CBK) hydropower project of the National Power Corp. (Napocor), particularly the performance undertaking guarantee being sought by proponent IMPSA Asia Ltd.

Finance Secretary Jose T. Pardo who met recently with IMPSA officials said "government stood its ground and we told them (IMPSA) that the approval extended by then former Finance Secretary Edgardo Espiritu will be honored."

Pardo said the performance undertaking is different from a sovereign or full government guarantee which IMPSA originally sought.

He said the National Government will only be required to assume the obligation of Napocor when it defaults on its obligations to IMPSA, if due causes are established, stressing that is highly improbable for Napocor to fail in its obligations to the private contractor.

The performance undertaking has been preventing IMPSA from drawing on a $460-million loan to jumpstart the hydropower project which involves the rehabilitation and capacity expansion of the hydropower facilities.

IMPSA's creditors are requiring the government guarantee which assures them of payments even if Napocor's financial problems prevent it from fulfilling its financial obligations.

IMPSA almost lost the project last June when Napocor threatened to cancel the two year agreement with IMPSA after the latter failed to raise the security deposit as well as financially close the project.

Napocor's CBK project is one of the biggest to come on stream since the 600-megawatt nuclear power plant in Bataan but which was shelved by government.

Being the only pumped-storage project in the country, the CBK facility is a strategic component in Napocor's Luzon power grid.

The project is being undertaken by IMPSA of Argentina and partner Edison Mission Energy of the US. The partners have a 50-50 percent stake in the 25-year build-rehabilitate-operate-transfer project.