DOJ opinion paves way for CBK financial closing

The National Power Corp. turned over yesterday the Caliraya-Botocan-Kalayaan (CBK) hydroelectric project in Laguna province to CBK Power Co., Ltd., the Philippine partnership between IMPSA of Argentina and Edison Mission Energy of the United States.

The turnover was made after the current administration completed all the documentation required for the project, which allowed the financial institutions to achieve financial closure and disburse the initial amounts for the $460-million rehabilitation and expansion project.

The last document released by the Philippine government was the opinion from the Department of Justice confirming the validity of the acknowledgement and consent agreement (GACA) of the republic and other documents provided by previous administrations. Justice Secretary Hernando Perez signed the opinion.

The financing consists of long-term loans for $340 million and equity contributions from IMPSA and Edison Mission Energy totaling $120 million. The company will run the plants for the next 25 years under a build-rehabilitate-transfer-operate agreement with Napocor. The loans have been ensured by an innovative private insurance covering the political risk, the largest ever transaction of this nature worldwide.

The financing will cover the cost associated with the rehabilitation and expansion of the project and also includes the disbursement of a special 15-year interest-free loan of $70.8 million from CBK to Napocor, referred to as the security deposit.

IMPSA has begun work at the CBK complex to prevent technical problems from worsening at the plant. Last October, it completed the rehabilitation of 172 MW for the first unit of Kalayaan and readied for shipment the equipment for the other plants. The disbursement of funds will allow IMPSA to proceed with the further rehabilitation of the hydropower plants and their expansion from about 300 megawatts to 750 megawatts in early 2003. The construction will employ more than 1,200 Filipinos.

Nineteen international banks – Société Générale, BNP Paribas, Dai-Ichi Kangyo, The Industrial Bank of Japan, Citiban, ABB Structured Finance B.V., ANZ Singapore, Banco Santander Central Hispano, The Bank of Tokyo-Mitsubishi, Bayerische Hypo-und Vereinsbank AG, Credit Agricole Indosuez, Fortis (Netherlands), KBC N.V., Norddeutsche Landesbank Girozentrale, The Norinchukin, The Sanwa, The Tokai, Westdeutsche Landesbank Gironzentrale, UniCredito Italiano and Raiffeissen Landesbank Osterreich AG – are providing the funding for the project.

In support of the Philippines, a group comprising the leading insurance companies in the world provided CBK with the largest private political risk coverage for project finance. This financing of CBK has been cited by various international specialized magazines as the Power Deal of the Year-Asia Pacific by Pfi magazine; Philippine Loan of the Year by IFR; Deal of the Year from Philippines by Asia Money; Best Project Finance Issue by The Asset and Best Asian Project Finance Deal by Finance Asia.

Unlike traditional power plants, CBK is a pumped storage power plant that has the vital role of maintaining the quality of power in the Luzon grid. As a hydroelectric plant, it can adjust quickly to fluctuations in demand, allowing it to stabilize the grid and adjust almost simultaneously to changes in the supply and demand. CBK Power will deliver another 225 MW within 12 months and the last 350 MW at the beginning of 2003.

IMPSA is an industrial conglomerate with vast experience in development and operation of hydropower plants and has designed and manufactured over 7000 MW of turbines and generators. IMPSA has presence in more than 20 countries and it has been in Asia for over 15 years.

Edison Mission Energy specializes in the development, acquisition, construction management and operation of global power production facilities. As one of the world’s leading global power producers, Edison Mission Energy owns nearly 23,000 megawatts of generating capacity, including interests in over 75 projects worldwide.