US power giant eyes RP assets of Enron

MidAmerican Energy Holdings, the mother company of CalEnergy Co., Inc., has expressed interest in Enron Power Corp., the Philippine subsidiary of US-based Enron Corp., which has filed for bankruptcy protection, Energy Secretary Vincent S. Perez said.

In a press conference Wednesday, Perez said MidAmerican wants to take a look at Enron’s generating assets aside from those of National Power Corp.

CalEnergy is an active developer and producer of energy from diversified fuel sources in the Philippines. MidAmerican, on the other hand, is a leader in the production of geothermal, natural gas, hydroelectric, nuclear and coal energy. It is also a lead supplier and distributor of energy in the rapidly deregulating United States and United Kingdom consumer markets, with a customer base of more than 3.2 million.

In 2000, MidAmerican earned revenues of $5.1 billion from total assets of $11.7 billion. It has a total generation capacity of approximately 10,000 megawatts (MW).

Perez, however, said they would prefer to buy out the contracts of Napocor with Enron Power before they dispose of them to other interested investors.

The Power Sector Assets and Liabilities Management Corp. (PSALM) is in the process of discussing the terms and conditions of the buyout contract with Enron Power. PSALM is an entity created under Republic Act 9136 or the Electric Power Industry Reform Act to absorb all the assets and liabilities of Napocor. "There are ongoing discussions between PSALM and Enron," Perez said.

He noted that there are some complicated and contentious issues in the terms and conditions of the planned buyout. "There are some issues such as the representation and warrantees. We want to see what will happen with the discussions," Perez said, declining to elaborate on these issues.

Though they have set deadline of end of last month to resolve the issues, he said they believe they should not be on a hurry to decide on this matter. "There is no hurry to close the deal if the terms are not threshed out," he said.

He said there is a need to study this deal very carefully as this will help reduce the stranded cost that will be absorbed by the government in the future. Under the new power bill, the government will have to absorb some P200 billion worth stranded cost of Napocor.

Enron Power is the local unit of Enron Corp., one of the largest energy traders in the US. Recently, Enron filed for bankruptcy protection, a type of proceeding that allows the company to remain in control of its business while negotiating with creditors. It was touted as the biggest bankruptcy filing in America’s corporate history.

PSALM earlier said it was willing to assume the contracts of Enron Power provided that the selling price is discounted.

The proposed buy-out will involve two build-operate-transfer (BOT) power plants, namely: the 105-megawatt (MW) Pinamucan-Enron oil-based power plant in Batangas and the 108-MW Subic-Enron 2 Unit 1-8 in Olongapo, Zambales. The two plants have combined estimated value of $250 million.

Enron Power is a contracted independent power producer of the Napocor. The contract for the Batangas plant started in July 1993 and will expire in July 2003 while the Zambales contract has a 15-year tenure and will lapse in March 2009.