"Officials from Marubeni will be here this week to work out a concrete proposal. They are proposing if we could convert the existing BOT contract into a 50-50 joint venture," EDC chairman and president Sergio Apostol said in an interview.
EDC has a 10-year BOT contract with Marubeni signed in 1996 for the 104 MW (2x52MW) geothermal power plant located in Mt. Apo in Kidapawan, North Cotabato.
"If negotiations will prosper, this means that Marubeni will not be turning over to EDC the Mt. Apo geothermal power plants once the contract expires in 2006 instead Marubeni will become part owner of the project," Apostol explained.
Apostol said EDC welcomes the Marubeni proposal since this will help the geothermal company in its cash flow problem.
He said so far, EDC has been paying some $600 million a month for the project for the past six years now. Since the initiative came from them (Marubeni), we (EDC) are quite interested to look at it. This JV will enable us to manage our finances and have lots of savings," he said.
According to Apostol, Marubeni floated the idea a month ago and decided to firm up the proposal this week. "Marubeni submitted their proposal a month ago. EDC will try to come up with a counter proposal within the week," he added.
Industry sources, said Marubeni’s proposal for joint venture with EDC shows continuing confidence in the country’s power industry. "This is a reflection of their (Marubeni’s) confidence on EDC," the sources said.
Apostol said EDC has a similar BOT contract with California Energy International Services Inc. in Leyte. EDC will assume full control of the power plants in 2007.
He admitted that EDC is having a cash flow difficulty because of its problem with Cal Energy. "We will be oozing with money if we will be able to settle our problem with Cal Energy," he said.
He said the company has paid some $200 million in penalties for its alleged non-delivery of required steam for Cal Energy. The US-based power firm argued that EDC was supposed to deliver some 444 MW based on the BOT contract. Apparently, EDC was only delivering 399 MW. But EDC argues that it is delivering more than what the contract prescribes or about 456 MW. The two companies are now in the middle of an arbitration to resolve the issue.