ERC okays Subic Enerzone, Cepalco loans for capex

The Energy Regulatory Commission (ERC) has approved the Subic Enerzone Corp.’s (SEZ) plan to secure some P390 million in loans for its capital expenditures.

At the same time, the ERC also granted the Cagayan Electric Power and Light Co. (Cepalco) a permanent authority to acquire a $4-million loan to construct a 950-kilowatthour (kwh) photovoltaic electricity generation power plant.

In its application, SEZ has sought authority to secure some P185-million long-term loan from the Development Bank of the Philippines (DBP) and/or other financial institutions; an omnibus credit line composed of a sub-facility of the long-term loan in an amount of P185 million; and P20-million bills purchase line.

SEZ intends to use a portion of the loan to settle advances from its affiliates and use the remaining portion to fund about 10 ongoing projects.

In approving the application, ERC has asked the SEZ to comply with five conditions.

"The application filed by Subic Enerzone for approval of obtaining a long term loan and omnibus credit line with DBP and/or other financial institutions is approved and bound to five conditions stated in the Oct. 26, 2004 order," the ERC said.

Included in these conditions is that the projects listed to be financed from the loan proceeds must undergo transparent and competitive procurement process.

The ERC also formed a team to conduct an ocular inspection upon completion of the said projects to validate recording of the said assets and the corresponding expenditures in the applicant’s books of accounts.

Last year’s order prevented SEZ from using proceeds of the loan for any purpose other than what was stated in its application.

It also required SEZ to book in a separate ledger proceeds of the loan and corresponding capital expenditures.

The commission also asked SEZ to submit to ERC every six-month a progress report on the remaining uncompleted projects being funded by the loan.

The ERC likewise directed SEZ not to capitalize interest incurred from the loan and to submit to the ERC within 15 days any changes in the terms of the loan.

With the ERC approval, DBP can now release the 10-year loan to SEZ at an interest of 9.5 percent per annum.

SEZ is a consortium composed of Aboitiz Equity Ventures, Davao Light & Power Co. (DLPC), Mirant Phils. and San Fernando Electric Light & Power Co. (SFELAPCO).

In 2003, SEZ committed to invest P350 million over five years to improve Subic’s power distribution system.

So far, the company has invested P200 million with plans of investing another P50 million by the first quarter of 2006.