Government to bid out Magat power plant next week

The Power Sector Assets and Liabilities Management Corp. (PSALM) will bid out the 360-megawatt (MW) Magat hydroelectric power plant on Dec. 14, the top PSALM official said.

PSALM president Nieves Osorio said it had released to bidders last Nov. 30, the final version of the asset purchase agreement (APA) and land lease agreement (LLA) for the sale of the Magat power facility.

Osorio said they are also set to release the other bid documents consisting of the lease contract and the operation and maintenance (O&M) agreement with the National Irrigation Administration (NIA) as soon as negotiations are completed and finalized.

She said these agreements will be binding among the winning bidder, PSALM and the NIA.

She added the APA for Magat requires the winning bidder to deliver at least 40 percent of the purchase price as upfront payment payable on or before the closing date.

The balance of 60 percent, she said, may be paid in 14 equal semi-annual payments with an interest of 12 percent per annum compounded semi-annually.

The winning bidder is also required to post a performance bond equivalent to two percent of the purchase price. The performance bond will be reduced every year equivalent to two percent of the aggregate amount of the deferred payments.

The winning bidder will likewise be required to post a deferred payment security deposit equivalent to at least the next deferred payment in the form of cash, currently dated manager’s check or an irrevocable standby letter of credit acceptable to PSALM.

"During the deferred payment period, PSALM will turn over to the winning bidder the Magat facility on the condition that it will operate, maintain and rehabilitate the complex in the ordinary and usual course of business," PSALM vice president for asset management and electricity trading Froilan A. Tampinco said.

The winning bidder will sign the APA and LLA with PSALM, and the lease contract and O&M agreement with the NIA. The O&M agreement details the terms and conditions set by PSALM and the NIA regarding the operation and maintenance of the dams and other non-power components needed for the operation of the Magat power complex, which has the largest generating capacity among the hydroelectric power facilities currently operating.

"NIA is amenable to lease its lands underlying a portion of the Magat facility subject to the execution of a lease contract under the O&M agreement," Tampinco said.

He said the terms and conditions of the lease contract will be "binding between NIA and the winning bidder."

The final transaction documents incorporate the comments raised by the bidders during the pre-bid conference last Nov. 8.

Seven prospective bidders attended the conference held at the Department of Energy. Of the seven investor groups, five submitted the documentary deliverables on the Nov. 14 deadline.

Tampinco said four of these investors have complied with all the documentary deliverables for the Magat facility.

The Isabela-based power plant is the second hydroelectric power facility to be bid out by PSALM this year following the successful sale last September of the 112-MW Pantabangan-Masiway hydroelectric power complex in Nueva Ecija.