The International Finance Corp. (IFC), the private sector investment arm of the World Bank, is planning to lend about $105 million to SN Aboitiz Power Inc. (SNAP), the joint venture between Norway’s SN Power Invest and the Cebu-based Aboitiz Equity Ventures (AEV).
The multilateral institution said the loan would partly pay for SNAP’s acquisition of the 360-Megawatt Magat hydro facility in Isabela.
“IFC’s proposed investment will be in parallel with additional financing from Nordic Investment Bank (NIB) and local banks, and will support the privatization,” it said.
IFC and NIB jointly engaged SKM Consulting of New Zealand to conduct a technical and environmental review of the existing operations at the Magat facility, assess SNAP’s plans and progress since its takeover in April, and work with SNAP to develop a social and environmental action plan.
Last June, SKM conducted visits and interviews at Magat, together with IFC and NIB representatives.
“The proposed IFC loan will partly finance the privatization. SNAP will put in place new management procedures, implement deferred maintenance, and address technical issues such as sedimentation and operational improvements. SNAP will also suggest, advise, and assist the National Irrigation Administration with respect to the operations, repair, and maintenance of the dam,” IFC said.
The Magat facility was originally planned for the possible addition of two generating units, and SNAP is considering the feasibility of such an addition.
SNAP tendered a winning bid of $530 million for the hydro facility. On top of the purchase price, SNAP is allocating $12 million as working capital, bringing the total project cost to $542 million.
“IFC will provide a $105-million loan, Nordic Investment Bank will contribute an additional $47 million senior loan, and a consortium of local banks will complete the financing with a $228-million equivalent in peso loans. The project sponsors believe that the proposed peso and US dollar mixture in borrowing would be cost efficient and provide effective currency hedging,” IFC said.
The Magat plant has been operational since 1983 and is among the country’s few peaking plants in the Luzon grid selling electricity through the wholesale electricity spot market (WESM).
SN Power was established in 2002 as an equal joint venture between Statkraft and Norfund (50 percent), both of which are 100 percent owned by the Norwegian government.
Its objective is to develop, build, acquire, own and operate environmentally friendly hydropower assets in Latin America, Asia and Africa on commercial terms.
SN Power has ownership in nine projects with a total installed capacity of about 627 MW in operation.
It has six projects with a total installed capacity of about 1,163 MW under implementation, of which two projects, a 155-MW La Higuera project in Chile and the 192-MW Allain Duhangan in India, are IFC projects.
AEV, on the other hand, is the publicly-listed investment holding of the Aboitiz Group, one of the largest conglomerates in the Philippines.