Malaysian firm takes over retired Manila thermal plant

MANILA, Philippines - Malaysian firm Gagasan Steel Inc. has officially assumed ownership of the decommissioned 200-megawatt (MW) Manila Thermal Power Plant (MTPP), the Power Sector Assets and Liabilities Management Corp. (PSALM) said.

PSALM said it received last week from Gagasan Steel the full payment of $2.5 million for the retired power facility located in Isla de Provisor, Paco, Manila.

The MTPP was privatized through a negotiated sale PSALM conducted on April 25, 2008. The purchase price covers the plant equipment, components, auxiliaries and accessories, but excludes the underlying land.

Gagasan Steel, an affiliate of Malaysia-based Gagasan Steel Sdn Berhad, is an import-export handler, dealer, and trader of scrap metals that has been operating locally since 2002. Its local clients include National Power Corp. (Napocor) and the Manila Electric Co. (Meralco).

PSALM’s Contract Management Group will monitor compliance with the asset purchase agreement provisions of the sale before the facility is turned over to Gagasan Steel to ensure that all required deliverables are met.

Gagasan Steel will then be given six months, subject to extension, to dismantle the plant building and equipment and clean up the site.

Part of Gagasan Steel’s responsibility is to secure the necessary permits, licenses and accreditation from pertinent government agencies such as the Department of Environment and Natural Resources in dismantling the structures and equipment as well as in cleaning up the site in accordance with existing environmental laws and regulations.

PSALM said proceeds from the sale of the MTPP would be used to help settle the financial obligations of Napocor.

As of Feb. 5, the total privatization proceeds generated from the auction of Napocor’s plants as well as the National Transmission Corp. concession have amounted to $6.33 billion. Of this amount, PSALM has collected a total of $2.91 billion.

From these collections, PSALM has utilized $1.3 billion for prepayments; $350 million for debt service; $290 million for independent power producers obligations; and $200 million for other power-related debts.

Gagasan Steel is also eyeing the decommissioned 225-MW Bataan Thermal Power Plant PSALM bid out last Friday. The third round of bidding, however, failed as two bidders, Krisahs Trading and Rubenori Inc., were unable to meet the technical requirements set by PSALM, while Gagasan Steel did not meet the reserve price.

PSALM will immediately enter into negotiations with Gagasan Steel pursuant to the privatization company’s procedures.