MANILA, Philippines – After San Miguel failed to beat the competition, it is now aiming to join them.
Diversified conglomerate San Miguel Corp. is in talks with the South Korean firm that it lost to in the 2010 bidding for the right to operate and manage the 218-megawatt (MW) Angat hydro power plant.
In a disclosure to the stock exchange on Monday, August 12, San Miguel said its board has directed management “to discuss, negotiate and to enter into a JV with K-Water.”
Korea Water Resources Corp (K-Water) won the bidding for the Angat facility, which is fueled by water from the Angat dam in Bulacan.
San Miguel has been eyeing a stake in the hydro power plant as part of its expansion into the energy business. K-Water’s $440.8 million bid bested other offers from San Miguel and other bidders, which included First Gen Northern Energy Corp., SN Aboitiz Power andTrans-Asia Oil and Energy Development Corp.
San Miguel said the joint venture aims to “undertake the administration, rehabilitation, operation and management of the Angat hydroelectric power plant.”
The Angat dam supplies more than 90% of Metro Manila’s potable water supply.
The facility has yet to be turned over to K-Water after the latter cited various issues after privatization.
The South Korean firm is demanding that the Philippine government bring down the $440 million project price citing the deterioration of the facility as well as several changes the Philippine government put in the agreements signed by both parties.
In a letter sent recently to the Private Sector Assets and Liabilities Management Corp (Psalm), K-Water said “the Angat HEPP deteriorated since the bid submission date mainly due to PSALM’s failure to operate it in the ordinary course of business.” State-owned PSALM oversaw the privatization of the Angat facility.
AHEPP refers to the Rehabilitation, Operation and Maintenance of the Angat Hydroelectric Power Plant (AHEPP) Auxiliary Turbines 4 and 5. The P1.16 billion project that will be bid out under the government’s flagship public-private partnership scheme was approved by President Benigno Aquino III in January.
K-Water had told Psalm it wants to “achieve the same level of benefits expected” in its 2010 bid for the power plant and wants the plant’s auxiliary units 4 and 5 to be included in the takeover.
State water regulator Metropolitan Waterworks and Sewerage System (MWSS) owns these auxiliary units and is bidding out their rehabilitation. The hydroelectric plant is composed of 4 main and 5 auxiliary turbines.
“It (Psalm) entered into an agreement which might infringe on our rights and obligations without informing us and has refused to provide a copy of it despite our repeated requests,” K-Water said.
The firm also asked the government to settle the P300 million municipal property taxes that PSALM and the state-owned power generator National Power Corp. failed to settle before the privatization.
“This will bring a severe burden to K-Water as the municipal government signaled difficulties in the buyer’s obtaining permits and licenses until the taxes are fully paid,” K-Water said.
“The foregoing critical issues require immediate attention and close cooperation by Psalm, as a seller who implements the bidding procedures for the transaction. However, to our regret, Psalm did not address our concerns and questions.”
In mid-July, Energy Secretary Jericho Petilla said he has met with K-Water representatives. “Hopefully by the end of the year, we can come up with a win-win solution,” Petilla had said. – Rappler.com
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