EDC to pay $123.8 million for 2 geothermal plants

www.philstar.com
December 02, 2009

MANILA, Philippines - Energy Development Corp. (EDC), the country's largest renewable energy company, will pay the Power Sector Assets and Liabilities Management Corp. (PSALM) $123.8 million for the purchase of two geothermal power plants. In a disclosure to Philippine Stock Exchange, EDC said the amount was actually a prepayment of all its deferred payments to PSALM for the 192.5-MW (MW) Palinpinon and 112.5-MW Tongonan geothermal power facilities.

EDC said it will pay through its wholly owned subsidiary, Green Core Geothermal Inc. (GCGI). GCGI has already formally notified PSALM of the prepayment on Dec. 29, 2009 of all deferred payments due, including principal and accrued interest. Under the asset purchase agreement (APA Group) with PSALM, GCGI has the option to prepay the deferred payment at anytime, subject to the delivery of a written notice of such intent at least 20 business days prior to any such prepayment.

The deferred payment arrangement of GCGI or the stable financing scheme with PSALM for the geothermal power facilities was supposed to be carried out in 14 payments within seven years. The first payment of GCGI should have been made in April next year. Since EDC was able to successfully raise funds to effect the full payment of the two power plants, it decided prepay the purchase amount.

EDC investors' relation manager Erudito Recio said they will finance the prepayment "from existing cash at hand consisting of funds raised via private placement and net cash flows from operations." Recio said the company found the prepayment move as beneficial. "Prepayment of the PSALM staple financing is financially beneficial for the company considering that the replacement funds are cheaper and denominate in Philippine peso," EDC said.

Last Oct. 23, the geothermal leader assumed operations of the two geothermal power plants after paying PSALM P3.9 billion, representing 40% of the purchase price and $7 million for the purchase orders, rental, option price, performance security deposit on land lease, and industrial all-risks insurance policy and comprehensive general liability.

EDC, through GCGI, acquired the two plants located in Leyte and Negros Oriental in an auction conducted by PSALM last Sept. 2 when it submitted the highest complying financial bid of $220 million. GCGI is a subsidiary of First Luzon Geothermal Energy Corp, which is wholly owned by EDC. The two plants boost EDC's current portfolio of geothermal power generation assets to 1,049 MW.

In Leyte, EDC operates the Unified Leyte plants consisting of the 125-MW Upper Mahiao, 232.5-MW Malitbog, 180-MW Mahanagdong and 51-MW Optimisation plants. In Mindanao, EDC runs the 106-MW Mindanao 1 and 2 plants. EDC's first fully owned power plant is the 49-MW Northern Negros geothermal plant in Negros Occidental. In addition, EDC acquired 60-percent equity in First Gen Hydro which operates the 100-MW Pantabangan and 12-MW Masiway hydroelectric plants in Nueva Ecija.