Manila, September 9, 2005
—The Philippine Department of Energy and the International Finance Corporation, the private sector arm of the World Bank Group, today announced that a consortium comprising of Coastal Power Development Corporation and Applied Research Technologies Philippines won a competitive bid to supply power to the Philippine islands of Marinduque, Romblon, and Tablas. The winning bidder proposed a hybrid diesel-wind energy solution that will improve standards and bring the generation into compliance with Philippines environmental standards.
Private sector participation was structured through a concession-type contract between the winning bidder and local electric cooperatives that take the power on these islands. The framework of this concession does not require the private supplier to buy existing generation assets of the National Power Corporation, allowing those assets to be deployed to unserved areas in the Philippines.
The winning bidder’s price will lead to a reduction of about 40% from the current cost (13.8 pesos per kilowatt hour) of generating power in the islands. The Coastal Power Consortium agreed to provide power without interruption all year long, compared with the current average interruption of 196 hours, or eight days, per month. The group bid to provide 25 megawatts of combined electric capacity to the three islands not connected to the national power grid.
IFC was charged with developing the agreements and a regulatory framework to attract private sector capital and expertise to power generation in remote islands. IFC was retained in 2004 by the Philippine government through the Department of Energy, National Power Corporation, and the Power Sector Assets and Liabilities Management Corporation to act as transaction advisor.
The Coastal Power consortium will take responsibility for power supply from the Small Power Utilities Group, which is part of the National Power Corporation. SPUG has maintained responsibility for supplying power to 74 remote offgrid islands. The annual subsidy requirement for all these islands amounts to 2.1 billion pesos. Only about 60 percent of that cost is covered by a universal service charge assessed to ongrid customers. The remaining 40 percent is passed on to the national deficit through NPC.
The Private Investor will be able to supply electricity to the 3 islands at a lower cost than the current government-managed operation and thus reduce the annual subsidy for electricity from 458 million pesos to 168 million pesos.
“IFC strategy includes support for power sector reform in the Philippines through increased private sector participation that promotes competition. The interest in this transaction provides tangible results for the ongoing power reform agenda in the Philippines,” said IFC Country Manager Vipul Bhagat.
“This model public-private partnership structure, wherein the investor achieves full cost recovery and profits from the electric cooperatives and partially through government subsidy, can be replicated for other infrastructure transactions in the Philippines and elsewhere,” said IFC Director of Advisory Services Bernie Sheahan.
IFC in the Philippines
IFC committed investments of $102 million in the Philippines during the 2005 fiscal year in the housing finance, infrastructure and insurance sectors along with advisory mandates in the infrastructure sector. IFC recently began lending directly in pesos to local companies to mitigate their foreign exchange risks, and about 85 percent of FY05 investments were local currency financing.
About IFC
The mission of IFC (
www.ifc.org
) is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY04, IFC has committed more than $44 billion of its own funds and arranged $23 billion in syndications for 3,143 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY04 was $17.9 billion for its own account and $5.5 billion held for participants in loan syndications.
