Manila, October 23, 2007
— IFC, a member of the World Bank Group, today disbursed its financing to SN Abotiz Power for the privatization of Magat hydroelectric power plant, an integral component of the government’s privatization program under the Electric Power Industry Reform Act. This is an important step toward providing reliable and efficient electricity to consumers.
IFC’s $105 million loan will support the company’s privatization bid of $530 million for the 360 megawatt plant. Magat is one of the first merchant power plants in a developing country in East Asia and the first privatization deal that was concluded successfully with significant foreign participation under the power reform act.
“Through the success of the Magat privatization, we hope to create a positive demonstration effect and help the Philippine government in its effort to catalyze further private sector investment in the power sector,” said Jon Aboitiz, President of Aboitiz Equity Ventures and Chairman of Aboitiz Power. “We appreciate IFC’s commitment to helping us achieve this goal.”
Under the Electric Power Reform Industry Act, the government is required to privatize 70 percent of the total power generated in the Luzon and Visayas islands, which comprise the country’s main grid system. The law aims to create a fully competitive power sector, free from public sector involvement and controlled by an independent regulator. It provides for unbundling tariff rates, creating a wholesale electricity spot market, privatizing generation and transmission assets, and introducing open access and retail competition. The Philippines is among the first emerging economies to use the Wholesale Electricity Spot Market, a bid-based, gross pool, and energy-only market.
“IFC is pleased to be supporting the privatization of the Magat hydropower plant, which is a key part of the government’s power privatization program. We recognize the importance of this project in sustaining sector reforms, particularly in contributing to the success of the Philippines’ Wholesale Electricity Spot Market,” said Jesse Ang, IFC Acting Country Manager for the Philippines. “This is also an excellent example of how IFC is helping the country’s economic growth and development.”
For this project, IFC is providing longer-term financing than what is currently available on commercial terms. IFC is also acting as an anchor lender to allow the company to raise additional financing from foreign and local banks.
“IFC is committed to supporting local and global players and helping enhance their capacity to invest in strategic industries. This project is particularly important as it provides proof of concept of a successful privatization of a large-scale merchant hydropower project for other East Asian countries that are hesitant to embark on similar sector reforms,” said Rashad Kaldany, IFC Director for Infrastructure.
Magat is one of the few reservoir hydro plants in the Philippines that can be used to provide peaking capacity, making a valuable contribution to the country’s main power grid, which is limited in supply. According to the Department of Energy, the country needs to generate an additional 3,700 megawatts of power by 2014 to avoid a power crisis and sustain current economic and social gains.
In response to the growing appetite for financing power and other infrastructure projects, IFC is strengthening its investment and advisory presence in the Philippines. In fiscal 2007, IFC invested $130 million in power, water, and transportation projects in the country, including a 5 percent equity stake in PNOC Energy Development Corporation, which had one of the most successful initial public offerings in 2007.
IFC also acted as transaction advisor to the Department of Energy to help attract private sector participation for power generation in Masbate, one of the poorest provinces in the Philippines. An advisory services package for rural electric cooperatives is also being prepared. In addition, IFC is helping local commercial banks tap into the potentially huge energy efficiency financing market.
About IFC
IFC, a member of the World Bank Group, fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing private capital in local and international financial markets, and providing advisory and risk mitigation services to businesses and governments. IFC’s vision is that poor people have the opportunity to escape poverty and improve their lives. In FY07, IFC committed $8.2 billion and mobilized an additional $3.9 billion through loan participations and structured finance for 299 investments in 69 developing countries. IFC also provided advisory services in 97 countries. For more information, visit
www.ifc.org
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IFC in the Philippines
IFC has been investing in the Philippines for more than 40 years and established an office in Manila in 1977. As of June 2007, the country ranked 3rd among IFC’s exposures in the East Asia and the Pacific Region, with about $411 million in 31 projects. To complement its growing investments, IFC is also expanding its advisory services to include public-private partnerships and supporting the development of small and medium enterprises. IFC is focusing on Mindanao and in 2006 opened an office in Davao City.
About SN Aboitiz Power Corporation
SN Aboitiz Power Corporation is a joint venture between Aboitiz Power Corporation (AP) and SN Power Invest AS of Norway, a global renewable energy company. AP is listed in the Philippine Stock Exchange. AP is a subsidiary of Aboitiz Equity Ventures, Inc., holding and management company of the Aboitiz Group, which is also listed on the Philippines Stock Exchange.
