Manila, November 16, 2006—
The International Finance Corporation, the private sector arm of the World Bank Group, has announced that Masbate Progress Power Consortium is the winning bidder of a competitive selection process to supply cheaper and more reliable electricity to the isolated Philippine province of Masbate.
“IFC is delighted to be partnering with the Philippine government and the private sector to establish an efficient, effective structure that can act as a model to meet a growing demand for power and promote rural electrification, furthering the development objectives of the Government,” said IFC’s Country Manager for the Philippines and Thailand, Vipul Bhagat.
Under the terms of the agreement, MPPC will be obliged to supply 13 megawatts of dependable electrical capacity to Masbate 24 hours a day, year-round. Masbate currently relies on just 8 megawatts of electricity per day, and this supply is usually interrupted for several hours a day. The enhanced supply will mean significant improvement in the lives of Masbate residents.
MPPC has also committed to provide electricity at 6.99 pesos per kilowatt hour, about half the current generation cost of between 12 to 14 pesos per kilowatt hour.
“The resulting contract will use private sector capital and expertise to improve the affordability, quality, and capacity of power generation for Masbate, increasing local access to electricity and supporting the province’s overall development,” said Sanjay Grewal of IFC’s Advisory Services Department.
In June 2004, IFC was retained by the Philippines Department of Energy and the National Power Corporation to develop contractual agreements and a regulatory framework to attract private sector capital and expertise to power generation for remote islands. Some 74 remote, off-grid islands are currently the responsibility of the Small Power Utilities Group. The annual cost of supplying power to these islands amounts to 2.1 billion pesos ($37.5 million), with only about 60 percent of that cost covered by a universal service charge to on-grid customers. The remainder, about 800 million pesos ($14.3 million), is passed on to the national government as accumulated losses. IFC acted as transaction advisor for the Masbate selection process and is playing a similar role as the government looks to improve electricity supply to other remote and underdeveloped regions of the country.
The tendering process was held between August and November 2006, attracting 12 investors in the first round. Three investors submitted second-round offers: MPPC (EEI Power and Islands Grid Network Philippines), Vivant Consortium (Vivant Corporation and Gigawatt Power), and DMCI Holdings. The winning bidder, MPPC, was selected on the basis of the lowest generation price, after meeting the technical qualifications.
“The price offered by MPPC represents a significant decrease in the cost of generation in Masbate and will help reduce subsidies, thereby improving our organization’s financial position,” said Cyril Del Callar, President of the National Power Corporation. “We would like to thank IFC for its technical and advisory assistance and ongoing support.”
DevCo, a multidonor program affiliated with Private Infrastructure Development Group and supported by the UK’s Department for International Development, the Dutch Ministry of Foreign Affairs, the Swedish International Development Agency and the Austrian Development Agency also supported the advisory work, in particular the technical and legal aspects.
About IFC
The International Finance Corporation, the private sector arm of the World Bank Group, is the largest multilateral provider of financing for private enterprise in developing countries. IFC finances private sector investments, mobilizes capital in international financial markets, facilitates trade, helps clients improve social and environmental sustainability, and provides technical assistance and advice to businesses and governments. From its founding in 1956 through FY06, IFC has committed more than $56 billion of its own funds for private sector investments in the developing world and mobilized an additional $25 billion in syndications for 3,531 companies in 140 developing countries. With the support of funding from donors, it has also provided more than $1 billion in technical assistance and advisory services. For more information, visit
www.ifc.org
