AES Corp planning to sell majority shares in Masinloc power plant?


Posted 7 months ago

Is power producer AES Corp. selling its majority stakes in the 630-MW Masinloc Power Plant in Masinloc, Zambales?

By Patrick Roxas

Masinloc power plant

According to a report published in the power philippines website last month, AES is thinking of giving up its 51 percent controlling interest in the Masinloc coal fired power asset.

AES acquired the majority shares of the coal-fired power plant in a $930 million bid in 2008.

Thailand’s Electricity Generating Public Co. Ltd. bought 41 percent of its stake in 2014 and the remaining 8 percent is owned by the World Bank’s International Finance Corp.

AES’ move reportedly made major local power utilities such as Manila Electric Co. (Meralco) and AboitizPower to also make plans of acquisition in the Masinloc unit.

Both have expressed strong interest and are already preparing to study their participation as soon as the sale is formally announced, the report said.

Ayala’s energy unit AC Energy Holdings Inc. was also reported to be contemplating to buy the AES asset but decided to review the controlling stake first before participating in the sale.

“The process has not started yet,” Meralco president Oscar Reyes has been quoted saying. “It’s up to them… but we have to do all the necessary due diligence.

“AES is an existing, operating generating company. In a sense, you already have something that is potentially cash and income accretive to the business.”

Meralco PowerGen (MGen), Meralco’s generator facility prior to the Retail Competition and Open Access regime, can greatly benefit in earning the Masinloc asset considering that it doesn’t have an existing power plant yet.

AboitizPower appears to be waiting as well for AES Corp. to issue a process letter as they have participated in a similar unit sale, specifically when the Masinloc plant was then operated by the national government, way back in late 2000.

The Masinloc Coal-Fired Thermal Power Plant is located at Barangay Bani in Masinloc, and takes up onshore and reclaimed areas and properties.

It utilizes refined coals from Australia, China, and Indonesia. It was previously owned by the National Power Corporation (NAPOCOR) but was privatized by an international bidding procedure under the Electric Power Industry Reform Act (EPIRA).

AES, through Masinloc Power Partners Co. Ltd., completed the $930 million purchase and transfer of assets of the 600 MW Masinloc Coal-Fired Thermal Power Plant.

The acquisition was a key component of AES’s strategy to invest in areas where there is a significant need for new capacity and offers the company an excellent entry point into the growing Philippine economy through one of the lowest cost base-load plants in the system.

The Masinloc project is a particularly attractive investment because the existing facility has the infrastructure in place to allow AES to add an additional 600 MW of generation capacity.

As it has done through similar acquisitions in other parts of the world, the company expects to improve the overall efficiency and output of the existing plant, providing more reliable energy to the Philippine market.

Originally constructed in 1998, the plant uses coal from a variety of sources in the Pacific Rim. Through this acquisition, AES now operates the Philippines’ first privatized thermal plant.

The Masinloc Power Partners Co. Ltd of AES owns the base-load pulverized coal-fired power plant. The plant consists of two 300 MW units, each with an identical drum type forced re-circulation boiler. The plant began operating in 1998.

During the 1980s and early 1990s, the Philippines’ power sector suffered major electricity supply shortages. In response to the shortages, the NAPOCOR invested substantially in costly fast-track diesel and oil-fired power plants, implemented new public sector generation projects including Masinloc, and completed 27 contracts for construction of independent power plants.

By 1994, the power supply crisis had receded. The subsequent increases in excess generation capacity rapidly undermined the finances of the power supply industry.

The government’s solution was to embark on an ambitious program of privatization and reform. The pivotal changes were initiated in 2001, when the government passed the EPIRA, which provided the basis for transforming the electricity sector from one with significant public sector ownership and operation of key components (generation and transmission) into one that is now largely privately owned and operated with significant and growing competition.

A complementary objective of the reforms was the privatization of state-owned generation assets to help establish several independent and competitive generators, and use the proceeds to reduce the Philippines’ national debt.

The 2001 act set ambitious targets for privatization of state-owned generation assets that envisioned the sale of 70% of the state’s power plants to the private sector by June 2004.

The act also provided for the creation of a competitive wholesale electricity spot market (WESM). By 2005, the program was clearly faltering, following the failure of initial attempts to sell two major power plants.

However, in 2006, the planned WESM commenced operations and in 2007, a second attempt to sell Masinloc, together with several existing power sales contracts between Masinloc and its customers, was successful.

Masinloc Power Partners Company Ltd. (MPPCL) won the tender at a price of $930 million. MPPCL’s ultimate parent was the global power company AES, based in the United States.

MPPCL subsequently gave the International Finance Corporation a mandate to raise the capital needed to finance the project. ADB agreed to help cofinance the project.

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