With the reckoning date set on December 2, 2005, Energy Secretary Raphael P.M. Lotilla set off brave words that the consent recently extended by the Japan Bank for International Cooperation (JBIC) on the asset sale "will allow PSALM (Power Sector Assets and Liabilities Management Corporation) to turn over the plant to the winning bidder before the end of the year."

From now to the targetted conclusion of the sale transaction, the winning bidder YNN Pacific consortium ­ a joint venture between local firm YNN Holdings and Australian firm Great Pacific Energy Ltd., would have less than a month to get their hands on the required $223 million that will account for the 40 percent required down payment out of its $562 million winning bid.

"The recent issuance of consent by the JBIC completes the process for the sale of the 600 megawatt (MW) Masinloc coal fired power plant," the energy chief has noted.

The transaction document, however, explicitly provided that a transaction could only be rendered complete upon submission to PSALM of the prescribed upfront payment, which is a portion of the total purchase price for the asset; and the settlement of the balance would be spread over several years as agreed by the parties.

In the event that the winning bidder fails in raising the money, the Philippine government is still considered a "winner" in the transaction as it can now invoke its right to forfeit the security deposit put in by the former; with the completion of PSALM’s mandate to secure creditors’ consent.

PSALM made prior announcements that the other major lenders of NPC ­the Asian Development Bank and World Bank ­ have already extended their respective formal consents to the sale of the coal-fired facility.

The ADB, in particular, granted its consent by way of waiving a provision under a loan covenant which prohibits the sale of the Masinloc plant. This is now embodied under the "Omnibus Amended Agreement" which also covered consent for the transfer of NPC debts to PSALM.

"Considering the size of the Masinloc plant, its strategic impact on the privatization of NPC and the restructuring of the power sector; and the advanced stage of its privatization process, it is recommended that ADB waive NPC’s covenant not to sell Masinloc and allow the sale of Masinloc to be completed," the Bank has emphasized.

The Bank has further noted that in extending said consent, it made prior consultations with its co-financiers for the project ­ the JBIC and the Organization of Petroleum Exporting Countries (OPEC) Fund for International Development ­ and noted that they "did not object to ADB’s agreement to the requested transfers."

Since the disposal of the Masinloc plant could be considered a milestone in NPC’s privatization, the completion of the transaction is deemed crucial as this will be taken as indicative of how far the government would be able to move forward with the disposal of the other assets already set in the auction block.

As declared by the energy secretary, "this will give more impetus in the government’s privatization program as PSALM readies the sale of other plants."

PSALM conducted last week pre-bid conferences for the privatization of 12 MW Magat and 112 MW Pantabangan-Masiway hydro plants and 410 MW Tiwi-Makban geothermal plants.