A team of Mirant executives were recently in the country and made some rounds at the Department of Energy (DoE) and its attached agencies to initially discuss the Philippine subsidiary’s sale plan.

"They have indicated to us that the plan is to pursue refinancing, among all other sale options being floated previously," a ranking energy official has disclosed. If ever, the company’s Philippine unit’s current debt-to-equity ratio would be reversed at a range that would be closer to 75:25; instead of the current 20:80.

Asked for comment, Energy Secretary Raphael P.M. Lotilla noted that while the government foresees throng of investors that may take keen interest on Mirant’s Philippine portfolio, "we are holding on to their word that they will come back and inform us of the final plan before any sale would be pursued."

It could be culled that their targetted proceeds of .2 billion, which is roughly half of the .5 billion total valuation for Philippine assets, would be almost enough to wipe out the .3 billion net loss reported by Mirant from its global operations for 2005. The bulk of its losses were attributed to the .4-billion worth of interest expense on liabilities covered in the compromise deal, resulting from its bankruptcy filing on July 14, 2003 and up to its re-emergence by December 31, 2005.

It is worth noting, however, that the Philippine portfolio was not included in the company’s Chapter 11 bankruptcy filing. And so far, it is hailed as one of its most profitable ventures overseas.

Over the life of the Philippine projects, there was a recent study of the International Finance Corporation (IFC) proffering that Mirant’s internal rate of return should be at least 17.5 percent; but given the pace of its financial performance, including the sale of excess capacity from its Sual power station, it is held that accrual returns may even hit higher than the suggested ceiling.

The US firm is eyeing to finalize the refinancing plan via its Asia-Pacific operations in Singapore, and as a way of building up its cash hoard, the plan would be to repatriate all the proceeds back to its mother unit.

Officials of both the Power Sector Assets and Liabilities Management Corporation (PSALM) and National Power Corporation (NPC) indicated that there are several issues that needed to be settled with Philippine government that may have a bearing on Mirant’s sale plan.

For one, NPC just recently billed the American power firm of P1.35 billion of "over payments" on the sale of 200-megawatt excess capacity from its Sual plant; which the latter needs to refund.

Similarly, a local tax court just rendered a ruling February this year holding Mirant liable to pay an assessed real property tax payments for its 700-megawatt Pagbilao coal-fired facility to the tune of P3.594 billion. The case was on appeal and is still pending for final resolution.

On the part of PSALM officials, they have concerns on how the agreed concessions stipulated under the General Framework of Agreement as a result of the governmentmandated renegotiations of contracts with the independent power producers (IPPs) be treated in case new owners would be taken into Mirant Philippines’ fold.

The government announced that savings generated from contracts with Mirant would hit 5.64 million based on the assets’ net present value; or if based on nominal terms, this would reach up to 7.20 million.

The expected cost reductions were taken from collateral agreement, set as a modification from the original terms of their power supply deal, whereby Mirant may no longer nominate the full 105-percent to 110-percent of the contracted capacity, primarily for its Pagbilao facility.

Mirant, to date, is the largest power producer in the country with roughly 3,000 megawatts of aggregate capacity under its sleeve.