41936-014: ACQUISITION AND REHABILITATION OF THE MASINLOC COAL- FIRED THERMAL POWER PLANT

Project Data Sheet (PDS): Details


Description

The Project involves acquisition, rehabilitation, and operation of the existing 600 megawatt (MW) Masinloc coal-fired thermal power plant in Zambales province by Masinloc Power Partners Co. Ltd. (MPPCL), an indirect subsidiary of AES Corporation of the United States. The electricity generated from the plant will be sold through the wholesale electricity spot market (WESM) for the Luzon grid and bilateral contracts. The Masinloc plant was one of the generation assets of National Power Corporation (NPC) targeted for privatization through the Power Sector Assets and Liabilities Management Corporation (PSALM) under the Electric Power Industry Reform Act of 2001 (EPIRA). EPIRA provides the legal basis and framework for restructuring of the Philippine electricity sector.

Objectives and Scope

The Project will aid the privatization efforts of the government undertaken to promote competition and efficiency in the power sector and to correct the country s fiscal imbalance. In addition, the Project will increase the electricity supply, improve the operating efficiency of the plant, and bring the plant s environment, health, and safety standards up to global standards.

Project Rationale and Linkage to Country/Regional Strategy

The Project is fully in line with ADB s country and energy sector strategies. The Project will immediately complement ADB s Power Sector Development Program s objectives of improving the country s fiscal imbalance by catalyzing privatization of an NPC-owned power plant and bringing in revenues to the Government. The Project will also help to improve the investment climate by increasing the reliability of generating capacity for the commercial and industrial centers of the country. Successful acquisition and operation of the Masinloc plant by AES, a reputable and experienced independent power producer, will boost market confidence and induce follow-on privatization of NPC s assets and new entry to the market. The Project will enhance competition in the Philippine market for electricity generation and, in the long run, help to drive electricity prices down.

Implementation Progress

Description of Project Outputs

1. The power plant acquired and rehabilitated by project company. 2. Plant's dependable capacity increased.

Status of Development Objectives

The sale of the Masinloc plant brought in $930 million of revenues to the government. With this sale, 25% of the privatization target was achieved.

Safeguard Categories

Environment: B
Involuntary Resettlement: C
Indigenous Peoples: C

Summary of Environmental and Social Aspects

MPPCL through its consultant conducted an environmental performance audit. The significant issues identified are related to (i) air emissions; (ii) wastewater, (iii) storm water and drainage; (iv) materials handling and storage; (v) waste management; (vi) marine ecological impacts and (vii) contaminated groundmass. Upon taking ownership of the facility, MPPCL will be responsible for rectifying the environmental issues identified during the audit to meet Government requirements within two years through a Remedial Action Plan. The completed plant rehabilitation work was successful in bringing the plant s operating and environmental performance back to the original design standards and did not involve any expansion or additional facilities. Moreover, it improved the operating efficiency, reduced environmental emissions, and increased the health and safety standards of the plant. The Project has been classified as environmental category B. Implementation by AES of a comprehensive environmental management plan according to an ISO 14001-consistent environmental management system will be monitored throughout the life of the ADB financing. With respect to the involuntary resettlement and indigenous peoples impacts, the Project has been categorized C. The Project will not involve any land acquisition, change in land use, or access restriction.

Stakeholder Participation and Consultation

Significant consultations with stakeholders were conducted in connection with ADB s public sector loans 1398-PHI and 1042-PHI to finance the original construction of the Masinloc plant.

Project Sponsor

AES Corporation



Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

Project Data Sheets (PDS)

Timetable

Concept Clearance
13 Aug 2007

Due Diligence Mission
20 Aug 2007 to 12 Oct 2007

Private Sector Credit Committee Meeting
22 Nov 2007

Board Approval
15 Jan 2008

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