Cebu power plant needs $300-million loan

BY MARITES S. VILLAMOR, Visayas Bureau Chief/BusinessWorld CEBU CITY — The Cebu Power Corp., a consortium formed by Global Formosa and Abovant Holdings, Inc., plans to secure a loan of about $300 million to partly finance the construction of three 82-megawatt (MW) coal-fired power plants in Toledo City in western Cebu. The group, however, is not waiting for bank financing to start work on the project next week. Each shareholder will provide equity amounting to 30% of the estimated $450-million project cost. "Project financing will be 30%, roughly $150 million through equity and 70% through debt. But basically, the shareholders are putting their balance sheets on the line to start the project immediately," said Erramon I. Aboitiz, president of Aboitiz Power Corp., which holds 60% of Abovant. "We will be taking bank loans once [power supply] contracts are signed," he said. Mr. Aboitiz said the group would still have to decide whether to secure the loan locally or from the international markets. But several domestic and foreign banks have already expressed interest to finance the project, he added. "We are evaluating. The peso may be strong now but its interest is higher. The dollar [on the other hand] may have lower interest but it is unstable. We have a bias towards stability in pricing," he said. The new power plant in Toledo, which is targeted for commercial operations by early 2010, is expected to put an end to a projected power shortage in Cebu starting the last quarter of 2008. It is expected to meet the growing power requirements of the industries in western Cebu and supply 70 MW to distribution utility Visayan Electric Co., Inc. (VECO), which lights up over 200,000 homes and commercial/industrial establishments in Metro Cebu. Deal with Atlas Jesus N. Alcordo, president of Metrobank subsidiary Global Business Power Corp., said he was confident that a power supply deal would be signed with Atlas Consolidated Mining and Development Corp. (ACMDC), which has started rehabilitating the copper mines in Toledo and targets to resume operations in the middle of this year. "Atlas has approached us. No agreement has been signed yet, but we are talking," Mr. Alcordo said. Atlas currently uses three megawatts for the rehabilitation of its facilities. Its power requirement is expected to increase to 30 MW in June and to 50 MW late this year. Mr. Aboitiz also said Aboitiz Power subsidiary Balamban Enerzone, which supplies power to the 200-hectare West Cebu Industrial Park in Balamban, would need an additional 11 MW this year because of the expansion of Tsuneishi Heavy Industries (Cebu), Inc. and the construction of a modular fabrication facility by Metaphil. "Even if we don’t have firm contracts in place, we can see the writing on the wall and we’re moving ahead with the project," Mr. Aboitiz said. Vivant Energy, which owns the balance of 40% in Abovant, earlier reported that it secured a P500-million loan from Metrobank for the project. Abovant holds 44% of the new power plant while Global Formosa owns 56%. Global Formosa was formed by Global Power, which owns the existing 81-MW coal plant in Sangi and the 40-MW diesel plant in Carmen in Toledo City, and Formosa Heavy Industries, Inc. from Taiwan, which will build the new generating units. Mr. Alcordo said three generating units would be ready for test commissioning in late 2009. All three are targeted for commercial operations in the first quarter of 2010. Power shortage Earlier, the power core group of the Cebu Chamber of Commerce and Industry (CCCI) warned that Cebu would need at least two power barges between the last quarter of 2008 and the completion of the Toledo power project to avert outages during peak periods. The higher demand is caused by the entry of more call centers and other investors, the construction and expansion of malls as well as the implementation of commercial developments throughout Cebu. — with a report from Jessica B. Natad