Project is the most recent in a series of successful power plant privatizations in which CRA has been advising
BOSTON, Apr 26, 2010 (BUSINESS WIRE) -- Charles River Associates (NASDAQ: CRAI), a worldwide leader in providing management, economic, and financial consulting services, today announced its role in advising the Power Sector Assets and Liabilities Management Corporation (PSALM) on the successful privatization of the 1200-megawatt Ilijan natural gas-fired power plant in the Philippines. PSALM is the government agency responsible for handling the sales of the Philippines National Power Corporation's assets.
On April 16, 2010, PSALM announced San Miguel Energy Corporation (SMEC) as the successful bidder for the appointment of an Independent Power Producer Administrator to manage the contracted capacity of the National Power Corporation in the Ilijan power plant. SMEC's winning bid was US$870,000,473.The next highest bidder, Trans Asia Oil and Energy Development Corporation, offered US$804,484,877, while First Gen Luzon Power Corporation and Therma Power Visayas Inc. bid US$534,148,533 and US$100,029,153, respectively.
"CRA is pleased to help PSALM fulfill its commitment to open access and retail competition and the privatization of its assets across the Philippines," said CRA's President and Chief Executive Officer Paul Maleh. "Our Hong Kong-based energy and environment team provided strategic expertise around the sale of energy assets, in-depth analytical energy modelling, and practical knowledge of the region's energy needs to create a successful sale for our client and strong value for electricity customers in the Philippines."
The privatization involved the award of Independent Power Producer Administrator (IPPA) contracts, and moves PSALM towards achieving its legislative objective of the entire IPPA process, which is to transfer the management and control of at least 70% of the total energy output of the independent power producer power plants under PSALM contract in the Philippines to IPPAs. The privatization is particularly significant because it is the precursor to open access in the Philippines electricity market.
CRA was PSALM's international commercial advisor on all stages of the matter, and advised on due diligence, financial modelling, asset valuation, WESM market modelling, commercial structuring of the deal, documentation of the IPPA agreements, negotiations with bidders, and other aspects of the bidding process.
Mike Thomas, a vice president in CRA's Energy & Environment Practice and head of the practice's operations in Asia, said, "The success of the Ilijan sale is a testament to the robustness of the IPPA structures that we have been designing with PSALM. Ilijan had a number of challenges, including a gas contract with a high price, and a high take-or-pay would have posed an impossible risk for bidders. CRA's team of energy consultants reformulated the package to manage these risks. The winning bid, along with the interest from three other groups, highlights how this effort stimulated strong bidder interest--ultimately resulting in an excellent result for PSALM."
CRA's work on the project was led by a Hong Kong-based project team including Mike Thomas, CRA's Officer-in-Charge; Sarah Fairhurst, who served as Project Manager; and Tom Parkinson who oversaw the market analysis. Other members of CRA's Energy & Environment Practice in Hong Kong provided support.
CRA worked closely with Pinsent Masons on this project. Pinsent Masons, a full service law firm with offices throughout the United Kingdom and Asia, served as international legal advisor to PSALM.
The Ilijan IPPA contract bid and privatization follow the US$1.763 billion formation of the Sual and Pagbilao coal-fired power plant IPPAs on August 28, 2009, and the US$595.5 million formation of the San Roque and Bakun-Benguet hydropower plant IPPAs on December 15, 2009, other projects in which CRA advised PSALM. CRA has been retained to advise PSALM on the next stage of the process, which will be the privatization of the Malaya and Unified Leyte power plants in June 2010 and the privatization of the Cebu power plant thereafter.
About CRA's Energy & Environment Practice
CRA's Energy & Environment Practice provides expert economic and business consulting services to a wide range of electricity industry clients around the world. With years of industry experience and exceptional strength in analytics, the practice's consultants offer management and economic expertise in every phase of the electricity production cycle--from fuel procurement to retail strategy--as well as hands-on experience helping clients manage market power, environmental policy and regulatory issues. CRA has pioneered techniques and models that have become industry standards, including competitive market designs, efficient bidding mechanisms, creative financial transactions, and methodologies to assess market power.
About Charles River Associates (CRA)
Charles River Associates(R) is a global consulting firm specializing in litigation, regulatory, and financial consulting, and management consulting. CRA advises clients on economic and financial matters pertaining to litigation and regulatory proceedings, and guides corporations through critical business strategy and performance-related issues. Since 1965, clients have engaged CRA for its unique combination of functional expertise and industry knowledge, and for its objective solutions to complex problems. Headquartered in Boston, CRA has offices throughout North America, Europe, the Middle East, and Asia. Detailed information about Charles River Associates, a registered trade name of CRA International, Inc., is available at http://www.crai.com.
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