Monitoring MWSS privatization: Water Rates

The management of Manila’s water and sewerage distribution system (MWSS) was privatized in August 1997 in what has largely been touted as a ‘successful’ water privatization, and the largest to date in the Asia-Pacific region.  The International Finance Corporation (IFC), the World Bank’s private sector arm, was adviser to the privatization, which resulted in two 25-year concessions (east and west) competitively bid.

IFC: using development funds for profit

The International Finance Corporation (IFC) is a part of the World Bank Group which invests money in projects involving private companies. It openly promotes privatisation in many sectors. Recent activity invcludes:

WB-Castalia report for Metro Iloilo Water District (Philippines)

Oct 09 Final report of Castalia consultants which will be basis of privitization of MIWD thru PPP. Board of Directors now in the process of signing a MOA with IFC for the conduct of the feasibility study.
Executive Summary:

IFC finances China investment in Africa

In April 2010, the International Financial Corporation (IFC), the World Bank’s private sector arm, agreed to finance Chinese investment in a Tanzanian commercial complex in Dar es Salaam.

Manila Water, Maynilad, MWSS penalized for failure to set up wastewater treatment facilities

MWSS and the 2 private water concessionaires in Manila (Philippines) were penalized by Philippine environmental agencies (e.g., Department of Environment and Natural Resources) for non-compliance with the Philippines' Clean Water Act and failure to set up wastewater treatment facilities.  IFC is both equity investor (9.2%) & financier (> $100M loans) of Manila Water.

La Société financière Internationale (IFC) finance le secteur de l'éléectricité au Sénégal

Africa News

December 5, 2005 Monday

IFC Finances Private Sector Investment in Senegal's Power Sector

BYLINE: International Finance Corporation

LENGTH: 674 words

IFIs Support to Private Power Players in Philippines

The Philippines is among the first country in the Asia-Pacific region to implement power sector restructuring, with loans and policy/ technical support and advice from international financial institutions (IFIs) like Asian Development Bank (ADB), World Bank-International Finance Corporation (WB-IFC) and Japan Bank for International Cooperation (JBIC). These reforms required the unbundling of state-owned National Power Corporation (NPC), an enabling legal and regulatory framework, and substantive privatization of NPC generation and transmission assets, with the aim to promote greater private sector participation and competition and ultimately bring down power rates. The IFIs also provided loans for the distribution and transmission sectors.

Aboitiz Power (Philippines)

The Aboitizes own or control 18 generation facilities nationwide, comprising a 13% share of the national grid. Its market share in Luzon grew significantly due to the acquisition of privatized NPC plants. Its power generation portfolio includes Philippine Hydropower Corp (mini and small hydro plants), Luzon Hydro Corp and HEDCOR (70MW Bakun Hydro), 113MW Western Mindanao Power Corp, 59MW Southern Philippine Power Corp, 232MW STEAG, 360MW Magat (SNAP), 175MW Ambuklao-Binga (SNAP Benguet), Therma Power-Visayas, Therma Luzon Inc, AP Renewables Inc (APRI).

Lopez Group-First Gen (Philippines)

The Lopez group is the leading private sector participant in the generation industry, with a total installed capacity of 3,200 MW, or 20% of the national grid. First Gen Corp (First Gen) is a Lopez-owned holding company and majority shareholder of 1000MW Sta Rita (First Gas Power/FGP Corp) and 500MW San Lorenzo (FGP Corp) Natural Gas plants in Batangas; 225MW Bauang Diesel in La Union (Bauang Private Power Corp), 1.6MW Bukidnon Hydro (First Gen Bukidnon Power Corp), 112MW Pantabangan-Masiway Hydro Plant Complex (First Gen Hydro Power Corp/FGHPC), EDC (Red Vulcan) and First Gen Renewables.

Masinloc Power-AES (Philippines)

In July 2007, Masinloc Power Partners Co Ltd (MPPC) won Masinloc coal-fired with a bid of US$930M. Masinloc is located in Zambales, about 250 km northwest of Manila, and has been operational since 1998. It is the biggest power plant privatized to date under a comprehensive sector reform law, the Electric Power Industry Reform Act (EPIRA). A total 265-MW of power supply contracts was tied to the sale, representing 44% of Masinloc's rated capacity; a coal sale agreement and a program for the rehabilitation of the power plant was also signed with PSALM. Masinloc Power opted to pay the full amount of its bid in April 2008, with up to US$275M loans and equity from WB’s International Finance Corporation (IFC) and a US$200M loan from Asian Development Bank (ADB). The electricity generated from the plant will be sold through the wholesale electricity spot market (WESM) for the Luzon grid and bilateral contracts.

Philippine power privatization 8 years hence

Eight years after the enactment of EPIRA, there has been no effective solution to the problems, old and new, that beset the country’s power industry – e.g., electricity prices continue to soar making the cost of electricity among the highest in Asia; new middlemen, e.g, in guise of IPPAs, will further jack-up prices; NPC/government continues to provide guarantees to new players, e.g., guaranteed markets, fuel subsidies; crippling debt burden; a new era of ‘cross-ownership’ risking ‘sweetheart deals’ among distribution utilities and sister IPPs; ‘uncompetitive market behavior’ in the new electricity market; dismantling of NPC (now down to 20% of the national power grid); increasing exposure of Japanese, Korean, and Chinese state-run utilities in the strategic power sector; shift of power infrastructure financing from public to private sector; violations of trade union rights and unresolved labor issues and that threaten industrial peace and a stable electricity supply. Fundamentally, EPIRA simply transfers the monopoly privileges from the state to ‘unbundled’ interests, both domestic and foreign and not necessarily private, and thus allowing the ‘gains’ to be kept as excess (private) profits and a large percentage plowed overseas, instead of being shared with the consumers and taxpayers through lower electricity rates and a reduced debt burden.

Ambuklao and Binga hydroelectric power plants (Philippines)

The Ambuklao and Binga hydroelectric power plants were privatized as a package through an international tender process, as part of the Philippines’ privatization program under a comprehensive sector reform law, the Electric Power Industry Reform Act (EPIRA). In November 2007, SN Aboitiz Power Benguet Inc. (SNAPB) won the Ambuklao-Binga power complex — the country's first and second hydroelectric power plants, respectively – with an offer of US$325M. The only other bidder (at US$305M) was Calaca Power Partners Co Ltd, which earlier won the 600-MW Masinloc coal-fired power plant, also under EPIRA. No power supply contract was attached to the sale, as this was not deemed to be advantageous to the prospective owner. The Ambuklao-Binga package is the fourth merchant power plant to be financed internationally in emerging economies in East Asia. SNAP Benguet completed the sale transaction in August 2008, with loans from International Finance Corporation (IFC), Norwegian Investment Bank and from six local banks. One of the responsibilities of the new owner is to rehabilitate the Ambuklao plant and make it operational to 65 MW minimum within seven years from the date of turnover. SNAPB disclosed plans to increase the combined capacity by 50 MW from 175 MW to 225 MW (30 MW for Ambuklao and 20 MW for Binga). Responsibility for the watershed management will remain with the Government.

360-MW Magat Hydroelectric (Philippines)

In December 2006, SN Aboitiz Power Inc. (SNAP) acquired Isabela-based Magat plant with an offer of US$530M under the Philippine power privatization program, topping the bid of the First Generation Northern Energy Corp (US$420.9M). Magat is deemed a very valuable asset because of its large water storage, giving it the capability to provide ancillary services. A 95-MW supply contract was tied to the sale. PSALM signed an Asset Purchase Agreement with SNAP; SN Power also signed land lease and Operation and Maintenance (O&M) agreements with National Irrigation Administration (NIA) and PSALM, respectively, which provided for rentals of NIA land underlying a portion of Magat and for service fee. In September 2007, International Finance Corporation provided a US$105M loan to SNAP to complete Magat’s privatization. This is the first privatization deal successfully concluded with significant foreign participation under EPIRA, the country’s electricity reform law, and the first merchant power plant to be financed internationally in East Asia.

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