Korea Electric Power Corp. (Kepco), South Korea's largest power firm, is looking at possible synergies in renewable energy with First Gen Corp. even as the Lopez firm has yet to approve its entry into the 1,500 megawatt Sta. Rita and San Lorenzo natural gas projects.
Kepco on Wednesday said it agreed to buy 40 percent stake in BG Group Plc's natural gas power plants in Batangas for US$ 400 million. First Philippine Holdings Corp. and First Gen owns the remaining 60 percent stake in the gas power plants.
First Philippine Holdings and First Gen, however, informed the Philippine Stock Exchange that the sale of BG's 40 percent stake to Kepco was still subject to their approval.
"Closing of the transaction is subject to receiving necessary waivers and consents from non-recourse lenders and First Philippine Holdings Corp.," First Gen and First Philippine Holdings told the Philippine Stock Exchange.
The Lopez companies said BG informed them that the US$ 400 million net consideration offered by Kepco was "subject to standard completion adjustments, including interest to be paid to BG Group upon closing, which is expected in the first quarter."
"First Philippine Holdings and First Gen are evaluating their rights and options in respect to BG's contemplated divestment of its interests in Sta. Rita and San Lorenzo," the companies said.
Kepco said they were keen to acquire the facilities because the natural gas power plants recorded stable sales based on 25-year power purchase agreements with Manila Electric Co., the largest electricity distribution company in the Philippines.
Kepco expects to "generate synergies from new business in the Philippines, which can be created in cooperation with First Gen."
"These could cover expansion of plants and renewable energy. Kepco looks forward to forming a mutually beneficial partnership with the Lopez Group," Kepco said.
Kepco said the acquisition of a stake in the natural gas power assets would also strengthen its position in the Philippine power industry.
"This transaction would enable Kepco to maintain around 10 percent market share in the Philippine power industry after the contract for the Malaya project expires next year," it said.
ING acted as Kepco’s financial advisor for the transaction.
First Gen officials earlier said a possible partnership with Kepco was "not feasible" because it was "not legally qualified" due to "conflict of interest."
First Gen president Giles Puno said Kepco was a competitor in the natural gas business because it operated the 1,200 MW Ilijan combined cycle power plant in Batangas.
“The issue... is that [we are] in potential conflict with the likes of Kepco,†he said.
Puno said Kepco would learn more about First Gen's future plans if it became the partner of the Lopez Group in the gas business.
First Gen and Kepco are both interested in the additional supply of gas from Malampaya.
First Gen wants to use the excess gas from Malampaya for the construction of a new gas power plant in Batangas while Kepco plans to use it to expand the Ilijan power plant.
“The issue that we are looking at is, for example, we have a gas expansion, is that in potential conflict? If we feel that it is potentially conflicting or if they could be construed as competitor, then certainly from our agreement, we may have a problem with that,†Puno said.
Kepco's power facilities in the Philippines has a capacity totaling 2,218 megawatts, or 10 percent of the country’s power generating market and 12 percent of the Luzon market. Kepco operates four power plants in the Philippines --the Malaya thermal plant, Ilijan combined cycle plant and two coal plants in Cebu. - source: PNA
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