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COULD an impasse over debt restructuring between a
major bank and a power company possibly cause a dent in utility
giant Meralco’s plans to shore up peak power requirements?
That’s a question been asked in
industry circles after the Philippine National Bank froze the
operating bank accounts it held of East Asia Diesel Power Corp. (EADRO)
and Druacom Mobile Power Corp. (DMPC)—both operating under the
banner of holding company East Asia Power—and causing the two
power suppliers to switch off its four diesel powered barges moored
in Manila Bay.
Furthermore, as the
barges—which have a combined capacity of 243 megawatts—remain
idle East Asia Power has filed a petition with the Malabon Regional
Trial Court for corporate rehabilitation.
After a change of ownership in
July 2006 East Asia Power intended to fire up its engines and
provide for the key peaking power requirements of Meralco from its
strategic location close to the Meralco grid.
EADPC/DMPC can directly connect
to the Meralco power grid which results in less transmission loss.
The power supply agreement (PSA) with Meralco ended December 25,
2006, but if as a result of the ongoing problems Meralco does not
renew the PSA, EADPC/DMPC can still sell power directly but
will require a permit from Meralco to use its transmission lines
since there is no nearby Transco power lines.
In October—after EADPC received
from PNB (acting in behalf of lenders) notice of default, and PNB
sent notice for failure to remit minimum quarterly interest payment
of P7.5 million due September 30—discussions with PNB commenced as
the new management polished up its financial forecasts for
submission to the banks. The discussions were supposed to have
reached a consensual restructuring arrangement for the indebted
companies.
However, PNB, acting through
their associated PNB Trust Banking Group division, decided not to
wait for the new plan and froze all the operating bank accounts of
EADPC and DMPC at the end of October 2006 without notice to the
involved parties.
The banks also started
distributing the cash from the said accounts amounting to
approximately P400 million to PNB and other lenders.
East Asia Power had to dig into
its own financial resources to provide P80 million to the two units
to continue the full complement of staffing and to maintain the
barges in working order.
As a result of what the power
company sees as PNB’s arbitrary action, EADPC and DMPC were left
with no choice but to file for protection from further action by its
lenders, through its petition for rehabilitation lodged in December
2006.
A sorry human aspect of this
situation is that more than 140 employees in Navotas are now in
danger of losing their jobs as the two companies operating cash has
been taken buy the banks.
There is also deep concern on the
part of East Asia Power over talk that PNB allegedly sold all its
interest in the loans to a special purpose fund.
If EADPC/DMPC rehabilitation is
not approved, they will have to go on a fire sale and liquidate the
assets at an estimated P100-P150 million which will not cover their
debts of close to P6 billion. So everybody, and that includes PNB,
are destined to become big time losers.
E-mail: bizzfizz_98@yahoo.com.
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