Caliraya, Botocan and Kalyaan I (hence ‘CBK’) – and the construction of a new pumped-
storage power station, Kalayaan II, adjacent to the existing Kalayaan I pumped-storage power
station. The company undertaking the project is CBK Power Corporation Company Limited,
a limited partnership between Industrial Metalurgicas Pescarmona SA (Impsa) of Argentina
and Edison Mission Energy in the United States.
Accomplished at a time when market conditions in the Philippines were deteriorating
because of economic and political uncertainty, this was the first syndicated project financing
for a sub-investment-grade country after the Asian financial crisis. There were significant
delays in contract negotiations because of the need for scrutiny by multiple government agen-
cies, a lack of deal experience on the part of the Philippine Department of Finance’s person-
nel and political sensitivity over awarding the concession to a foreign contractor rather than
a competing local bidder.
Background
The Kalayaan I and II power stations, which represent approximately 94 per cent of the total
project capacity, are the only pumped-storage hydroelectric facilities in the Philippines. They
use power from the Luzon grid during offpeak hours to pump water from Lake Laguna de
Bay into the Caliraya Rreservoir, released to flow through the turbines and thus generate elec-
tricity for the grid. The Luzon grid serves the metropolitan Manila area.
In addition to their energy-storage capabilities, the CBK stations provide critical ancil-
lary facilities to support the stability of the Luzon grid, such as frequency regulation, ‘load
following’, ‘load shedding’, ‘spinning reserve’ and ‘standby reserve’. Load following con-
sists of small increases or reductions in pressure on the turbines to adjust the plant’s output in
response to fluctuations in the load on the grid. Load shedding is the process of shutting off
the CBK facility when it is in pumping mode, taking power from the grid, at a time when that
power is needed elsewhere. When a plant is in spinning reserve status it is running and ready
to be connected to the grid with minimal notice. When a plant is on standby reserve it is not
running and must be started before it sends power to the grid. The need for additional grid-
stabilisation support in the Philippines was demonstrated in 1999, when the ingestion of a
large number of jellyfish at the Sual II 540-megawatt power station caused the unit to fail,
leading to the tripping of Sual I and subsequently all generating stations in the Luzon grid.
Restoration of power took approximately 18 hours.
As mentioned above, CBK Power Company Limited, which is undertaking the project,
is now a limited partnership between Impsa of Argentina and Edison Mission Energy of the
United States. However, it began as a company set up by Impsa Asia Ltd, a subsidiary of
Impsa. The Argentine parent company is an industrial conglomerate with experience in the
development and operation of hydroelectric power projects. It has designed and manufactured
turbines and generators to a total power load of more than 7,000 MW. It has a presence in 20
countries and has been in Asia for more than 15 years.
Impsa Asia Ltd established CBK Power Corporation to pursue the CBK power project.
CBK Power began preparation for the project in 1993 and won a contract with the state-
owned National Power Corporation (NPC) in 1997, after a lengthy approval process that
included scrutiny by the Philippine Central Bank, the Board of Investments, the National
Economic and Development Authority, and the Departments of Justice, Energy, and
Environment and Natural Resources. Other delaying factors included lack of deal experience
CBK, THE PHILIPPINES