•a relatively standard concession agreement embodied in the BROT agreement;
•a turnkey construction contract with Impsa Construction Corporation; and
- an operations and maintenance (O&M) agreement between CBK Power and the two
sponsors, Impsa and Edison Mission Energy.
Arrangement of financing
In August 2000 CBK Power took the most important step toward finalising the contract by
reaching agreement on a US$383 million loan with four major international financial institu-
tions: Société Générale (SG), Banque Nationale de Paris (subsequently BNP Paribas), Dai-
Ichi Kangyo Bank and the Industrial Bank of Japan (IBJ). Impsa and Edison Mission Energy
planned to provide US$120 million equity for the project. By that time the NPC had made
progress on the outstanding right-of-way issues for the project, but had not completely
resolved them.
The Debt Service Reserve Facility provides liquidity for a debt service reserve once the
project has begun operation. It works in tandem with the requirement for the borrower to
maintain an amount in a debt service reserve account. If the account balance is insufficient,
the borrower is able to show the committed amount of the facility as evidence of funds avail-
able to meet the debt service reserve requirement. If the borrower cannot meet a payment due,
the lenders have the discretion to be paid under the Debt Service Reserve Facility, thereby
keeping the project out of default. All of the lenders have pro ratashares in this facility. The
advantage of the facility for the borrower is that it allows cash that would otherwise be sit-
ting in the Debt Service Reserve Account to be used to pay dividends, thus improving the pro-
ject’s return on a net-present-value basis.
Syndication, launched on 28 August 2000 and closed on 5 October, was 30 per cent over-
subscribed, with 14 participating banks. SG and the IBJ served as joint bookrunners, BNP as
technical and insurance bank, DKB as agent and modelling bank, and SG as documentation
bank and political risk insurance coordinator.
The next step, at the request of CBK Power and the lenders, was for the Philippine
Department of Finance to issue a government acknowledgement and consent agreement
(GACA), which was to acknowledge the government’s pledge to fulfil the NPC’s obligations
under the 25-year BROT contract. Issuance of the GACA would clear the way for CBK
Power to provide the required security deposit, a US$70.8 million, 15-year, interest-free loan
to the Philippine government, and for the rest of the project to proceed. The final documen-
tation, allowing the facility to be turned over to CBK Power, was not completed until early
2001, primarily because of local political turbulence. The first loan drawdown was on 7
February 2001.
Project debt service coverage ratios
The projected base case debt service coverage ratio was an average of 1.47 times and a min-
imum of 1.34 times. A sensitivity analysis was conducted to estimate the effect of various
unexpected events on the project’s debt service coverage, as summarised in Exhibit 10.1.
The base case assumed that all units were completed in accordance with the turnkey con-
struction contract.
The ‘delay’ case assumed that the completion of Caliraya Units 1 and 2, and Kalayaan
CBK, THE PHILIPPINES