The project company, SN Aboitiz Power Benguet Inc. (SNAPB), the owner of the Ambuklao-Binga plants is a joint-venture between SN Power Invest (SN Power) of Norway and Aboitiz Equity Venture (AEV) of the Philippines. SN Power Singapore (SNPS), a wholly-owned subsidiary of SN POWER, owns a 40% equity interest in SNAPB directly and another 10% indirectly through its 16.7% equity interest in Manila-Oslo Renewable Enterprise (MORE), while AEV (through its two power subsidiaries, Aboitiz Power Corporation (APC) and Philippine Hydropower Corporation (PHC) will own a 50% interest in SNAPB indirectly through its 83.3% ownership in MORE. As a result, SNAPB is owned directly and indirectly 50% by AEV and 50% by SN Power.

SN Power is a global renewable energy company, which is a 50:50 joint-venture between Statkraft, the Norwegian state-owned power company, and Norfund, the state-owned Norwegian investment fund.

AEV is a publicly-listed holding and management company of the Aboitiz Group, one of the largest conglomerates in the Country focusing on electricity, financial, food and transport sectors in the Philippines.

The total project cost is currently estimated around $560 Million. The sources include IFC A Loan up to $85 million and IFC C Loan up to $15 million, NIB loan up to $60 Million, local banks consortium up to $200 million and the remaining amount is expected to be financed by equity and internally generated cashflow. The uses include acquisition price of $325 million and rehabilitation/refurbishment capex around $170 million. The estimated project cost is preliminary and subject to further discussions. The sponsors are currently under discussions with suppliers to finalize the project costs. However, this will not affect loan financing as additional costs will all be covered by additional equity.

100.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	100.0
Equity

* These investment figures are indicative

Ambuklao and Binga are located on the Agno River in Benguet Province, in a relatively narrow, steep sided valley. Ambuklao dam was built in 1956, and was decommissioned in 1999 as a result of accelerated silt accumulation around the water intake point. As part of the rehabilitation, SNAPB will construct another intake point at a higher elevation. The rehabilitation plan will also include installation of new electrical and mechanical equipment and a new tailrace discharge structure at a higher elevation to address silting. The Ambuklao dam will also need some repair works in relation to erosion and damage to the embankment, repairs to gates, and general maintenance. Rehabilitation is to take two years and is targeted for completion in July 2010.

Binga was built downstream of Ambuklao in 1960. Binga will be upgraded with the construction of a new intake and the replacement of each generation unit per year during dry season when all units are not needed. Plant rehabilitation will include construction of a new intake similar to Ambuklao as well as installation of new electrical and mechanical equipment. The Binga dam will need some repair works in relation to damage to the embankment, a deficiency in spillway capacity, and other maintenance and repairs. Completion of the refurbishment plan targeted for the first half of 2013.

As Ambuklao is upstream to Binga the Ambuklao reservoir supplements the reservoir for Binga as well allowing for the operation of the two power plants in cascade. This will be important in the future, as sedimentation progress is expected to lead to a run of river situation at Binga by 2027. SNAPB does not plan on desilting the reservoir and will instead operate the plant in a manner that will regularly remove silt from the areas immediately in front of the intake.

The project will be the fourth power generation privatization project with foreign participation. It has a high development impact, as it is expected to:

- reinvigorate foreign investors interest in the country’s power privatization program after several years of inertia,
- continue to support power sector reform by restoring market confidence in the WESM mechanism and the institutional capacity of the Philippines power sector governance in general;
- provide proof of concept and demonstration effect of a successful privatization of a large scale merchant hydro power project to other East Asian countries who hesitate to embark in similar sector reforms;
- support the improvement in the operations and the potential capacity expansion of an environmentally friendly source of energy in the country; and
- contribute to government efforts to address fiscal problems through prepayment of deferred payment facility.

IFC’s key role involves:

- helping support the success of the Ambuklao-Binga privatization thereby helping sustain momentum and investors’ interest in the country’s privatization program;
- facilitating the participation of foreign sponsors in the privatization program as IFC’s presence is seen as a critical safeguard from regulatory and implementation uncertainty;
- providing longer-term financing than currently available from commercial sources to strengthen the fundamentals of the project, which is only the fourth merchant power plant to be financed internationally in emerging economies in East Asia;
- taking the leadership role to help the project raise additional financing from other international and local financial institutions, capitalizing on IFC’s experience with the previous privatization transactions; and
- ensuring implementation of appropriate environmental and social policies.

IFC''s review of this investment identified the following issues:

- environmental and social management capacity of the project company, SNAPB, and the expected technical support from the sponsors;
- environmental liabilities from past operations, and planned corrective actions;
- reservoir sedimentation;
- environmental upgrade plan;
- dam and reservoir safety;
- watershed management planning; and
- community engagement.

Communities of Indigenous Peoples predominate in, and derive livelihoods from natural resources, in the reservoir and watershed areas. As such, IFC considered their current livelihood patterns, the status of any ongoing programs of engagement and community development between them and SNAPB, and potential adverse effects on these communities from construction activities and changes to reservoir operation and maintenance. Actions planned or in negotiation related to the Ambuklao and Binga projects are expected to provide a means for SNAPB to be compliant with IFC’s Performance Standards within a reasonable timetable.