In Manila
Lumen Balboa
Phone: +632 843 7333
Email: LBalboa@ifc.org

In Hong Kong
Andrew Mak
Phone: + (852) 25098110
Email: AMak@ifc.org


Manila, October 12, 2006 – The International Finance Corporation, the private sector arm of the World Bank Group, is playing a major role to support private sector involvement in bringing electricity to remote regions of the Philippines.

IFC will help design and oversee a competitive process to attract new power providers in remote areas on the island of Mindanao. Mindanao is home to six of the country’s 10 poorest regions and leads the Philippines in incidence of poverty at 46 percent. Income inequality is also widespread, with two of the island’s regions, Zamboanga Peninsula and Northern Mindanao, worse off than the rest of the country. IFC is attracting private investors to increase efficiency, provide reliable supply, and contribute capital for further investments.  

IFC’s participation in privatizing Mindanao’s electricity supply follows the signing of a Memorandum of Agreement between the country’s Department of Energy, Basilan Electric Cooperative (Baselco), and Sulu Electric Cooperative (Suleco), whereby IFC will provide technical assistance to the two cooperatives.

IFC has been charged with developing the agreements and a regulatory framework to attract private sector capital and expertise to power generation in remote islands. IFC was retained in 2004 by the Philippine government through the Department of Energy, the National Power Corporation, and the Power Sector Assets and Liabilities Management Corporation to act as transaction advisor to the Small Power Utilities Group.

As part of the National Power Corporation, the Small Power Utilities Group has responsibility for supplying power to 74 remote offgrid islands. The annual cost of its supply to these islands amounts to 2.1 billion pesos ($37.5 million). Only about 60 percent of that cost is covered by a universal service charge assessed to ongrid customers. The remainder, about 800 million pesos ($14.3 million), is passed on to the national government as accumulated losses.

“IFC’s strategy includes support for power sector reform in the Philippines through increased private sector participation that promotes competition. The interest in this transaction provides support for the country’s ongoing agenda for power reform,” said Vipul Bhagat, IFC’s Country Manager for the Philippines and Thailand.

Under the terms of the agreement, IFC will conduct an evaluation and technical review of Baselco and Suleco, market their supply requirements to prospective power providers, and draft a power supply agreement that will undergo a competitive bidding and rigorous selection process until new providers have been chosen.

“We want to craft a model public-private sector partnership in which the investor achieves full cost recovery and profits from the electric cooperatives and partially through government subsidy, and which can be replicated for other infrastructure transactions in the Philippines and elsewhere,” said IFC’s Director of Advisory Services, Bernard Sheahan, who was in Manila to witness the signing of the agreement.

In 2005, IFC supported the National Power Corporation’s successful bid to privatize electric supply in the provinces of Marinduque, Romblon, and Tablas. Coastal Power Development Corporation, which now forms part of the 3i Powergen consortium, won a competitive bid managed by IFC to supply power to the three islands through a hybrid diesel-wind energy solution that will increase efficiency and bring the generation into compliance with Philippine environmental standards.

A competitive bidding process for a new power provider in Masbate province is also scheduled in October 2006.

IFC has also opened an office in Davao City in April 2006, making it the first multilateral organization to establish a standalone program office in the southern Philippines. “IFC is committed to helping the development of Mindanao,” said Bhagat.

About IFC

The International Finance Corporation, the private sector arm of the World Bank Group, is the largest multilateral provider of financing for private enterprise in developing countries. IFC finances private sector investments, mobilizes capital in international financial markets, facilitates trade, helps clients improve social and environmental sustainability, and provides technical assistance and advice to businesses and governments. From its founding in 1956 through FY06, IFC has committed more than $56 billion of its own funds for private sector investments in the developing world and mobilized an additional $25 billion in syndications for 3,531 companies in 140 developing countries. With the support of funding from donors, it has also provided more than $1 billion in technical assistance and advisory services. For more information, visit www.ifc.org