Cavite EPZA Diesel Power Plant

distressed

This 63-MW plant is located in Rosario, Cavite, in the Cavite Export Processing Zone. A first phase (48 MW) came on-line in 1995. The plant was constructed on a build-own-operate basis. The plant was powered by bunker-C diesel fuel. The second phase, an expansion of 15MW, was expected to be operational by 1998. The electricity was to be sold under a PPA to the Philippine Economic Zone Authority (PEZA), for resale to business located within the zone. The PPA with PEZA was vaild until 2009. Excess capacity was to be sold to Napocor. Covanta Energy, formerly known as Ogden Corp., acquired 100% ownership of this project from CMS Generation and Magellan Capital Holdings in February 1999. On January 3, 2002, PEZA, the main off-taker for the project, served the project company with notice of termination of the PPA for alleged non-performance by the project. Due to high fuel pricing and low tariff conditions, project revenues were insufficient to cover both operating costs and debt service beyond the second quarter of 2004 and in May 2004, the Magellan project company filed a petition for corporate rehabilitation under Philippine Law. On October 20, 2005, the Court overseeing the rehabilitation issued an order approving, with certain modifications, a rehabilitation plan. The approved rehabilitation plan, among other things, provided for debt restructuring and reduction via a debt-to-preferred equity swap. Under the plan, Covanta Energy was to retain management control of the project, but its equity interest will be reduced from 100% to approximately 30 to 36%. The court’s order was appealed by certain creditors which could result in modifications to the rehabilitation plan. On March 27, 2006, the Court granted an appeal made by the creditors, thereby anulling the rehabilitation plan.