November 24, 2013

EDC will not accept award of its winning ULGPP administration bids

In a disclosure to the Exchange, Energy Development Corp (EDC, Sell) said it has notified the Power Sector Assets and Liabilities Management Corp that it will not accept the award of its winning bids for administration contracts involving up to 400MW of capacity in the Unified Leyte geothermal power plants. EDC argued that the physical and economic conditions by which its bids were made have been seriously altered by the destruction caused the super typhoon. The PSALM has yet to comment on EDC’s decision.

Our take: We can understand the logic behind EDC’s decision given that the bids were made based on the assumptions prior to the destruction caused by the super typhoon. As such, the economics of the bids may have changed significantly. The power administration contracts would have provided EDC opportunities to generate lucrative margins. It remains to be seen if PSALM will discard the winning bids and launch another auction with new terms. – WealthSec