Intergen

INTERGEN AND THE QUEZON POWER PROJECT:

BUILDING INFRASTRUCTURE IN EMERGING MARKETS.

Power Investments Limited (PIL) had recently approached InterGen with an unsolicited offer to purchase 50% of InterGen’s stake in the Quezon Project (23% of Quezon’s total equity) for $85 million. Should Greg Paul recommend retaining InterGen’s current equity, betting on the option value inherent in the “national energy company” strategy? Or should he recommend selling the position, cutting InterGen’s exposure to this volatile region and redeploying capital else where.

* MARKETING (PTM, 4P)

* SUPPLY CHAIN (PUSH/PULL, OUTSOURCING, QFD, KANO)

* STRATEGIC (CANVAS, BLUE OCEAN, BSC, KPI)

* FINANCE (IRR, PV, NPV, FINANCE SOURCE)

* HUMAN CAPITAL (ORGANIZATION STRUCTURE, CULTURE)

* LEADERSHIP (LEADERSHIP STYLE)

* COST/FINANCIAL ACCOUNTING (BEP ANALYSIS, INCOME STATEMENT)

* Project Descriptions:

The Quezon project consisted of a 440 MW base load pulverized coral fired electric generation plant, a 31 KM 230 kilovolt transmission line, and related facilities. The generation facility was located on a 100-hectare coastal site in Mauban, Quezon Province. Meralco had signed a 25 year take-or-pay power purchase agreement to accept the plant’s entire output. The transmission line connected the generation plant to NPC’s transmission system. The project was scheduled to come-on-line in January 2,000.

* Considerations:

1. Selling would lock up in a $30 million profit on the equity stake sold.

2. Reduce InterGen’s exposure to the Philippines.

3. Free up capital for other projects.

* Company Background:

* InterGen is jointly owned by Bechtel Enterprises and the Royal Dutch/Shell Group. But it has its roots in the J. Makowski Corporation (JMC). It was formed in early 1995. Bechtel Enterprises and PG&E (Pacific Gas & Electric) Enterprises acquired J Makowski for nearly $300 million.

* Expertise, Role & Responsibilities :...