POSTSCRIPT / July 11, 2006 / Tuesday


Philippine STAR Columnist

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Meralco emerges as key to puzzling Masinloc deal

MERALCO THE KEY: The key to the Masinloc mystery appears to be the Manila Electric Co. (Meralco), the Lopez-managed giant power distribution firm where government has four nominees in the 11-member board.

If Meralco does not sign a long-term supply contract with YNN Pacific Consortium by Aug. 6 to buy power from the 600-megawatt power plant in Masinloc, Zambales, YNN’s elaborate scheme to acquire, then sell, the coal-fired plant is likely to collapse.

Whoever has been maneuvering to deliver Masinloc to YNN — in effect to the Malaysian firm Ranhill Berhad behind the scene — must clinch the Meralco contract on or before Aug. 6, the new deadline for YNN to pay its binding $227.54-million first payment.

YNN outbid First Gen Corp. of the Lopezes, who submitted a bid of $274.85 million. That losing bid was 30 percent below the government’s reserve price of $388 million and less than half of YNN’s bid.

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NEW EXTENSION: Records show that YNN headed by businessman Sunny Sun has neither the technical nor the financial capacity to buy and operate Masinloc, the biggest generating asset of the National Power Corp. marked for privatization.

After winning with a $561.74-million bid, YNN busied itself with convincing Ranhill to buy out YNN (for $8 million) and all its rights to Masinloc.

To make this possible, the Power Sector Assets and Liabilities Management Corp. (PSALM) overseeing the transaction has given YNN — in effect Ranhill — another 36 days to deliver the down payment of $227.54 million (40 percent of its winning bid).

But Ranhill has made it known that it would part with its money and take over YNN obligations only after the latter delivers a Meralco power supply contract to ensure a ready buyer of Masinloc’s output.

Meralco is reportedly being pressured to sign the contract with YNN. Incentives being mentioned include a settlement of Meralco’s outstanding debt to Napocor and favorable action on its application for an electric rate increase.

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GRACE PERIOD: The announcement of the new Aug. 6 deadline surprised many industry observers, who thought all along that the latest (the third) extended deadline was last June 30.

In fact, PSALM has forfeited on YNN’s $14.14-million performance bond for failing to make a down payment last June 30. If the deal falls through, how can Ranhill recover the $14.14 million it had advanced for YNN?

The repeated extension of payment deadlines is widely seen as giving YNN, and Ranhill behind it, more time to wrap up the Meralco power supply contract and get things going.

Finance and energy officials have been saying lately that since the notice of termination of the asset purchase agreement was handed to YNN only last Friday (July 7), it still has until Aug. 6, or 36 days from June 30, to pay upfront and reinstate its status as winning bidder.

PSALM president Nieves Osorio justified the new Aug. 6 deadline by saying that there is nothing in the purchase agreement prohibiting the winning bidder from paying during the 30-day termination (grace) period.

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VALUE ADDED: The government would not credit the $14.14-million performance bond to the purchase price of Masinloc, Energy Secretary Raphael P.M. Lotilla said over the weekend.

But it is not clear why PSALM seized the bond and terminated the asset purchase agreement right after the June 30 deadline yet allowed the defaulting YNN to still continue paying under that supposedly terminated contact and thereby regularize its status.

Media friends have told us that PSALM has stepped up a propaganda blitz insinuating that Meralco refuses to sign a supply contract in sympathy for its sister company First Gen that lost the bid to YNN.

Industry veterans said that what PSALM should do is conduct another bidding — but this time after negotiating power supply agreements with Meralco and other big users.

Such a value-added item would make Masinloc and other Napocor generating assets more attractive to a wider field of bidders. If Ranhill is still interested, it could bid without having to spend for a broker-type middleman like YNN.

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LESSONS: This Masinloc saga should be a learning experience for us all.

We should put an end to notorious Philippine biddings where hurriedly organized groups that boast of connections but have neither technical nor financial capacity are pre-qualified to bid.

We should also stop making a mockery of public bidding by not allowing Ranhill-type of maneuvers wherein a non-bidder could end up being winner.

A review of the terms of reference shows that we already have some good rules in place. Let us renew the resolve to enforce them. For one, we should not change the rules in mid-stream to accommodate one bidder.

And this is very important: Let us put behind bars those who had violated the law and disqualify from future biddings those business groups and their officers who had broken the rules.

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RISING RATES: Electricity users must be alarmed that Secretary Lotilla said in a press conference that they offered Meralco a contract with Napocor at P3.60 per kilowatt-hour. He claimed that Meralco never replied to their offer.

Presumably the price was not attractive enough?

Now we hear that the Meralco deal that is in the works with YNN-Ranhill would be priced at 2 percent below the Wholesale Electricity Spot Markets average price. That would price a Ranhill-owned Masinloc to consumers at over P4.50 per kilowatt-hour — rising higher as WESM heads into tighter supplies in the coming years.

Why did PSALM get Meralco’s front door slammed in its face despite the better price offer? What special charm does YNN possess?

If PSALM’s privatization policies and procedure lack credibility this early, how can we successfully privatize the other assets?

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REMINDERS:Assuming nobody close to her is pushing the YNN-Ranhill deal, President Gloria Arroyo better remind PSALM and her energy and finance officials to think long-term and place public interest above everything.

They must be told that they have a much broader mandate than merely maximizing bid prices. They will have to balance conflicting objectives of obtaining high bid prices and assuring low electricity prices for consumers.

They must also ensure that Napocor’s generators fall into reliable and capable hands — not into the hands of players whose obsession is to fleece the public at the first chance and learn the ropes of running power plants at the expense of captive consumers.

Immediately, PSALM must scrap the Masinloc bid altogether and resume negotiations with Meralco for a 10-year transition supply contract.

Now that Meralco has displayed a willingness to negotiate with YNN for a 10-year deal, there is no reason for it to spurn PSALM’s offer for a similar, if not better, one.

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WHAT ABOUT HIM?: In the shadow of the glorious victory of Manny Pacquiao over his Mexican challenger days ago, there is the lingering tragedy of another great Filipino boxer — Luisito Espinosa.

Louie’s plight was brought to my attention the other day by boxing aficionado and TV commentator Hermie Rivera. Let him tell the vagaries of this irrational sport himself:

Manny Pacquiao continues to reap reams of write-ups. No one can question this doting adulation heaped by the press on his deserved fistic accomplishments.

Pero hindi naman tayo kaya nakakalimot sa mga ibang deserving fighters who have brought so much boxing glory to our country?

The case of Luisito Espinosa, whose unpaid purse owed him ($150,000) by his promoters led by ex-Gov. Larry de Pedro, promoter Rod Nazario and matchmaker Lito Mondejar, remains unresolved for over eight years already, and counting.

We’ve filed a civil suit for collection before Judge Rosario Cruz of the Manila Regional Trial Court — walang nangyari (nothing happened)..

Louie has written President Gloria Arroyo for help — walang nangyari.

He has written then Chief Justice Hilario Davide for assistance —walang nangyari.

Similar appeals to both houses of Congress were made — lalung walang nangyari (the more nothing happened).

And the Judge — Rosario Cruz of the Manila RTC — seems to be taking her time far too long in deciding the case, an outrageous legal stance taken by one sworn to uphold the majesty of the law.

Almost a decade and four lawyers later, the simple collection case is still hanging limp and forgotten like badly battered gloves. Why?

To refresh you on how this happened — On Dec. 6, 1997, Louie defended his world boxing council featherweight (WBC) crown against Carlos Rios of Argentina in Koronadal, South Cotabato.

He ended the well-received fight in a sensational 6th-round knockout of the game challenger who went home with a badly re-arranged mug but with a purse that was paid in full tax-free.

After the customary accolades strewn his way by fawning pols and the rest of boxing’s denizens, Louie was, how do you call it, nagantso!

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(First published in the Philippine STAR of July 11, 2006)

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