POSTSCRIPT / August 28, 2014 / Thursday


Opinion Columnist

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Darkness to shroud last year of Noy term

TWILIGHT: Darkness may literally shroud the twilight year of the administration of President Noynoy Aquino as the country reaps the fruits of official neglect and the failure to meet the need for bigger power capacity.

Energy Secretary Carlos Jericho Petilla himself has dark foreboding, including that of an imminent power shortage, resulting partly from a Supreme Court order to the National Power Corp. to pay P60 billion in damages to its former drivers and mechanics.

That is just one labor problem, kicked off by a class suit by some 8,000 workers displaced in 2003. It was allowed to fester in the background as Napocor went through privatization to save what was left of the firm.

The real culprit for the looming power crisis is the failure of the administration, despite sufficient early warning, to address the consequences of running ageing generators and failing to add new plants, including those using alternative fuel, to meet current and rising power needs.

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YAWNING GAP: The power crisis was already staring the Aquino administration when it took over way back in 2010, but economic planners and energy officials did not aggressively address it.

There is a yawning gap between the administration’s wanting to achieve a minimum of seven percent economic growth rate while, strangely, sticking to its accompanying power supply growth target of only five percent.

Whatever Malacañang does now to boost generation capacity is too late since it takes at least three years to build and operate a major power plant, assuming the preliminary work has been completed prior to construction.

While national agencies have simplified and integrated preparatory processing, one complaint of some power investors is red tape and corruption in many local governments trying to cash in on the upcoming business.

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PRIORITIES: Many investors are smart enough not to be hypnotized by glowing reports of credit rating upgrades, an alleged clamor for the President to stay on for another term, and an offer to amend economic provisions of the Constitution to accommodate foreign capital.

The erratic supply of cheap and reliable power has been scaring prospective foreign investors. Even Manila’s notorious traffic gridlock that delays cargo deliveries has raised a red flag among those in the import-export business.

A Moody’s Investors Service analyst told the STAR the other day that reducing the cost of power and improving cargo movement should be given higher priority than amending the Constitution to ease restrictions on foreign investments.

Christian de Guzman, vice president and senior analyst at Moody’s, said: “Liberalizing the constitutional restrictions on investment is not a panacea for the weak performance of Philippine FDI (foreign direct investment) relative to other countries in the region.

“Arguably, further developing infrastructure in a way that lowers the cost of electricity or improves logistics efficiency, among others, may be more critical.”

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PHL LAGGARD: The country’s net FDI was up by 34 percent to $2.923 billion as of May, from $2.182 billion in the same period last year, according to data from the Bangko Sentral ng Pilipinas.

But research figures from the Metropolitan Bank & Trust Co. showed that in the first quarter, its net FDI of $1.852 billion was lower than Indonesia’s $4.527 billion, Thailand’s $2.887 billion, and Vietnam’s $2.45 billion.

De Guzman said: “As I am not a political analyst, I’d rather not comment on the implications of a second Aquino administration. However, I would note that it may be more important to focus on the near-term outlook for reform.

“Indeed, reforms enacted in the near-term will have more of an impact only a few years down the road, regardless of who wins the presidency in 2016.”

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GARNISHMENT EFFECTS: On the Supreme Court order to pay P60 billion to Napocor workers, Petilla warned that if the amount were garnished from the Power Sector Assets and Liabilities Management Corp. that manages Napocor assets, PSALM would suffer financial dislocation.

That setback could see power rates going up. PSALM president and chief executive Emmanuel Ledesma Jr. explained: “This will result in operating cash deficit, which will lead to power shortage nationwide.”

If PSALM’s funds are garnished, Ledesma pointed out, its long-term debts would become immediately due and demandable. Under PSALM’s loan contracts, garnishment is a ground for default that will activate the payment acceleration clause.

“PSALM would be obligated to instantly settle outstanding obligations amounting to P329 billion as of June 2014,” he said.

With that unscheduled expenditure, Ledesma said PSALM would have to get advances or loans from the national government, which would entail additional government borrowings.

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POWER TRAP: As development is being pushed in the homestretch of the Aquino term, the country is projected to require 9,011 megawatt of power next year, or 3.4 percent higher than this year’s demand of 8,717 MW.

Petilla has proposed that a state of emergency in the power sector be declared to allow the government to tap additional capacity.

Among other measures, he has in mind renting bunker-fueled power facilities to fill up the projected shortfall of 300 MW to 500 MW. This looks like merely shuffling around existing resources.

Sen. Antonio Trillanes has proposed also that President Aquino be given emergency powers to enable him to address adequately the coming power crisis.

The senator’s plan looks like a trap. What if the President were given emergency powers but still failed to solve the crisis (which is likely to happen), his failure would further sink him.

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(First published in the Philippine STAR of August 28, 2014)

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