No irregularity in transfer of Kalayaan unit - Napocor

The National Power Corp. (Napocor) denied yesterday any irregularity in the CBK power project and revealed that the second generating unit of the Kalayaan power plant was "in danger of imminent collapse" and had to be transferred to IMPSA to allow the company to conduct repairs.

Napocor vice-president Alberto L. Pangcog also explained that the transfer was allowed by the BOT contract that IMPSA signed with Napocor.

"There is a valid contract -- the Build-Rehabilitate-Operate-Transfer (BROT) agreement itself between IMPSA and NPC, and the supplemental agreement itself followed this mother contract," Pangcog stated. "These provided the legal basis for Napocor to allow the entry of IMPSA into Unit 2 of Kalayaan and proceed with its repairs."

Based on the supplemental agreement, IMPSA will not earn anything from the repair of the generating unit and the Argentineans will have to shoulder the expenses and risk of the repair.

Pangcog said allegations from Sen. Serge Osmeña that the turnover of Unit 2 of Kalayaan for repair was "grossly disadvantageous" to the Filipino public was baseless and unfair. "On the contrary, IMPSA is undertaking the repair of the transformer of Kalayaan at its own cost, expense, and risk, as provided for by the supplemental agreement. Under the mother contract, it is actually Napocor that should undertake the repair of the said unit. It is just logical, and it makes business sense, to allow IMPSA to shoulder the cost of the said repair. In effect, advancing the cost of rehabilitating Kalayaan 2 proves IMPSA's good faith."

The turnover of the whole plant to IMPSA cannot as yet be done because Napocor has not yet complied with all the conditions in the contract, specifically the acquisition of an opinion from the Department of Justice and delivery of the right-of-way over portions of the power plant facility. Napocor needed to sign a supplemental agreement because it could not deliver on all the requirements of the BROT contract, thereby requiring an extension of time. This delay had, in turn, affected IMPSA's ability to close the funding for the project as the financiers were waiting for all documents from Napocor and IMPSA to be in order.

Pangcog explained that it is only 30 days after the effectivity of the BROT agreement that Napocor can turn over the entire CBK hydroelectric complex to IMPSA. It is also within 30 days after the effectivity of the contract that IMPSA can be obliged to post the $70-million security deposit.

Francisco Ruben Valenti, president of IMPSA Asia, for its part explained that the transfer was in accordance with the contract and necessary to prevent further damage to the unit and the rest of the CBK facility.

Examination of Kalayaan's unit two revealed problems which, in accordance with international engineering standards, required the removal of the unit from service under no uncertain terms. The ongoing inspections and repairs of the transformer, generator, valve, turbine and auxiliary systems already proved that was a wise decision on the part of Napocor to start the rehabilitation of such critical plant of the Luzon grid.

"The greater danger here if we had allowed unit two to operate without repairs, the probability of failure and damage to the rest of CBK was so great that to continue operating the plant without taking corrective action would have been negligent and unconscionable. We just observed criticism after the Dec. 10 blackout and so much fuss with the recent Y2K issue with regards to the status of the power system. Now that a judicious preventive measure has been taken, we cannot see how anyone can criticize the actions taken," Valenti said.

IMPSA reiterated that the repairs would be done without charge to the government and would be at the company's own expense.