2 senators urge government to nullify YNN group’s bid for Masinloc

Two senators have urged the  government to nullify the $11.2- million bond put up by Fil-Australian consortium YNN Pacific for failure to fulfill its contract commitments on the 600-megawatt Masinloc coal-fired power plant.

Sen. Joker Arroyo said the government should "just foreclose on the bond and go through a new bidding", noting further that the Masinloc privatization project has been overextended. Since the bidding was conducted last Dec. 1, 2004, Arroyo noted that the YNN Pacific consortium has been favored with three to four extended grace periods to be able to meet its obligations but it has so far failed to comply.

Under the asset purchase agreement, YNN Pacific was required to put up the $11.2-million performance bond supposed to guarantee its obligations to pay by Dec. 20, 2005 an upfront fee of $227 million. The $227 million represents 40 percent of its winning bid price of $562 million. Records show that the amount was well above the reserve price of $388-million set by government, and relatively lower that the $275-million bid  offered by First Gen. Corp. for Masinloc.

The same Asset Purchase Agreement required the government to first obtain creditor consent to award the deal to YNN.

Because of this, Arroyo protested YNN Pacific consortium’s continued failure to comply with its financial obligations and asked government to just cancel its bond.

Arroyo added that the government should conduct another bidding to find a more technically competent and financially capable buyer to get the Masinloc plant privatization back on track. For his part, Senate Minority Leader Aquilino Pimentel Jr suggested that the National Power Corp. (Napocor) could now to confiscate YNN Pacific’s bond, and "rebid Masinloc so we can find another bidder with the  technical and financial capability."

The issue on the Masinloc privatization came as the Senate conduct plenary debates over the revision of the Electric Power Reform Industry Act (EPIRA) of 2001.

Sen. Juan Ponce Enrile, in sponsorship of Senate Bill 2232 and committee report 59, said the EPIRA law became "ineffective" that led to the alarming increase in electricity rates to the detriment of household and corporate electric users.

"Contrary to the original intention of the law, EPIRA became anti-poor and anti-consumer, benefiting only a selected number of power generators and distributors. At the same time, the issues the law originally intended to resolve were not properly addressed," Enrile said.

Enrile’s revision also aims to address the growing debt incurred by the government due to operation losses of the National Power Corp (Napocor).

Under the proposed revision of the EPIRA law, the government will be asked to assume at least P200 billion of Napocor’s stranded debts as opposed to the original provision of making P200 billion as ceiling.

As defined, Napocor’s stranded debts refer to its unpaid financial obligations, which are not liquidated or offset by the proceeds from the sale, distribution or privatization of Napocor’s generation assets, transmission and sub transmission assets, and facilities, and other disposable assets.

Under the 2001 EPIRA Law, the national Government is mandated to absorb the combined assets and losses of Napocor to make it attractive to the private sector. In 2004, about P500 billion in debts of Napocor were accumulated through several administrations.