Alcordo replies

Energy Regulatory Commission member Jesus Alcordo has sent us a letter airing his side on the current issues concerning the sale of the 800-megawatt Masinloc power plant to the YNN-Sunny Sun group.

Alcordo said he wishes to clarify in particular the questions this column raised regarding the suspect timing of the suspension of ERC Resolution 21 and on his divestment of his shareholdings from a power firm in which Sunny Sun is also identified with.

In the spirit of journalistic fairness, I am reprinting in this column the pertinent portions of Alcordo’s letter:

"ERC Resolution 21, signed by all the commissioners and the ERC chairman, except for the commissioner who was on official travel, was issued to ‘obviate a possible legal challenge’ on an earlier ERC Amendment promulgated by ERC without the conduct of a public hearing.

"Precedent cases and recent Supreme Court decisions compelled ERC to ‘afford all affected parties the opportunity to submit their views and comments’ during the public hearings to be conducted on the Amendment which affects many distribution utilities and not Meralco alone; ERC has undertaken similar decisions on pending petitions recently filed with ERC which are susceptible to legal challenge.

"I never owned any interest in YNN or in any corporation owned or controlled by Mr. Sunny Sun; my shareholdings in East Asia Power Resources Corp. (EAPRC) was divested in favor of El Paso Corp., the Houston, Texas-based principal of EAPRC in Dec. 2000.

"I have not been in any role or inclination to suggest to Mr. Sunny Sun on his plans regarding his bid for Masinloc; I have no interest in the outcome of PSALM’s decision concerning the sale of the Masinloc Power Plant and at no time have I nor my family and relatives intervened or influenced PSALM’s decision-making on that matter or any other.

"Any agreement if at all between YNN and Meralco is a decision that these two parties may or may not begin or conclude based on their respective interests; any agreement between these two, if and when submitted to the ERC, will be exposed to the mandatory public hearings to be conducted before the ERC, acting as a collegial body and which will promulgate a decision that shall consider the interests of electricity consumers in the Meralco franchise area."

So, there. We have said our piece on the matter and have given Alcordo space in order to air his side. Let it not be said that we did not adhere to the journalistic principle of fairness.

At this point, the conclusion lies in the hands of our readers.

Hell breaks loose

Meanwhile, as the sordid details of the 600-MW Masinloc deal unfold, many of our worst fears appear to be materializing.

A close look at recent disclosures of Ranhill Berhad to the Malaysia Stock Exchange confirm the following facts:

1) Malaysian firm Ranhill does not have any material experience running a power plant. Ranhill is primarily just a consultancy firm and only has a concession to put up a 120-MW power project in Sabah. Even the financing for this project has been delayed as they seek more favorable changes to the Power Sales Agreements they currently have with the insolvent Sabah Electricity Sdn. Bhd.

2)YNN and Ranhill do not have the funds to pay for Masinloc and are still trying to get the interest of banks to finance them. Our money is on their failure again to meet the already twice extended June 30 deadline of PSALM to pay the $227-million downpayment due since Dec. of 2005. They are in fact in a quandary as to how they will justify another extension and will withhold any payments to YNN’s Sunny Sun if he can’t deliver that extension.

3) Given their (YNN and Ranhill) limited balance sheets, the banks will not finance them if they do not have a Meralco contract that guarantees where their revenues will come from.

4) Sunny Sun’s tiny P2.5-million investment in the YNN Consortium will be worth a P425-million bonanza practically overnight should the Ranhill buyout materialize. However, he and his fellow investors will get paid only if the following conditions precedent as stipulated by Ranhill should happen:

First, Meralco signs a contract with YNN Consortium that is "in form and substance satisfactory to Ranhill."

Second, there is written confirmation from PSALM that it will extend the June 30 payment deadline again.

Third, financing is available for Ranhill’s to pay the required $227-million initial purchase price for the Masinloc plant to PSALM.

Ranhill appears quite assured that a Meralco contract to their liking is in the works courtesy of YNN owner Sunny Sun.

Our sources have in fact confirmed that Ranhill has already infused $3 million in "working capital" into YNN. But as they have not yet taken over the Masinloc Plant, where is this massive working capital fund going to be put to use?

A few important observations are worth mentioning:

First, why did PSALM allow a flipper like Sunny Sun’s YNN to bid for a huge critical asset like Masinloc?

When this was discovered, why then did they allow successive changes in the anchor partners from Great Pacific of Australia to now Ranhill Berhad of Malaysia?

PSALM is accountable to the Filipino electricity consumer and should ensure that the country’s power generating capacity is in the hands of good experienced players and not inexperienced ones that will learn the ropes at the people’s expense.

In fact PSALM may also need to be reminded that they are not just selling mangoes or dried fish. They are selling assets that are a vital cog in a modernizing economy and as such they must ensure they are in dependable hands.

From the Ranhill disclosure documents, it’s apparent that the lynchpin to the whole Masinloc deal is an attractive deal with Meralco.

The silence at the Meralco camp is deafening, inspite of the fact that a lot of questions need to be answered fast.

For instance, why did Meralco emphatically refuse to sign-up a Transition Supply Contract with PSALM before the Masinloc bidding as mandated in EPIRA? Signing a supply contract at this time would have equitably and impartially made the contract available to all bidders beyond just the two bidders with strong Meralco connections.

If there was a reluctance to sign then why has that been substituted now by acquiescence and consent to signing one with YNN and Ranhill? Is it in the Meralco consumer’s interest to negotiate a deal with YNN-Ranhill now?

Why the rush, isn’t there a severe overcapacity of power plants in Luzon anyway? Why are they acting like they’ll run out of power supplies?

Everyone from PSALM to Meralco and even the ERC is acting like YNN-Ranhill has some tremendous power over them, when the current circumstances indicate that the opposite should instead be true.

Is there something we ordinary pedestrians don’t see?

We’re sure the answers to many of these questions, should they come to light, will be highly unsettling to electricity consumers.

Why does the disclosure highlight that Ranhill puts so much faith in YNN and Sunny Sun’s ability to get that elusive contract from Meralco? They highlight the "market/off-take risk" or lack of a contract as a major risk but highlight that YNN is currently in an advanced stage of securing one from Meralco.

The answer here may be even more troubling for Meralco consumers and shareholders. In fact Meralco insiders are quite perturbed by the incestuous and practically anomalous relationship of YNN’s Sunny Sun with some very powerful figures at the helm of Meralco.

Who from Meralco is dancing cheek to cheek with Sunny? Definitely not just mere mortals at the power firm.

Aside from the inordinately high dispatch levels of his two oil-fired barges, Sun seems to enjoy a special relationship over there.

For instance, Napocor wags at the Masinloc plant are puzzled about why the firm that conducted YNN’s technical due diligence during the bid was a Meralco subsidiary named Miescor (Meralco Industrial and Engineering Services Corp.).

YNN’s power firms also seem to have hired a number of key retired executives from Meralco.

Another very interesting sign of this bizarre relationship has Meralco staffers talking of Sun’s daughter working as a full-time employee at a key department with some very special people there too!

Potential whistle-blowers at the country’s largest distribution utility are asking many questions. And in time more details will surface.

As the Masinloc saga unfolds we are seeing the deal for what it really is – a contaminated one that will line many pockets but leave consumers ultimately holding a bag of smelly toxic waste.

Aside from the P10-million bonus PSALM officials are granting themselves the P425-million largesse that will be earned by Sunny Sun and a few friends will ensure that the deal gets done.

All at the consumers, expense of course.

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