End of the road

Finally! PSALM saw the light and drew on the $14-million performance bond of YNN Pacific Consortium Inc. We pray this brings the deplorable Masinloc saga to a rightful close.

Sadly, a number of those involved were embarrassingly caught in an attempt to deceive the electricity-consuming public were it not for the vigilance of a few brave individuals in media, the legislature and civil society.

A number of lessons can be drawn from this sorry episode, lessons we hope will be heeded by those principal actors involved in this shameful affair.

First, the credibility of the privatization process should have been sacrosanct and inviolate. And protecting that should have been PSALM’s main concern. Instead, PSALM allowed itself to be dazzled and blinded by YNN’s illusory $562-million bid. PSALM in fact even slipped into a state of denial when it became apparent that YNN was just a middleman who did not have the financial or technical capability to fulfill its offer and that its supposedly well-heeled Australian partner, Great Pacific Financial Corp. had dropped away.

They absolutely refused to see the truth. PSALM granted two (not one as they claimed in a recent press release) extensions from the original Dec. 2, 2005 deadline to give YNN a chance to find "another" partner and "work out" a power supply agreement with Meralco! In this case, PSALM evidently believed the end fully justified the means, even if it meant jumping through hoops at YNN’s command.

The second lesson is PSALM should have privatized Masinloc with a power supply contract attached to it already. They say that it was not possible because talks between NPC and Meralco for such an agreement were "going nowhere". Why then was Meralco secretly working overtime to ink a supply agreement with YNN supposedly at the behest of the palace? And what magic did the palace perform now that they couldn’t do before Masinloc was bid out?

PSALM is surely not that naïve to know that having those supply contracts attached to the latter when it was bid out would have made it more attractive to a lot more players and ultimately would have redounded to their benefit.

The third lesson is PSALM should have acted more responsibly in screening and pre-qualifiying bidders. It only tarnished our image further and the credibility of the privatization process to have our country’s critical power assets falling into the hands of brokers and middlemen without any real capability to pay or even run those plants. The pre-qualification process should have weeded out such characters at the outset. And the ultimate protection against such scam artists was to draw on their performance bond as soon as it was clear they were only intent on flipping the deal by shopping around for someone else to buy it and in the process make a mockery of PSALM’s privatization program. It’s sad that it had to take a public outcry to bring PSALM to its senses.

The fourth lesson is an age-old one we were taught even as children. "Never to count your chickens before they’re hatched." PSALM’s act in generously granting itself a P10-million bonus for the "successful" sale of Masinloc was clearly premature – even insensitive to the plight of many others within the government bureaucracy who have had to make do with reduced pay and benefits. One columnist correctly pointed out that granting themselves this bonus destroyed PSALM’s objectivity with regards to awarding Masinloc to YNN. For even when it was apparent that YNN had lost its first foreign partner and did not have the capability to pay they couldn’t reverse the award and call the bid a failure. Yet PSALM continued to chase the illusion justifying it was in the country’s best interest to do, saying the $562-million bid price could never be obtained again.

But refusing to confront that reality much sooner made PSALM look like an irresolute and desperate seller. And the premature P10- million bonuses to directors and officers of PSALM made it difficult for all of them to confront the facts staring them in the face.

There are also some difficult lessons that will hopefully be heeded by Meralco in this pitiful caper. The power company should learn to stay clear of unsavory characters like Sunny Sun and YNN. But if Meralco top management is already deeply in bed with them, as is already being talked about, then let’s not be surprised when we see more clandestine deals unfolding in the future.

It is no secret that during the last few months, Meralco was avoiding media queries over whether a power supply agreement was being negotiated with YNN. And it was only last week, when formally asked by the Philippine Stock Exchange did they finally admit of ongoing negotiations with Sunny Sun’s YNN.

Even more worrisome is that despite having policies set by the Meralco board and its creditors that were meant to ensure transparent public bidding in the procurement of power supplies, Meralco seemed bent on breaking these very same guidelines in order to ink a deal with YNN without the benefit of transparent bidding process.

We heard sources talk of a quid pro quo being dangled by government for a condonation of Meralco’s P20-billion liability to Napocor, or the grant of their long requested rate hike. Others even suggested the largesse related to YNN’s P425-million bonanza coming from the Ranhill buyout had much to do with it. And now, the power industry, Meralco included, is reeling from a lack of public trust. Also, much of what was transpiring inside Meralco effectively demolished ERC commisioner Jesus Alcordo and the ERC’s defensive press statements that Resolution No. 21, issued just last May 10, 2006, was not meant to open a window for YNN and Meralco to sign a sweetheart contract without a transparent bidding process. Was it pure coincidence then that Meralco and YNN were at that very moment close to signing a power supply deal? Without public bidding at that? Having friends in high places has helped YNN’s Sunny Sun.

The ERC "coincidentally" issued a resolution that would have helped him fulfill Ranhill’s toughest precondition to buying him out for P425 million – getting a Meralco supply contract. As for Alcordo, although he retires this July, something else seems to be afoot. Strong rumor going around industry circles is that a certain Jose Reyes is a strong contender to takeover Alcordo’s post as ERC commissioner. Reyes is a former employee of East Asia Power and a right hand man of Alcordo while he was working there and later at NPC. Now we hope he’s not being placed there for "continuity" and to cover his former boss‚ tracks. Needless to say if he makes it as commissioner he’ll be just as sympathetic to Sunny Sun’s requests as his predecessor.

Finally, the great lesson for the general public is that vigilance pays and can never be dispensed with. There’s nothing like shedding a spotlight on the whole process to bring accountability back to Napocor’s privatization. In this case, the public’s perception now is that PSALM, Meralco, and ERC conspired to deliver a deal that would have lined people’s pockets quite nicely but hurt consumers badly.

At the end of the day the people in PSALM were mature enough to rise above their initial mistakes and draw on YNN’s $14-million performance bond. Although it would never have happened without a vigilant public.

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