Osmeña hits Palace for ‘favoring’ YNN group in Masinloc bidding

Sen. Sergio Osmeña III accused some Palace officials yesterday of pushing their way to favor the YNN Pacific consortium and its new partner, Malaysia’s Ranhill Bernard, in cornering the operations of the Masinloc power plant in Zambales.

Osmeña told reporters that Malacañang is also "pressuring" Manila Electric Co. (Meralco) to sign a guaranteed supply contract with YNN and Ranhill Berhad to salvage the Masinloc privatization fiasco.

This came even after government, through the Power Sector Assets and Liabilities Management Corp. (PSALM), forfeited YNN’s performance bond after failing to meet the final deadline to put up the $227-million downpayment for the coal-fired power plant last June 30. PSALM has extended for another month the YNN to comply with its commitment.

"The (Palace) dummies claimed that although the security deposit has been forfeited, YNN still has 30 days to execute the contract by paying the $227-million downpayment. That is designed to give YNN time to sign a power supply contact with Meralco. With the assistance of the Palace, of course," Osmeña said.

On the other hand, Meralco said it should not be blamed for the botched sale of the 600-megawatt facility.

"We took exception to a statement made last week by Economic Planning Secretary and NEDA director general Romulo Neri, which apparently puts the blame on Meralco for PSALM’s difficulties in selling the Masinloc power plant," Meralco vice president and corporate communication head Elpi Cuna said.

"Mr. Neri seems to be suggesting that Meralco is deliberately making it difficult for the winning bidder of Masinloc to obtain a power sales contract from us with the end of strengthening our so-called monopoly," Cuna said.

"Far from wanting to establish a monopoly, we have even given our consumers who use at least one megawatt the freedom to choose their own electricity suppliers. By doing this, we have even actually initiated the groundwork for the implementation of open access," he added.

Cuna said it would not be advisable for any party to pressure Meralco into signing any contract just for the sake of convenience.

"We are not trying to avoid or delay anything here. We are merely making a careful study of the possible implications of a possible deal, especially on the customers. You can be rest assured that any supply agreement that Meralco enters into will be done with the intent of bringing down the generation component in the customers’ electricity bill," he said.

Meralco, in an earlier disclosure to the Philippine Stock Exchange (PSE), confirmed previous meetings with YNN but stressed that nothing has been agreed upon. YNN won in the bidding for the Masinloc power facility in December 2004.

For its part, PSALM said its board did not receive a "P10-million bonus" in 2004 out of the Masinloc sale.

PSALM president Nieves L. Osorio said the asset management firm did grant a performance incentive to PSALM officials and employees for accomplishments made in that year, but the sale of the Masinloc coal-fired power plant was not the sole basis for the grant.

Osorio made this statement to debunk reports that the proceeds from the sale of the Masinloc facility were used to fund the Corporate Variable Incentive Award (CVIA).

The PSALM chief said the CVIA amounted to around P6.4 million and not P10 million as erroneously reported.

"The money used for the CVIA was taken from corporate funds budgeted for incentives under the 2004 PSALM corporate operating budget approved by the Department of Budget and Management. It did not come from privatization proceeds," she said, adding that it was not only the Masinloc sale that was used as gauge in giving the CVIA.

"Masinloc was not the only key result area for 2004. It was bid out in December 2004 and while it was the largest plant to be bid out, it was only one of six plants that were bid out that year. PSALM had made other significant achievements, which the PSALM board rightfully recognized," Osorio added.

According to Osorio, five other power plants were sold before Masinloc which can also be used in justifying the CVIA.

"Privatization has various stages, each composed of sets of activities that require significant amounts of time and effort, regardless of the size of the plant. Hard work has been put in before an asset can be placed in the auction block," she noted.

She noted that before the privatization program can go full swing, PSALM had to facilitate the transfer of the P200-billion debt of National Power Corp. (Napocor) to the National Government.

The debt transfer, she said, was key to getting the consent of the World Bank (WB), Asian Development Bank (ADB) and the Japan Bank for International Cooperation (JBIC) which, in turn, is a requirement before PSALM can sell the assets.

PSALM had to secure individual consents for the plants, including Masinloc, which were bid out in 2004.

Furthermore, PSALM also conducted activities to implement the assumption of loans owed by rural electric cooperatives to the National Electrification Administration (NEA) totaling P18 billion and renegotiated remaining IPP (independent power producers) contracts with an estimated additional net present value savings of $6.5 million, or P364 million.

PSALM also generated additional P973 million in savings resulting from cost-cutting measures implemented in 2004.