BCDA scare II

It’s not just the Benguet brew that’s steaming in these pubs nowadays – the discussions on Northern Luzon issues are just as hot.

Word is abuzz that the Bases Conversion Development Authority (BCDA) has succeeded in riling up the La Union business and civic communities again in connection with an alleged plan by some Taiwanese businessmen to ship out around $200 million worth of gravel and sand annually from the province. BCDA president Narciso Abaya was quoted as saying that this extraction cannot take place because of the current conflict between BCDA subsidiary Poro Point Management Corp. (PPMC) and the private operator of Poro Point bulk terminal, Bulk Handlers, Inc. (BHI).

Does this statement have anything to do with the current legal battle between BCDA and PPMC on one side, and BHI on the other? La Union businessmen think so.

It will be recalled that PPMC passed a resolution declaring the 1999 contract between BCDA and BHI for the Poro Point project null and void, paving the way for its take over of the management of the port. The La Union court, however, slapped BCDA and PPMC with an injunction, preventing it from carrying out its move.

They say Abaya is now trying to get back at his nemesis in Poro Point for the major legal setback and embarrassment. The retired general had attempted to distance himself from the PPMC resolution several times by saying "only the court can declare the BCDA-BHI contract null and void" but succeeded only in terrifying locators in BCDA zones.

The businessmen took Abaya’s statement as a veiled threat of sorts, interpreting it as a warning that BCDA just might be looking around for contracts that can be subjected "to review" and the inevitable court contest leading to a possible nullification.

Comes now the latest Abaya "scare". The locals, of course, feel that the statement could just be part of an attempt to make BCDA’s legal nemesis look bad by making it appear that the private operator is to blame for the imagined loss of potential income of $200 million annually from the export of La Union’s gravel and sand.

But what has riled up the La Union community is the fact that Abaya would countenance, or even advocate, the idea of some Taiwanese carpetbaggers scooping up $200 million worth of gravel and sand (around 62,500 tons per day) yearly and shipping them out of the country.

One group says the Abaya statement is merely part of the legal strategy in its bid to have the injunction slapped against its subsidiary PPMC quashed. The ploy is apparently to convince the court that the private operator is hampering the development of Poro Point. Another group says if Abaya is serious with this figure and actually believes the myth that the Taiwanese would really scoop out $200 million or $225 million worth of La Union gravel and sand every year, then he might have overlooked the ecological and environmental implications. This is the scary part. In five years time, La Union would have lost some 75 million tons of gravel and sand. And where does one quarry for these materials. The mountains and the seashore are good candidates. If that be the case, La Union faces the specter of landslides and receding shoreline.

Abaya sympathizers in media circles are however worried that the amiable general might have been placed on the spot again by his peers within BCDA. It will be recalled that there were concerns that Abaya was not in the loop when BCDA and PPMC chair Filadelfo Singson-Roxas and PPMC president Felix Singson-Racadio pushed the bid for a Poro Point take over.

Now, he is no longer just a forlorn figure. This latest PR misadventure has added a dash of the comic to his lonely image. We hope the general would be more circumspect before he bites the next statement served him on a platter by BCDA’s government-paid PR handlers.

Anatomy of a stinking deal

On the one hand, YNN’s $561 million offer for Masinloc has dazzled PSALM officers who are painting it as a deal so good it may "never be obtained again". On the other hand, Meralco’s recent press statements seem to have left the door wide open for a deal with YNN claiming it wants to help the government privatize and may consider signing up to insure it has access to future power supplies.

Funny how all these are made to appear as "doing good for consumers". But to many out there, these proclamations seem more like attempts to paint over PSALM’s controversial P10 million bonuses for the botched deal or even Meralco’s "compromise" with the government for its rate increase or forgiveness on its P20 billion liability with NPC.

Industry experts were all stunned by the high bid price. After all, $561million is a lot of money. Practically the price of a brand new coal plant. Government only expected $388 million so they must be dying to get their hands on the money.

But why did YNN bid so high? The answer could be "bait-and-switch" tactics – get it at all cost and then either wangle a high-priced contract with Meralco or renegotiate the bid price downwards with government later.

There were early signs that this was where it was headed. When Sun started peddling the deal around town after his original backer Great Pacific had dropped out, people in the know tell us he intimated to prospective partners that he knew he bid too high but would renegotiate it downwards in due time.

Shortly thereafter, the press was reporting secret negotiations between YNN and Meralco and they had agreed to price the power from YNN at two percent below the average Wholesale Electricity Spot Market (WESM) price.

If WESM had been averaging close to P5 per kilowatt-hour then that would have pegged Masinloc power price at close to P4.90 per kwh today. And could even climb higher in the coming years as the WESM price itself increases.

Energy Secretary Popo Lotilla claims they offered P3.60 per kwh for a supply contract before Masinloc was bid out but Meralco never replied to their offer. So why is Meralco clandestinely entertaining YNN’s higher offer now?

Our sources in Meralco tell us that its top honchos pushing for the deal are justifying it by claiming it’s only a "take-and-pay" or "dispatchable" contract. In other words, Meralco consumers will only pay for kilowatt-hours that are used.

Now this may sound harmless but not when you look at what happened with the other Sunny Sun deal called Duracom, a "dispatchable" oil-fired power generating barge that sells power to Meralco at a high price of P7.50 per kwh. The purpose, according to Meralco top management, is for "load following" and "voltage-regulation". In layman’s terms that’s supposed to keep our lights and appliances from flickering and fluctuating because of unstable power they get from the grid.

Our Transco sources tell us if that were the real purpose you would expect that the Duracom barges would be dispatched by Meralco for only about 10 to 15 percent of its capacity on the average. What happens on a daily basis is quite different.

We hear that Sun’s Duracom barges are dispatched upon the orders of Meralco officials at an annual average of between 40-50 percent of its capacity – indicating that Duracom’s 200-MW barges are dispatched by Meralco more than all of NPC’s oil-fired power plants combined. This despite NPC’s oil-based power plants having capacity that’s almost five times larger.

Duracom’s creditors have been seething about how Duracom sets aside P0.20 - P0.25 per kwh as "marketing fees" flowing up to holding firm YNN. The so-called "marketing fees" run up to as high as P250 million per year! These fees to YNN are treated as preferred dividends and paid out before the creditors of Duracom are paid for loans they’ve extended. So where do these marketing fees go eventually?

This bit of history should already alert us consumers to what a YNN-owned Masinloc will mean. They’ve done it before and signs tend to indicate that it may happen again. Only this time Masinloc is three times larger than Duracom.

Sunny Sun’s past tends to indicate that a deal with him is never what it appears to be at the outset. Energy industry sources tell us that power from his Duracom barges were originally priced at five percent below NPC’s selling tariff to Meralco but subsequently altered and amended.

‘In November 2004, with a little help from a "close" friend and business partner at the ERC, Duracom obtained a 20 percent increase in his selling price to Meralco. And if our math is right, that increase put more than P20 million per month in additional revenues into Sun’s pocket.

Our Meralco mole also tells us Duracom’s PPA with Meralco was supposed to have expired February 25th of this year. That would have been a welcome relief for consumers from the P7.50 per kwh charges. However, sometime during the Christmas holidays it was surreptitiously extended for another year.

Now we have endless extensions granted YNN by PSALM for its $227 million downpayment on Masinloc despite losing its Australian financial backer and not having the required financing in place on its own. From Dec. 2, 2005 to March 31, 2006 to June 30th 2006 and now to Aug. 6, 2006!

PSALM and Meralco should stop kidding themselves or us about this deal. It stinks, plain and simple and YNN should be banned from participating in any future PSALM biddings.

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