PCIJ Report: Ramos friends got best IPP deals

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Philippine Center for Investigative Journalism ( Third of a series )

For all the flak that former President Fidel Ramos is now getting over the numerous questionable contracts the National Power Corp. (Napocor) entered into with independent power producers (IPPs), the deal that inspired these was crafted way before he became a Malacañang occupant.

The country had its first Build-Operate-Transfer (BOT) contract in 1987, with Hopewell Holdings Ltd. of Hong Kong tycoon Gordon Wu as the proponent. Hopewell constructed two 100-megawatt gas turbine plants in Luzon.

The venture was deemed so successful that the government was encouraged to enter into more BOT power contracts and even enact the BOT Law (Republic Act 7718) that would allow Napocor to tap the private sector more effectively. Past and present government officials agree that the early Hopewell contracts provided the model for all future power deals with the private sector.

But Napocor soon found itself with more IPP contracts, and more power, than it could handle, and what was once thought of as a brilliant solution to the country’s power needs have now become problems themselves. At the time it was accumulating IPP contracts, the government had also let the private Manila Electric Co. (Meralco) to build its own power plants, which later exacerbated an energy oversupply.

Such a situation, however, was unseen in 1991, when Hopewell won the contract to build a coal-fired power plant in Pagbilao, Quezon. Three years later, it won the deal for a similar plant in Sual, Pangasinan.

Yet while Hopewell started doing business in the country under the Aquino administration, it was during Ramos’s time that it expanded its power generation business. Wu, who is a close friend of Ramos, even put up the British Virgin Islands company Consolidated Electric Power Asia (CEPA) to bid for the Sual coal plant.

Yet even before construction on the 1,000-megawatt Sual plant began, it was already attracting special scrutiny. Minutes of an April 1994 meeting of the Investment Coordinating Committee (ICC) of the National Economic and Development Authority (NEDA), for instance, show that various officials noted that the construction of the plant violated NEDA Board Resolution No. 17 that said the Masinloc coal-fired power plant in Zambales would be "the last coal-fired power plant to be constructed that will be designed for 100-percent imported coal utilization."

There was also concern, as early as that time, that Sual would lead to excess power. Even now, a 1,000-MW plant is considered huge, considering that the entire daily demand for electricity in the whole of the Luzon grid is less than 6,000 MW. Also at that time, the First Private Power Corp., a power-generation firm owned by the influential Lopez family, was already planning to put up its own power plants, also totaling 1,000 MW. The NEDA ICC proposed that the planned capacity of Sual be lowered, other IPP contracts be rescinded, and old power plants be decommissioned or retired to avoid excess capacity.

Curiously, though, minutes of NEDA ICC Technical Board meetings reveal that even while the Sual project was being evaluated on April 27, 1994, Ramos had already set April 30, or just three days later, as its groundbreaking date. Even more curious is that the approval of the NEDA board, which is headed by the president, is recorded as having been made only on May 10, 1994, 10 days after the groundbreaking.

But a bigger controversy would erupt in 1995, this time over Pagbilao. According to the contract, Hopewell could not yet charge the government for capacity fees and operational expenses because Napocor’s transmission lines linking Pagbilao to the rest of the Luzon were not yet in place.

Instead, a former Napocor official revealed, Hopewell charged the state power firm various fees simply by declaring the plant completed, sans inspection and testing. By doing this, Hopewell was forcing Napocor to put up transmission lines as soon as it could. Otherwise, Napocor would have to pay penalties.

Former government officials recall that at the time, Wu’s projects in China were in dire financial straits and the mogul apparently wanted money fast. He got what he wanted, since Napocor had to pay penalties for the delayed installation of transmission line. Napocor, however, got Hopewell to reduce its obligations and extend the contract for Pagbilao.

Helping hand

Asked about his well-known friendship with Wu, Ramos acknowledged that he once helped the tycoon obtain a favorable court ruling for the Pagbilao project. The former president related that Wu had received two temporary restraining orders (TROs) preventing the groundbreaking activities for the plant.

"What did I do to help?" Ramos recounted. "We researched the laws and found there was a Marcos decree prohibiting a TRO on any major project of public interest."

He said he instructed then chief legal counsel Antonio Carpio Jr. to bring up the matter to the Supreme Court, which would then issue an order to the lower courts. With Ramos’s intervention, the TRO was lifted. Ramos said, "Tulong ko kay Gordon Wu ’yan, pero tulong ko rin sa tao (That was how I helped Gordon Wu, and also the Filipino)."

Wu’s Pagbilao project would give birth to other contracts. In September 1994, the Ramos government got the Philippine National Construction Company (PNCC) to sign an agreement with Hopewell Holdings to extend the South Superhighway all the way to Pagbilao, where an international and domestic seaport was also proposed to be built. Local opposition to the projects, however, forced government to shelve them.

In the late 1990s, the US energy company Southern Energy Co., later renamed Mirant, would acquire Wu’s shares in Pagbilao, Sual, a Navotas power barge, and the Toledo Power Plant in Cebu, among others. The companies now managing Pagbilao and Sual are called Southern Energy Quezon and Southern Energy Pangasinan. These two companies, as well as the mother firm Southern Energy Holdings, were listed among the top 10 net income-earning corporations in the Philippines in 2000. (To be concluded)