Masinloc bid winner unable to pay $227 M

POSTSCRIPT By Federico D. Pascual, Jr.
The Philippine Star

NO NUMBERS GAME: Somebody high up in the government should be reminded that they should not play with cold numbers, but must work on real human persons.

We do not reduce the number of Filipinos languishing below the poverty line by redefining numerically what poverty is and simply lowering the line below which a person or household is statistically considered poor.

We do not belittle the reality that we lack 6,800 classrooms at 45 students per room in the coming school year. We do not suggest to education officials to cram the children 100 to each room to shrink the space shortage.

Neither do we spread students over several shifts in a 24-hour class day using the same overworked facilities just to nip further the looming shortage.

What we have to do, as Postscript keeps saying, is plan way ahead, calculate the incoming student population (that is easy), build the rooms, put up the facilities, and recruit the teachers needed – before the children troop to school.

Minus the gargantuan graft in government, there is more than enough money for classrooms and related needs. So let us not foist lack of funds as an excuse for this criminal neglect of our youth. * * *
MASINLOC BID: It has happened too often in this Strong Republic that an investor bids for a big government project, wins it, then tarries paying and mobilizing.

The winner cannot or does not pay on time, because (1) he does not have the money up front, (2) is still looking for financier-partners, (3) is trying to pre-sell the contract at a profit, (4) or is negotiating an amendment to fatten the contract before paying.

Wizened by its checkered experience in dirty public bidding, the government is supposed to have refined the process to preclude instances of supposedly solvent winners being unable to pay, and also to prevent favoritism and corruption.

Before the bidding starts, the ground rules or the terms of reference are made known to, and made binding on, all parties. If the rules are followed, and they should be, everything is supposed to proceed without any hitch, like clockwork. * * *
DEADLINES RESET: I reiterate this basic premise, because something queer is happening in the awarding of the 600-megawatt coal-fired power plant in Masinloc, Zambales, to the YNN Pacific consortium.

The Power Sector Assets and Liabilities Management Corp. (PSALM) bid out the Masinloc plant on Dec. 1, 2004. As the ostensible winner, YNN was given one year, or until Dec. 22, 2005, to make good its $227-million offer.

But it turned out that YNN could or did not pay. Either it did not have the money or the National Power Corp. and PSALM themselves could not complete the paperwork fast enough to enforce the deadline, or both.

So PSALM gave YNN until March 31, 2006, to pay. Again, YNN failed to produce the money, prompting PSALM to extend the deadline again to June 30, 2006. Explanation given: "The YNN bid is difficult to duplicate should PSALM calls for a rebidding."

Why cannot YNN pay up? If it did not have the money in the first place, why was it pre-qualified and allowed to bid? Would it not be best to just confiscate its bond and get new qualified bidders?

The government is reportedly losing some P70 million in foregone interests for every month that PSALM delays collecting the $227 million from YNN. Some quarters are asking tuloy if YNN and Napocor/PSALM are not colluding to delay payment. * * *
CONNECTIONS: A two-step process was reportedly designed by PSALM precisely to make sure that only technically and financially capable parties are allowed to bid for power-generating assets.

Yet industry sources said that YNN was allowed to bid for that huge merchant plant in Masinloc with only a P1-million capitalization. They explained this unusual arrangement by pointing to the alleged "connections" of YNN.

Sources said YNN’s local shareholder is YNN Holdings Corp. owned by a certain businessman Sunny Sun. He was identified as a distributor of Duraflex Wires and Cables, selling its wares to such power utilities as the Manila Electric Co. (Meralco).

His YNN Holdings Corp. also happens to be the 60-percent owner of Duracom Mobile Power Corp. operating a small 108-megawatt barge-mounted IPP (independent power producer) plant in Navotas. * * *
SUN-ALCORDO LINK: The pattern gets more interesting as the dots are connected. Sources said Sun’s partner in Duracom is East Asia Power Resources Corp., owned by the bankrupt American company El Paso Energy.

When the partnership was signed in 1993 the president and part-owner of East Asia’s Philippine operations reportedly was none other than Jesus Alcordo who now sits as a commissioner of the powerful Energy Regulatory Commission.

The Sun-Alcordo relationship was further cemented, according to sources, when they brought another 108-megawatt barge into the partnership. A sister company called East Asia Diesel Power Corp. was formed.

Documents brought out by Sen. Juan Ponce Enrile had shown Alcordo agreeing to pay Sunny Sun commissions running to about P0.15-P0.21/kwh or as high as P150-200 million per year and a success fee of $3 million for securing contracts for additional capacity. The higher the plant’s dispatch capacity, the bigger the payoff. * * *
THRIVING TIES: The Sun-Alcordo relationship is thriving, sources said, manifesting itself in the campaign to capture Masinloc.

It was reported that Alcordo’s nephew, Edward Alcordo, and his son John played key roles in the failed attempt to bring in Australian partner Great Pacific Financial Corp. Edward is reportedly chief executive officer of the Australia-based Great Pacific Investments.

Reviewing his track record, sources said Alcordo as ERC commissioner since 2003 may have been helping his friend Sunny Sun in his business.

They recalled that Duracom applied for and was granted by the ERC a 20-percent increase in its tariff rates in January 2004. Sources said this effectively gave the firm an additional P20 million per month in revenues. * * *
SWEETHEART DEAL: More recent incidents cited had something to do with Meralco signing a contract with YNN. The ERC issued on Dec. 22, 2004, official guidelines entitled "Amendment to the Guidelines for the Rates."

The guidelines in effect required power distribution utilities (such as Meralco) to certify that they have conducted public bidding in the procurement of new power supply contracts with generation companies. The rationale given was to protect consumers and ensure transparency in the sourcing of power.

Many utilities such as Visayan Electric Co. and Davao Light and Power of the Aboitiz family as well as Cagayan Electric of the Abayas complied and publicized in the major dailies their upcoming requirements for power supply.

Yet just recently, on May 10, the ERC issued Resolution 21 under which the commission – despite the absence of any formal complaint – temporarily suspended the need for having transparent public bidding for utilities procuring power supplies.

Industry sources said it was obvious that the resolution was issued to conveniently open a window for Sunny Sun to sign a sweetheart contract between YNN and Meralco.

Only three out of the five ERC commissioners signed Resolution 21. The most prominent signature on it was that of Alcordo. * * *
GUIDED PROCESS?: President Gloria Arroyo has said that privatizing Napocor’s generating assets is the key to rehabilitating the ailing power firm and stabilizing the retail price of electricity.

But if PSALM is going to successfully bid out Napocor assets and leave the power sector in good hands, it better show more competent judgment.

An industry executive remarked: "Their handling of the Masinloc privatization shows how dangerously vulnerable the process is to two-bit hustlers and influence peddlers all too willing to play a bait and switch game."

It appears that YNN is not ready to pay. Why not then rebid Masinloc – but this time bid it out with full "transition supply contracts" from Meralco and other Luzon utilities so that the Lopez family and companies close to Meralco are not the only ones always bidding for plants up for sale. After all, that was the original intention under the Electric Power Industry Reform Act of 2001 (Epira).

Meanwhile the administration has to contend with rumors that privatization is being delayed, because Malacañang is having a hard time guiding the process to favor chosen beneficiaries.