Straying power

Just a few years ago, the government was worried sick of a “potential” power shortage in Western Visayas, particularly Iloilo province. Without much ado, the government quickly achieved an almost impossible feat.

The government simply struck a deal with a publicly listed company, which made the company super-rich—to the tune of hundreds of millions of pesos

The deal involves two power plants that the government, through the company called Power Sector Assets and Liabilities Management Corp., or PSALM, sold to the SPC group, which is listed on the Philippine Stock Exchange.

At the pretense of an impending power crisis in the country, the government gave the SPC group a sweetheart deal that could have cost the national coffers billions of pesos. The government did not have a choice! There was a forthcoming power crisis!

But SPC who? Well, the company was originally known as Salcon Power Corp. Amid the energy crisis of the 1990s, during the time of former President Fidel Ramos, the Salcon consortium obtained from the government a contract to operate a huge power plant in Naga, under the infamous take-or-pay arrangement with the government. The contract was so arranged that even if the Salcon consortium had monkeys to manage the plant, instead of engineers, it would still make money.

In other words, the deal was so heavily stacked in favor of the private power plants at that time, there was no way for the Salcon consortium to lose money. There was no risk at all for the investor.

In 2008—during the time of the cute administration of Gloriaetta—the fortunate SPC group, which had enough staying power in the business, got another opening to fat government deals when the PSALM decided to sell two diesel power plants in Bohol and Panay.

If I recall it correctly, PSALM was organized only in 2008, seven years after the passage of the Epira, which was the law that sought to restructure the entire power sector, including the sale of government power plants to pay the mountains of debts of Napocor.

Despite being new and all, PSALM insisted on selling the Bohol and Panay power plants right away. As Evardone noted in his privilege speech, the sale did not have the benefit of screening by the usual PBAC, or the public bidding and award committee.

To top it all, PSALM did not even have a constituted board. So much so that when the present PSALM management took over under the Aquino (Part II) administration, it could not locate any record of the board deliberation on the sale of the two plants.

Thus, when our leader, Benigno Simeon (aka BS), became president, three undersecretaries of the Department of Energy conducted an investigation of what seemed to be a sweetheart deal between PSALM and the SPC group.

They were Loreta Ayson, Josefina Patricia Asirit and Jose Layug Jr.—who submitted their “preliminary committee report” to the energy secretary, who at that time was still Jose Rene Almendras, now reassigned as “Secretary to the Cabinet,” whatever the newly invented position really meant.

Nothing really came out of the committee report submitted to Almendras.

As a matter of fact, the same SPC group—which already made a killing in the take-or-pay contract in the Naga power plant way back in the 1990s—got another big break from the PSALM. The same lucky SPC group became the lone bidder for the Malaya power plant which was offered for sale by PSALM last September.

Really now, why would the government even bother to consider the sale of another plant to the same group that was already involved in a highly suspicious deal with the same government firm, PSALM?

The committee report noted that the government, through PSALM and Napocor, entered into an agreement with the SPC group, called the joint power supply agreement, concluding that JPSA “heavily favored the SPC group.”

For one, the NPC and PSALM fixed the price of the electricity that the SPC group would generate at those two plants at P3 per KWH, versus the prevailing rate in the Visayas, which was P2.99 per KWH.

Not much difference, right? Wait a minute, under the JPSA, the cost of the fuel that will be used to run those two plants would be borne by none other than—take a wild guess—the government.

That is not all. According to Evardone, the sweet-smelling JPSA also required PSALM to shoulder all the repair costs in the two plants. One document—just one single charge—already showed a repair expense of almost P6 million.

Under the agreement, Napocor and PSALM would also pay for the fuel and lubricants that the SPC group would need to run the two diesel plants. The fuel alone, according to Evardone, already amounted to P1.2 billion.

Based on the findings of the three-man committee, the generous JPSA allowed the SPC group to make a killing equivalent to more than double its initial cash outlay of $5 million for the two diesel plants.

In calling for a congressional inquiry into the deal, Evardone asked: “Who masterminded this tangled web of corruption, and who are the malefactors of this great official evil?”

The SPC group, originally known as the Salcon consortium, was actually organized by a foreigner named Chan Lok Lim and a Filipino named Dennis Villareal. Both of them are still in the board of the listed SPC, serving as chair and CEO, respectively.

The others in the SPC board are Enrique L. Benedicto, Alfredo L. Henares, Ramon Y. Sy, Alberto P. Fenix, Moon-Kyoung Kim, Kyu-Byeng Hwang, Hyeong-II Moon, and former Finance Secretary Roberto de Ocampo.

The SPC group seems to specialize in deals with the government. Aside from the Panay and Bohol power plants, the same group (when it was still known as Salcon consortium) had a take-or-pay deal with Napocor in 1994. It is again the winner—as the lone bidder—for the contract to operate the Malaya thermal plant in Rizal. Really now, the company has yet to put up its own power plants.

The straying power plant deal involving the SPC group thus puts the entire power sector privatization program into question: Is it working at all?

According to our contact in the power industry, private power companies consider the privatization program a success. For one, the power plants are now more reliable, and a number of them had undergone expansion. Most of the private power plants are also selling electricity at rates much lower than those of the Napocor.

Well and good—sure we have power supply, thanks to the privatization program. But the question is: Who benefits from it?

At the moment, 12 years after the Epira heralded our salvation, we still must bear the highest power rates in all of Asia, while this private company called SPC—with a little help from the government—already made a killing.