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Biz Buzz: DPWH needs PPP expert

/ 12:28 AM June 10, 2015

There’s a slight delay in the awarding of the Cavite Laguna Expressway—originally set on June 4— given that Public Works and Highways Secretary Rogelio Singson was among the key officials who joined President Aquino in his state visit to Japan.

But everything is apparently still on track and the award, likely to go to Manuel V. Pangilinan’s Metro Pacific Investments Corp., would happen very soon and possibly within this day, our sources say.

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What’s more pressing, however, is the appointment of a full director at the DPWH’s PPP Service office especially with Aquino’s keystone infrastructure program continuing to swell in size. Its more than 60 projects in the pipeline are valued at about $27.3 billion, by the government’s last count.

The DPWH’s PPP Service is currently headed by officer-in-charge Ariel C. Angeles, who has served in this post for the past year and has decades of experience at the department. We hear that under Angeles, the department was even able to do away with foreign transaction advisers for the recent Calax deal.

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Given the smooth auction process and stellar results, it’s also a sign that our own officials are gaining competence in implementing big-ticket infrastructure deals.

With time dwindling and more crucial projects on the way, it might be the right time to get the right people solidly in place, if only to ensure that reforms are sustained moving forward. Miguel R. Camus

FIT no more?

THE FEED-IN-TARIFF (FIT) system for renewable energy (RE) projects was under fire at the recent power industry conference in Manila as developers warned about the limitations of the incentive scheme in promoting widespread, low-cost power development.

An official of a startup solar power firm said during the discussion on FIT that the RE industry was getting “addicted” to FIT and warned that the declining cost of RE technologies such as solar power might not be reflected by developers used to high returns.

The official told of a developer who approached one investor and was turned away because the cost presented was so low that the investor thought “something was wrong.”

The developer “learned his lesson,” went to another investor, took commission on the EPC (engineering, procurement and construction) and padded the project cost by $2 per watt.

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“The prices seemed fair, the return was attractive, and the investor bought in at a higher than necessary rate,” the developer said.

“Sometimes being the lowest in the market might turn away some investors.”

What happens after FIT, which is only applicable to the corresponding installation targets?

Present business models, at least for solar, will all come crashing down after next year’s non-FIT environment, this official said. Solar power developers will have to learn how to live with generation rates of around P6 to P7 kWh or “pack your bags.”

Presently, projects with a combined 70 megawatts (MW) qualified for the original solar FIT rate of P9.68 per kilowatt-hour (kWh). A lower rate of P8.69 per kWh will apply to the next batch—the remaining 430MW out of the new target installation of 500MW—or until March 15, 2016.

The other rates are for run-of-river hydro (P5.90 per kWh) for an installation target of 250 megawatts (MW), biomass (P6.63/kWh) for 250MW, and wind (P8.53/kWh) for 200MW.

A more established solar power industry player said: “The point for us developers is, there is uncertainty. How many will really qualify for FIT, and what happens after 2016?” Riza T. Olchondra

Hospitality for a favor

A GLOBAL company considered one of the biggest, if not the largest, in its industry agreed to pay a fine of $25 million to settle charges of violating the United States’ Foreign Corrupt Practice Act.

According to US regulators, investigation showed that the giant firm “failed to devise and maintain sufficient internal controls over its global hospitality program connected to the company’s sponsorship of the 2008 Summer Olympic Games in Beijing.”

In other words, the motive behind the company’s expensive junkets for the Olympics was questionable. Perks covered travel for three to four days, including tickets, luxury hotel accommodations and sightseeing excursions —with each package worth $12,000 to $16,000 (P530,000 to P712,000 in today’s exchange rates).

The intended beneficiaries included government officials from African and Asian countries, including the Philippines. What raised the red flag for investigators in particular was that four of these officials—including the Philippine official—“were directly involved in, or in a position to influence, pending negotiations, regulatory actions, or business dealings” of the global firm.

The company footed the bill for foreign government officials to attend the Olympics while these officials were in a position to help the company with its business or regulatory concerns, the US SEC said.

In the Philippines, the global firm was involved in a dispute with its local joint-venture partner. At that time, in 2007, the industry giant had a pending request to the official related to assets that were subject of the dispute.

The US SEC found that, a few months after filing the request, the company invited the official and spouse to attend the Olympics. The invitation was accepted and, after another few months, the official issued a decision in favor of the global firm and against its local partner.

However, the global giant withdrew the invitation just before the Beijing Games opened, apparently worried that the local partner got wind of the offered hospitality.

According to US regulators, in settling the fine, the company recognized that inviting government officials to the Olympics created a heightened risk of violating anti-corruption laws, yet it failed to implement sufficient internal controls to address such risk.

So who was this would-be Olympic excursionist? The official was very visible in the sports community and a close relative is a popular source of information on atmospheric events, albeit a “non-expert” (as a rival’s employer describes the relative). Ronnel W. Domingo

E-mail us at [email protected] Get business alerts and a preview of Biz Buzz the evening before it comes out. Text ON INQ BUSINESS to 4467 (P2.50/alert)

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TAGS: Business, Cavite-Laguna Expressway, economy, Manuel V. Pangilinan, Metro Pacific Investments Corp., News
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