OBVIOUSLY the government corporation called PSALM must come up with an explanation on why South Korean STX Marine turned out to be one of its most favorite contractors.
STX Marine again figured highly in another bidding held by Power Sector Asset and Liabilities Management Corp., which took over the assets of Napocor.
But a new one-year contract with PSALM seemed to await STX Marine to operate and maintain the ancient 40-year old asset known as Malaya thermal power plant in Pililia town in Rizal province.
Reports said PSALM attracted only two bidders—Salcon Power and STX Marine, which both had Korean connections.
Under its newly appointed president, Lourdes Alzona, a long time accountant in the folded-up Napocor, PSALM insisted on spending P460 million more on the Malaya plant for its yearly upkeep starting September.
The government apparently wanted to keep the plant back up soon, hoping that it would provide additional power in Luzon in case of emergency, such as when other power plants would conk out without warning.
Every year, the guys in PSALM would chase some private companies to conduct bidding for the contract to maintain Malaya.
Alzona acted as PSALM OIC in the past few months, because the Aquino (Part II) administration suspended, and eventually dismissed, its former president and CEO, Emmanuel Ledesma Jr.
It was under Ledesma that PSALM gave STX Marine its first break, through a maintenance contract for the Malaya plant in 2014, after submitting the lowest bid at P302 million vs PSALM’s budget of P451 million.
The 2014 contract of STX Marine is expiring next month, and in the bidding for the 2015 contract, the lucky STX Marine again submitted the lowest bid.
From what I gathered, PSALM only had to do some post-bidding procedures, re-checking the qualifications of the bidders, and, presto, STX Marine would get the new contract.
It seemed that PSALM hardly ever considered the track record of the Korean firm, which was supposed to maintain the 40-year-old oil-fired Malaya in the past year.
That it hardly did.
With its 650-MW capacity, Malaya was considered one of the biggest plants in the country, and yet reports said its employees complained about the lack of expertise of STX Marine for such a plant with extraordinary needs.
The employees filed a “petition” asking the PSALM management to drop STX Marine from the bidding for the new one-year contract. The complaint did not seem to have gotten them anywhere.
First, the employees claimed, STX Marine was not really into the power industry, because, as its name indicated, its line of business was shipbuilding and ship maintenance.
They also said certain STC Marine managers always cut down on expenses even if they were meant to solve some technical problems. It was perhaps the reason the firm could keep its bid low.
STX Marine parent company, the STX Group of South Korea, has reportedly been in a deep financial mess for the past several years.
In June 2013, New York-based Wall Street Journal reported that an affiliate of STX Marine filed for bankruptcy proceedings, after the parent failed to find a buyer for the company.
The report noted that the 2008 financial crisis in the United States hit STX Group hard, since the conglomerate spent much of the “advances” from clients to acquire new businesses, leaving little funds for operating capital.
In June 2014, another STX subsidiary in Dalian province, China also filed for bankruptcy. This information could be obtained in the Web, if only PSALM cared to check.
Question: How did STX Marine pass the stringent screening of PSALM for bidders, and worst of all, why did PSALM award the P300-million Malaya plant maintenance deal to a company specializing in shipbuilding?
For the new contract, as all bets seemed to go to the same shipbuilding firm, it would now seem that PSALM was always chasing after STX Marine to give it more money.
The financial hardship of the STX group also showed in the performance of subsidiary STX Marine, which could not even honor its commitments under the contract with PSALM, such as paying for the so-called operator stock.
Yet PSALM continued to give more projects to STX Marine in the past year, such as the overhaul of a turbine, which was delayed for months, making it the longest overhaul record in the history of the 40-year-old plant.
STX Marine already reported the completion of the overhaul, but news reports indicated the Korean firm had yet to turn over the turbine to the Malaya plant because it encountered big problems in the start-up test. In other words, the turbine was still not running properly.
The boo-boo even inspired our favorite congressman, Bayan Muna Rep. Neri Colmenares, to wonder why PSALM would give more contracts to STX Marine despite its lack of track record in the power industry.
As Colmenares noted, STX Marine had sub-contracted the contract for the turbine overhaul to another Korean firm that also had no experience in turbine overhauling, creating more problems.
To solve the new problems, STX Marine sub-contracted another Korean firm that was formed for the supply of local manpower and tools, and not for the turbine overhaul.
Guess what—PSALM never did a performance audit of STX Marine, which the Malaya plant employees insisted was the reason STX Marine could hide its violations of the 2014 contract.
But the Aquino (Part II) administration would not give up on the plant that was said to be ready to be sold as scrap metal.
For one, the plant was too old, having started operations in 1974.
But the administration wanted to keep the plant in case of emergency. Question: Did the Malaya plant perform its supposed role in the government program for power supply, such as in the emergency situation in early 2014, when several power plants were shut down for maintenance, which created a spike in the price of electricity because of an artificial shortage. Did the Malaya plant respond to the emergency?
Answer: Never!