Gun with the wind

Up to now, it is hard to say how much the organizers of the lucky energy company called Northwind Power Development Corp. really put up as capital in the company some seven years ago.

Yet, thanks to the generosity of the Energy Regulatory Commission, or the ERC, which sets the power rates in this country that is said to have the highest electricity cost in Asia, Northwind—under its new owner, none other than the Ayala group—stands to realize a windfall of about P2 billion.

As I reported last week (Breaktime Jan. 19, 2012) the ERC “temporarily approved” for Northwind a huge FIT rate of P9.30 per kWh (kilowatt-hour), compared to the going rates in the open market WESM of P3 to P4 per kWh last year.

FIT is shortcut for “fit in tariff” that our government is ready

to give supposedly only to new—again “new”—investments in so-called renewable energy, as incentives for businesses to go into alternative power systems like wind and solar.

One thing is clear: Northwind is not a new company. It actually started operations in Ilocos Norte in 2005, organized by a group headed by former Energy Secretary Vincent Perez, who was one of the Wall Street-type Cabinet members in the cute administration of Gloriaetta.

Fortunately for Northwind, another government agency, called the National Renewable Energy Board, decided to include even existing RE companies. It is a fact that only Northwind has benefited from such an amazing decision.

Anyway, even before the FIT system becomes operational, the ERC already granted Northwind a provisional rate of P9.30 per kWh, which started talk in the power sector about a possible windfall profit for Northwind that can reach P2 billion in the life of its 20 turbines in Ilocos Norte.

Where will the windfall come from, if not from all of us, the electricity users, including factories and malls, and all the guys down here in my barangay. We will pay for the windfall through electricity rates. Nice.

And just exactly how much capital the organizers of Northwind put into the company, nobody can as yet say, simply because Northwind is keeping the figure as one of its biggest secrets.

Earlier reports nevertheless put the total cost of the Northwind project at $50 million. Part of the investment came from an outright grant from the Danish government of about $10 million. Also, the Danish government gave an interest-free loan of about $30 million to the project.

By the way, the loan enjoyed a full guarantee from the Philippine government during the cute administration of Gloriaetta.

And so, theoretically, at that project cost of $50 million, the original stockholders could have put up $10 million, although nobody in the power sector could say for sure, because the stockholders did not really disclose the exact figure.

Anyway, let us do the math. It is said that the wind turbines of Northwind have a lifespan of 20 years, and so they have some 14 years remaining. At a FIT rate of P9.30 per kWh, calculations of the income from the turbines in the next 14 years should amount to about P3.5 to P4 billion. Investment analysts are saying that, because of the generous FIT given by the ERC, Northwind adds to its present value something like P2 billion.

That is the windfall.

And it is not bad for a project in which initial equity of the stockholders has not been disclosed fully to the public up to now.

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To achieve the ideal ratio of one policeman for every 500 Filipinos, and thus lower the crime rate in the country, the Philippine National

Police has started to beef up its ranks last year.

Result: The crime rate went down significantly last year.

And so the PNP is also in the process of getting a supply contract for the official firearms issued to its new recruits. Unfortunately, as usual, the PNP hit a snag in the bidding process for the contract. The bidding was cancelled.

And now one of the bidders is waging a media war against the company that supposedly submitted the lowest price, which is the local firm called Armscor, which offered to supply the PNP with the Italian-made Tanfoglio Force 99 polymer gun.

Supposedly, the Tanfoglio pistol was disqualified because it did not meet the testing requirement set by the Department of Interior and

Local Government, or DILG, and the PNP.

As usual, the lowest bidder, the supposed winner, always gets hit, perhaps to stop the government from awarding the contract to it, even on the pretext that the 2010 budget already expired.

Does it mean that the new PNP recruits will have no official firearms, and they will have to use wind guns?

Anyway, Armscor SVP Gina Marie Angangco explained, in detail, the kind of “testing” that the DILG-PNP team did for the Tanfoglio pistol, which was the reason why PNP disqualified the bid of Armscor. You know, the firearm failed the text.

But Angangco said that the Tanfoglio pistol, in fact, already passed the PNP tests, such as accuracy test, interchangeability test, maintainability test, weapon drop and safety test, and adverse condition tests.

The controversial test was of course the 20,000 round endurance test, which was the reason why Armscor was disqualified.

After some 5,000 rounds of firing, according to Armscor, the PNP recorded only two minor defects in the Tanfoglio firearm. After some 10,000 rounds, the PNP recorded seven minor defects. Only after some 14,600 rounds did the first “stoppage” occur.

By the way, in gun testing, a stoppage is actually not a failure. So much so that the PNP in the past required only 5,000 rounds in the test.

And so Tanfoglio the gun stopped again after some 600 rounds. And then it stopped again. Finally, the cause of the “stoppage” was discovered. The right ambidextrous pin was missing. The DILG-PNP stopped the testing. They disqualified Armscor.

Armscor is now saying that, based on the rules of the bidding, testing for the Tanfoglio should have been allowed to complete the 20,000-round test without changing any part.

Armscor also points out that, in reality, a policeman will not fire 20,000 rounds over the lifetime of his gun.

Interestingly, the other bidders were not tested for the 20,000-round endurance test before the bidding was cancelled.

Now Armscor reportedly submitted a price of P16,800 per pistol—the lowest one. The other bids were companies called Armaments (about P18,200 per), Trust Trade (also about P18,200), and Espineli (about P22,000).

The difference is about P1,600 per pistol. This means the PNP would have been able to save some P20 million if it chose the Armscor bid as against, say, the next lowest bidder.

It was perhaps best to disqualify the lowest bidder.