01 October 2003
The Freedom from Debt Coalition (FDC) urges the Senate Committee on Government Corporation and the Blue Ribbon Committee to take the lead in exposing the irregularities in contracting the CBK-IMPSA project. The Senate hearing, touted as its last hearing on the subject, should pave the way for the contract’s immediate cancellation.
IMPSA’s financial and technical incapability to undertake the CBK project has been compounded with graft controversies. Former Justice Secretary Hernando Perez has been implicated with bribery charges, which has already implicated First Gentleman Mike Arroyo and “Jose Pidal.”
This illustrates that the CBK contract is a can of stink half-opened and ready for resolution.
IMPSA did not pre-qualify to undertake the CBK-BROT. The report of the Price and Non-Price Evaluation Group (PNPEG) submitted to NPC on 22 July 1997 indicated that IMPSA did not meet the minimum technical and financial requirements and it lacked necessary legal documents required by the terms of reference. Despite this, NPC insisted on pushing with the contract with IMPSA.
Further, the signing of the contract was rigged, as it was irregular. The CBK contract signed on 06 November 1998 carries provisions previously disallowed by the NEDA-Investment Coordination Committee, the approving body for all BOT contracts. These include contentious provisions such as performance undertaking, accession undertaking, and allowable downtime.
On 14 September 1999, NPC forged a Supplemental Agreement with IMPSA even when the original CBK-BROT was yet to take effect. Testimonies and records later showed that the contract became only effective on 07 February 2001, after financial closure was achieved as a result of the Department of Justice opinion rendered on 20 January 2002 by then Acting Secretary Perez. US$2-million purportedly changed hands in exchange for the DOJ opinion.
The CBK-IMPSA contract has resulted into added financial burden to taxpayers and consumers, as the contract is overpriced. New Zealand-based consultant Meritec Ltd. noted in its July 2002 report that the rehabilitation caused the NPC to pay IMPSA a price disproportionate to the cost IMPSA invested. Meritec reported that IMPSA would recover some US$50 million for rehabilitating Unit 2 for a mere US$500,000. Furthermore, IMPSA would recoup some US$30 million for repairing Unit 1, compared with the cost of less than US$8 million in repairs.
Amid the onerous nature and the anomalies behind the IMPSA contract, the government has hastily entered into a renegotiation with IMPSA.
The CBK-IMPSA is only one of the IPP contracts that the government renegotiated, albeit fast tracked. However, renegotiation of an inherently onerous contract will not bring down electricity rates: the action is a mere palliative. Canceling the grossly disadvantageous and burdensome contracts will bring about significant reduction in the cost of electricity rates and lessen the government’s financial burden.
The Senate should bring out the irregularities in contracting the CBK-IMPSA project by probing deeper into the circumstances surrounding the approval of the contract.