21 June 2006
The Freedom from Debt Coalition (FDC) is calling on all those and will be involved in the privatization of Masinloc plant to stop all deals. We see this deal as a betrayal of the interest of the Filipino people in exchange for the fulfillment of the government’s commitment to its creditors and the private sector/investors to privatize the power industry.
First, the Power Sector Assets and Liabilities Management Corporation (PSALM) auctioned Masinloc for privatization and awarded the bid to YNN Pacific Corporation Inc., a Filipino-Australian joint venture, for $561.7million although the power company appeared to have no financial capability at all. Masinloc, a 600-MW power plant, is one of the newer, dependable, and profitable plants of Napocor. One and a half months past deadline to make its downpayment of $227million for Masinloc, yet the company is still searching where to get such amount. Worse, instead of drawing the $11 million bond because of this failure to deliver the down payment, PSALM extended the deadline to June 30, another 90 days since March deadline.
Second, the Malaysian power company Ranhill Berhad that recently bought out the entire equity interest in YNN for $8 million is now raising $227million for Masinloc. The company is already seemingly putting our money into its pocket. It will only make the consumers its milking cow. It effectively bought YNN and is now talking to investment banks to buy shares in YNN. Aside from this, it will have to almost double the present power rate of Masinloc to fully pay the power plant.
The power rates of Masinloc will shoot up between P4.80 and P5.00/kwh from its present P2.80/kwh because of the unrealistic high bid price of YNN and 12% rate of interest for the remainder of the $561.7million bid amount.
Ranhill, like other investors, will only charge the additional cost for the interest to their production cost. This will result in higher power rate.
Third, the Asian Development Bank, one of the international financial institutions that pushed for the privatization of the Philippine power industry through the Electric Power Industry Reform Act (EPIRA) is seemingly setting eyes on investing in Masinloc to save its power privatization project. In fact, it has already issued statements that it has two requirements before it infuses equity in Masinloc. One is the supply contract between Meralco and YNN for the power from Masinloc. And another requirement is that the installed capacity of Masinloc plant be raised from 600 MW to 1,000 MW, allegedly the cost of which will be financed through a loan from Japan Bank for International Cooperation. Again, if this materializes, the payment for loan will also be charged to the consumers.
Fourth, the Energy Regulatory Commission passed Resolution 21 that tied Meralco in a supply contract with YNN-Masinloc, without the benefit of public bidding. Hence, ERC became an accomplice in this conspiracy to bailout YNN at the expense of the consumers.
We believe the deals surrounding the privatization of Masinloc, the acts of our government agencies, ADB, and the YNN Corporation are all condemnable and must be stopped soon. ADB and the government must put a halt in dealing with YNN Corporation. The officials responsible in these despicable acts must be held accountable.
The failure in the privatization of Masinloc is not a surprise to us knowing that the EPIRA that mandated such privatization is full of flaws. A “payola” even had to happen for the legislators to pass this flawed law six years ago. The privatization of Masinloc is a manifestation of how desperate the government is in realizing the privatization of the power industry.
We reiterate our position that privatization is not the answer to the woes in the power industry. It is not the solution to huge Napocor debts and high power rates. Power contracts must be reexamined and those found onerous must be rescinded. A law that promotes the rights and interests of the consumers, gets rid of corruption in the power sector, and one that creates a truly independent regulatory body must also be in place.