22 July 2003
The US energy giant Mirant Corporation has declared bankruptcy to the tune of US$1.1 billion (P58.3 billion, US$1=P53). Meanwhile, its Philippine subsidiary raked in a P12-billion profit last year.
The Citizen’s IPP Review Commission (CIRC) is not surprised that the US Mirant has not included its Philippine subsidiary in its bankruptcy filing. Mirant Philippines’ IPP contracts contain “take-or-pay” arrangements and guarantees that allow it to operate its business virtually risk-free. Under these contracts, consumers absorb all risks, while Mirant Philippines rakes in huge profits.
Mirant Philippines’ power plants in Sual (Pangasinan), Pagbilao (Quezon Province), and Navotas account for a big share in the Luzon power supply, totaling 2,000 megawatts (17 percent of the 12,000-MW Luzon grid capacity). The contracts are among the most unfair and grossly disadvantageous to consumers. Even the government’s own Inter-Agency IPP Review Committee (IAC) has declared Sual as one of the five most onerous contracts and Pagbilao as having serious “financial” issues.
What is surprising and defies logic is that despite its own findings on the Mirant contracts, the Arroyo administration has not cancelled the contracts. Does this have something to do with the special relationship of President Arroyo with Mirant Corporation?
We recall that on 08 February 2002, President Arroyo appointed Mirant CEO Marce Fuller as a member of her International Board of Advisers. The IAC released its findings on the Mirant contracts in July 2002. Recently, the US Federal Energy Regulatory Commission found Mirant liable for manipulating the California electricity spot market, which led to dramatic disturbances in energy prices in that state. Why did President Arroyo choose to appoint and continues to retain Fuller as a member of her International Board of Advisers?
The Mirant contracts are among the 35 contracts that the Arroyo government claims it has been renegotiating for the last few months. This apparent special relationship with Mirant and its CEO Marce Fuller casts grave doubt on the integrity of the renegotiating process.
The CIRC calls on the Philippine Congress and other appropriate government institutions to conduct a thorough and transparent investigation to determine the extent of Mirant’s involvement in the Philippines. The inquiry should cover all transactions and relations, financial and political, of Mirant with Philippine government officials, including the President.
We demand from President Arroyo full public disclosure of her relationship with Mirant and the advice she has received from Fuller, in her capacity as a member of the President’s International Board of Advisers. Further, there should be full public disclosure of the details and results of the government renegotiation with Mirant.
We call for an immediate official inquiry into the possible impact of Mirant’s US bankruptcy on Mirant Philippines, lest the bankruptcy of its Mother company be used by Mirant Philippines to exact even more concessions and guarantees from the Philippine government, which President Arroyo might all too willingly give.