Napocor, PGI seen settling dispute soon

The National Power Corp. is expected to finalize soon a compromise agreement with the Philippine Geothermal Inc. (PGI) to end a long-term dispute over a steamfield contract., Power Sector Assets and Liabilities Management Corp. (PSALM) president Edgardo Del Fonso said yesterday.

In an interview, Del Fonso said they hope to reach a compromise agreement in the next couple of weeks. "There are at least two remaining issues we have to resolve. We might come up with a compromise agreement very soon. If we can finalize it in the first two weeks of July, it would be better," he said. Del Fonso declined to give further details.

PSALM, is handling all the assets and liabilities of the state-owned power firm.

According to Del Fonso, they need to finalize a compromise deal within the executive branch since both parties have already agreed to suspend court cases against each other. "We are already doing some arithmetic’s on how to resolve the issues. We have to come up with the decision while cases in courts are temporarily suspended," he said.

Sources at PGI, on the other hand, said they are still threshing out the terms which have been disputed for six to seven years now.

"The compromise agreement will contain general terms which will be fair for both sides and will be adjusted to the new power law," the sources said.

The sources said the agreement might not even entail signing of a new contract with Napocor. "We keep on talking with each other to make a fair deal. It will not necessarily mean we have to sign another contract with Napocor," the sources said.

In the ’70’s, PGI, then Unocal, signed a 25-year contract with Napocor to develop steamfields in Tiwi in Bicol and Makiling-Banahaw in Quezon.

The contract was supposed to be renewable for another 25 years. But after the contract had lapsed in 1996, Napocor apparently did not want to renew its contract with PGI.

PGI, however, argued that under the signed contract in the mid-70s, there is a provision that allows them to enter into another 25-year agreement with Napocor. This issue has prompted both parties through arbitration and to filing suits against each other.

PGI prayed for the renewal of the service contract and/or damages in the amount of $468 to $600 million. In August 1996, Napocor filed a petition for declaratory relief before the Regional Trial Court of Quezon City.

PGI and Napocor closed an interim agreement on June 22, 1998. The agreement represents the willingness of both parties to suspend legal proceeding and resume settlement talks. Apart from allowing PGI to continue operating the steam fields, the agreement suspends local court proceedings, dismisses international arbitration without prejudice to refilling; and requires 60 percent of PGI’s service fee be placed in escrow; and remains in effect as Napocor and PGI negotiate in good faith to reach a final agreement.

PGI and PSALM are now engaged in negotiations and are now working toward a final commercial agreement aligned with the thrust of the power reform law.

Meanwhile, the Tiwi and Makban geothermal power plants of Napocor are expected to undergo full rehabilitation within this year. The rehab is expected to be completed by December 2003.