Way out of the rut

The disturbing saga of the Masinloc privatization has reached preposterous heights.

PSALM, led by its chairman, Finance Secretary Gary Teves, has granted another 40-day extension to YNN via some technicality they’re invoking. They say it’s not really terminated until 30 days after they served the notice last July 11th, which means YNN has until Aug. 11 to come up with the 40 percent downpayment ($227 million) on the purchase price for Masinloc of $562 million.

Whether they admit it or not, what government is doing now is giving Ranhill more time to come up with a Meralco contract, which they will then use to borrow the money needed to meet the downpayment.

Many have observed that Meralco, through its recent statements seems to be leaving the door wide open for a contract with YNN. Meralco has admitted to the Philippine Stock Exchange that it had indeed been in secret negotiations with YNN. What do the board of directors now have to say about Meralco negotiating with YNN inspite of a board policy requiring public bidding for such contracts?

All these "secret maneuverings" leave many to suspect that YNN’s P200 to 250-million marketing fees (a fact known by YNN’s own creditors) and Sunny Sun’s P450-million windfall from Ranhill are attractive incentives that promise to line the pockets of many involved in this transaction.

Electricity consumers should now be alarmed. Energy Secretary Popo Lotilla has announced that they offered Meralco a contract with Napocor at P3.60 per kilowatt-hour. He claims Meralco never replied to their offer. Presumably the price wasn’t good enough?

Now we hear that the Meralco deal that’s in the works with YNN-Ranhill will be priced at two percent below the Wholesale Electricity Spot Market’s (WESM) average price. That would price a YNN-Ranhill-owned Masinloc to consumers at over P4.50 per kwh, rising higher as WESM heads into tighter supplies in the coming years.

Lotilla’s credibility seems to be waning. He should stop defending the YNN deal. If there is anyone to blame for this fiasco, it is Lotilla himself. He was the one who accepted the YNN bid when he was still head of PSALM so naturally he is left with no recourse but to fight tooth and nail to defend it.

If PSALM’s privatization process lacks credibility this early in the game how can we successfully privatize the rest? Instead of forcing a Meralco-YNN contract to salvage a rotten deal, PSALM should step back, take its blinders off and think of what’s best for the country.

Chasing YNN’s $562-million bid price under the circumstances is definitely not the astute thing to do. PSALM should instead scrap the Masinloc bid altogether and resume negotiations with Meralco for a 10-year Transition Supply Contract (TSC). Now that Meralco has displayed a willingness to negotiate with YNN for a 10-year deal, there is no reason to spurn PSALM’s offer for a similar, if not better, one. And if Meralco stonewalls on signing a deal with PSALM a second time around, that should raise suspicions. With a TSC in hand, PSALM can then turn around and rebid Masinloc and its other plants.

Ranhill should be perfectly welcome to join that bidding. Aside from not having to pay YNN’s $8-million "entrance fee," they may even get it cheaper than $562 million. YNN on the other hand must be blacklisted from future bids. They’ve already made a mockery of PSALM’s bidding process. No sense in allowing them to fool us all a second time.

If we are to attract more credible players to participate in NPC’s privatization and salvage the failing privatization program of NPC, then a transparent and consistent application of the rules is badly needed.

Sariaya port row

The sleepy town of Sariaya, Quezon hardly ever hits the news. Aside from the Pahiyas-like festival which it marks during summer, we do not hear much about the town which is sandwiched between Candelaria and Lucena City.

This remote town is more than 120 km from Metro Manila. The place has about two blocks of commercial establishments, mostly restaurants and shops, and a couple of very old mansions which, despite their age, remain majestic and impressive.

Businessmen who put up beach resorts along Tayabas Bay are however concerned over the rise of a port facility in the area which threatens the serenity and ecology of this remote sleepy town. The port facility, we learned, was put up by a conglomerate identified with leading rice traders.

The anxiety is understandable: the place was being positioned as a get-away, a haven pleasantly distant from the stress of Metro Manila life. All these could be threatened by a humongous structure rising along the shores of serene Tayabas Bay.

This port facility project is reportedly intended to transform the Philippines into an Asian transshipment hub for rice and corn. Farmers and traders, however, expressed serious doubt on the ability of the Sariaya port project to fly, citing its remoteness and the perennial insurgency problem that seems to plague Quezon province to no end.

If Filipinos have strong reservations about using the remote facility, would grain traders from other Asian countries use it ?

We hope the prognosis is wrong. After all, the Sariaya port was built at a staggering cost of P1.6 billion. NGI had to borrow that money from a consortium of major banks led by the United Coconut Planters Bank (UCPB), PBCom and Dutch ABN-AMRO.

According to media reports, the loan would be due in 2009. If the local agriculture trading sector snubs the facility, where will the borrowers source the funds to pay off the loan in three year’s time?

Good news is that the national government has guaranteed the loan, which means that if the project proponents fail to pay, the banks can go after the government, through the Philippine Export Import (Philexim) Credit Agency. The bad news is, at the end of the day, Filipino taxpayers will be at the receiving end.

Philexim is a government agency under the Department of Finance. Its chairman is DOF Secretary Gary Teves while the president and CEO is Virgilio Angelo. Among its board of directors are BSP Gov. Amado Tetangco, NEDA director-general Romy Neri, Trade Secretary Peter Favila, Luis Sicat, Rogelio Lombos, Genando De leon and Quirino Baterna.

We are for a world-class grains terminal and would always be willing to support a government guarantee for the money required to build such facility. If the project flies, then the economy of Sariaya benefits. The conglomerate hopes for the day when giant vessels, called "capesize" in shipping parlance, would come docking at the pristine shores of sleepy Sariaya.

But the farmers and local traders deserve some answers, too. The howl is not aimed at the conglomerate nor at Philexim – it is against the wisdom of the choice of site. Why, of all places, Sariaya, Quezon, they ask. They are also urging Philexim to disclose to the public if the loan was covered by a collateral sufficient enough to cover the loan plus interests. The collateral cover is vital to ensure that we, taxpayers, would not be liable for the whole amount in case of a possible default.

If these questions can be satisfactorily answered, then alls well that ends well. A satisfactory answer to the questions should also calm a probable nervousness in the banking sector over the repayment of the loan. One thing the banking community does not want to see these days is a major default on a cape-size loan.

If the concern of the farmers and local traders are addressed, then, perhaps a patronage of the facility would become imminent.

The agriculture trading sector also wants to know whether or not the use of the remote Sariaya port would result in higher costs for them. Would users of the remote Sariaya port be assured that the commodities stocked in the port and the trucks that would haul them be secure from insurgents? Would they be "taxed" at two kinds of checkpoints, one run by government police agencies and the other by Mt. Banahaw-based armed groups?

The government should not take the concern of the agriculture sector regarding the viability and security of the Sariaya port lightly. The risk on that loan was assumed by taxpayers for the benefit of the farmers and local traders. They deserve to understand the intricacies of the decision surrounding the Philexim guarantee.

As for the concerns of the tourism sector of Sariaya over the fate of their shoreline, well, that is another story.

For comments, e-mail at [email protected]