Stench in Napocor deal

Energy industry insiders are again worrying about how the National Power Corp. is quietly embarking on what appears as another highly questionable power transaction.

We’re referring to the contract entered into by the Napocor with the undercapitalized Lanao Hydroelectric Development Corp. (LHDC) which like Masinloc, was cornered under irregular circumstances. But Masinloc already had an existing coal-fired power plant but no valid contract. The LHDC on the other hand had a contract but no plant. Its idea of an Agus 3 hydroelectric plant is, just that, an idea.

Napocor entered into a deal with LHDC which will set electricity rates way above what is mandated by the Energy Regulatory Commission. The rates were set despite the fact that there is no plant yet to generate the electricity. The contract allows for LHDC to charge rates simply far too high for Mindanao ‘s captive consumers who are left with no option but to the 220-megawatt output of the Agus 3 project in Agusan.

Next, the negotiations were kept suspiciously hush-hush between Napocor officials and former energy officials (who are incorporators of LHDC).

Equally intriguing is a marketing agreement to exclusively sell the electricity from Agus 3 which assures some fortunate mercenaries to be paid a handsome fee for the effort.

Simply put, Napocor has given LHDC undue advantage over other power generators and other investors who might be interested in the electricity business in Mindanao.

As with the Masinloc fiasco, Napocor officials appear to have glossed over documents showing that LHDC does not have the capability to build and operate the proposed 220-MW power plant. The LHDC’s articles of incorporation show that it has an authorized capital stock of P20 million and a paid-up capital of only P1.2 million.

It would be interesting then to see how LHDC can build a P22-billion power plant when its paid-up capital is just enough to buy an SUV.

It would really be interesting to know how Napocor top honchos could have missed this glaring basic detail? Maybe Napocor officials were blinded by the 12 centavo per kwh marketing or broker fees they stand to gain as a result of their sales agreement with LHD.The marketing fees could easily translate to P120 million a year for Napocor. Sadly, Mindanao consumers have to shell these out as part of operating costs.

True cost of NAIA 3

The three commissioners tasked by the courts as part of the determination of just compensation in an expropriation case have placed the value of NAIA 3 at $144 million.

On the other hand, Asia‘s Emerging Dragon Corp. (AEDC) is offering the government only $200 million for the Piatco-built facility, not $375 million as earlier reported.

Inspite of the disparity, there is a glaring similarity. Both are much lower than the $565 million being sought by Piatco as compensation for the construction of the terminal.

And because the AEDC offer is much higher than the recommendation made in the expropriation case, a ranking DOTC official revealed that Malacañang has tasked the department to coordinate with the Department of Finance on how it would go about with the AEDC offer.

Piatco is claiming from government $565 million in a case filed with the Singapore-based International Chamber of Commerce while another set of hearings is going on at the International Center for Settlement of Investment Disputes in Washington on the $425 million claim of Fraport.

The Supreme Court had nullified the contract earlier awarded to Piatco for the construction of the NAIA 3, but in order to take over the facility, some people in government believe that it will have to first expropriate the property after payment of just compensation. This legal route was of course questioned by AEDC which said that there was no need to expropriate since NAIA 3 was build on government-owned land.

But why pay Piatco when here is AEDC offering to shoulder the financial burden on behalf of government?

In its petition for a writ of mandamus before the Supreme Court, AEDC also claims that it has legal and vested right to the international passenger terminal as the original project proponent.

If the petition is granted, AEDC lawyers say that government would likewise be absolved of the lawsuits before the ICC and ICSID which could cost the government around $1 billion.

Why government would still not award NAIA 3 to AEDC is a question that has long been begging for a decent response.

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