Senator hits turnover of $150-M generator to firm

In a move described by Sen. Sergio Osmeña III as unprecedented, irregular, irresponsible, and illegal, the National Power Corp. transferred a 150-MW generating unit worth $150 million to the Argentine firm IMPSA/CBK Power Corp. which has a paid up capital of only P250,000.

Osmeña disclosed that last Feb. 7, Napocor president Federico Puno ordered the turnover of Kalayaan Unit 2 of the Caliraya-Botocan-Kalayaan (CBK) hydro-electric power complex to IMPSA/CBK without a valid contract in place and without collecting the $70-million security deposit.

Osmeña claimed that Puno had signed a vaguely-worded supplemental agreement with IMPSA officials last September 1999 without having obtained prior Napocor board approval which was secured only in November. Neither did Puno send the supplemental agreement to the NEDA-ICC for review in violation of the procedure laid down by the BOT Law.

"The principal agreement covering the Build-Rehabilitate-Operate-Transfer (BROT) project for the CBK complex is not yet effective for failure of the IMPSA to raise financing, to pay up its equity, and to remit the $70 million security deposit to Napocor," Osmeña argued. He said that a subsidiary contract cannot therefore be effective. "If the behest contract has not been legalized, then the behest baby must be illegitimate."

The principal CBK contract was attended by much controversy when it was signed on Nov. 16, 1998 in Malacañang with President Estrada as witness. A news daily which had described the President as the "unwitting godfather" of the contract was forced to shut down while its ownership changed hands.

Osmeña said that Puno's move was unprecedented because no government contract has ever been implemented on the basis of a subsidiary or supplemental agreement which has no effective principal contract to stand on.

"Puno may be charged with violation of the Anti-Graft and Corrupt Practices act for entering into a transaction grossly disadvantageous to the Filipino people," Osmeña declared. "I will furnish more juicy details when I deliver my privilege speech this afternoon on this matter."

In response, IMPSA said the Kalayaan Unit 2 unit was turned over because the transformer was on the verge of collapse, as detected by more than 20 tests conducted last year by Napocor and the private firm.

IMPSA Asia Ltd. president Ruben Valenti explained that tests conducted since March 1999 showed an alarming progress of the defect.

"According to the International Electrical Engineers Standards, the transformer was in Condition 4, which means it should be removed from service," Valenti said in a statement. "The international standard indicated a 'thermal decomposition fault,' which was reconfirmed when the transformer was opened last month."

He said it was a wise and prudent decision to stop Unit 2 because destruction of the transformer could have resulted as a consequence of a short circuit.

"The occurrence of a collapse was imminent. There was melted insulation and irreparable damage could have occurred," Valenti said.

He explained that while there are some precedents that Napocor could not deliver because of the case pending in court, the power firm cannot afford to risk the collapse of Kalayaan.