( Second of a series ) |
The former chief executive gets regular updates and talks extensively of the San Roque project’s benefits to flood-prone Pangasinan, which happens to be his home province. When asked for the latest photo, an aide immediately produces another picture of the dam dated February 2002, given to Ramos by the Raytheon Ebasco Overseas Ltd., which in 1996 won a subcontract to design and build the San Roque dam.
"They’re only giving me (these photographs) for my information since I helped them, even as ex-president," explained Ramos, a civil engineer by training, who said his assistance came in the form of settling local quarrels and ironing out disputes over the project. The dam is part of the San Roque multipurpose project, whose final component is the hydroelectric power plant that harnesses the Agno River in Northern Luzon.
The San Roque project is one of the five independent power producers (IPPs) that, according to an inter-agency government review committee, have financial, technical and legal infirmities. The others are the Binga hydroelectric project in Benguet, the Sual coal-fired power plant also in Pangasinan, the Casecnan multipurpose project in Nueva Vizcaya and the Cavite Export Processing Zone diesel power plant.
The IPP review committee, which submitted its report to President Arroyo last month, actually found just six out of 35 contracts it studied as "above board."
What the questionable projects have in common is that they are among the most expensive power generation projects the government has ever embarked on. Moreover, most of them are closely identified with Ramos himself, either as flagship or priority projects of his administration, or because the contractors are said to be friends of his.
Ramos has repeatedly denied this, as well as the allegation of the so-called civil society groups that say his administration entered into onerous contracts with IPPs that have left the government at a gross disadvantage.
Yet even Napocor’s 1993 annual report cited Ramos’ "personal involvement" in helping end the power crisis in just 18 months after he became president. At the same time, an independent study commissioned by the Senate energy committee in 2000 listed 12 IPP contracts signed by the Ramos administration as among the most expensive ever entered into by the government, accounting for half of the estimated P400 billion ($8 billion) in net liabilities now being shouldered by Napocor.
Former Ramos officials concede that because IPPs were perceived as saviors, these were allowed to dictate the terms of contracts over the objections of many government agency executives. But there are indications that other factors were at play. A former official in the power sector told the PCIJ: "People would come to me and say Ramos said, ‘this contract is mine, five dollars per metric ton of this coal contract goes to you.’"
This official, however, insisted he never gave in to any of these offers, and that neither he nor Ramos ever made money from the deals. He said, "I told them, give (the money) to the church. There were so many of them. If that’s all you’re after, there were a lot of those."
"I said our first priority in terms of infrastructure is energy. Second is energy. Third is energy," he told the PCIJ in an interview. In the course of this singled-minded pursuit of energy, however, rules were bent to accommodate contracts that were unfavorable to the government.
Foreign investors who participated in the power sector were welcomed and given various incentives. The Ramos administration even passed the Mini-Hydroelectric Power Law that gives proponents a seven-year income tax holiday for those putting up small hydro power plants.
Ramos’s first "fast-track" involved a hydroelectric company that was closely identified with a family friend.
The Binga Hydro Electric Power Inc. (BHEPI), the company that held the contract to rehabilitate the Binga plant, had as its president Catalino Tan, godson of Ramos’ father, the late congressman and ambassador to Taiwan Narciso Ramos. When Fidel Ramos was Philippine Constabulary chief, Tan was a supplier of military boots and uniforms.
In 1996, former Benguet Rep. Ronald Cosalan delivered a privilege speech exposing anomalies in the Binga project. He said Ramos told him to support Catalino Tan. "Kaibigan natin ito. Malaking naitulong sa atin (This is our friend. He’s helped us a lot)," Cosalan quoted Ramos, who later berated the legislator for delivering the speech.
Binga employees would later described Catalino Tan as "the Dante Tan of the Ramos administration." Dante Tan is the crony alleged to have helped Ramos’s successor, Joseph Estrada, make money from stock trading.
Engineers at the Binga plant say Tan openly supported Ramos’ party, the Lakas-NUCD, in the 1998 elections, doling out campaign funds to local candidates in Itogon town in Benguet. He also met with party officials on a number of occasions.
Yet Ramos would say of Tan later, "He’s a friend but not that close." Still, he did laud Tan as one of the investors who made the Binga plant work after the original managers were forced to abandon the project. "And he made it work," Ramos said.
The BHEPI held the Binga contract until Estrada became president. After Estrada’s ouster, Tan started maneuvering to regain control of Binga. Although his contract was terminated in 1998, Tan is still demanding $25 million from Napocor for operational expenses the Binga plant incurred from 1999 to 2000. A politician who asked for the help of Napocor chief Jesus Alcordo, an Arroyo appointee, to speed up payments to Tan, used his familiar line in making his case: "Kaibigan natin ito. Malaking naitulong sa atin (He’s our friend. He’s helped us a lot)."
Two other hydropower projects are Casecnan and San Roque. Both are mainly costly irrigation projects that would not have been approved by the NEDA without a power generation component, since irrigation alone could not provide enough revenues.
In the early 1980s, the Marcos administration had sought funding for the ambitious project, but the World Bank and the Asian Development Bank said no because of the huge costs involved and some environmental and social concerns.
When Ramos became president, he immediately directed the National Irrigation Administration (NIA) to implement the project that would divert water from the Casecnan and Taan rivers in Nueva Vizcaya to the Pantabangan reservoir for irrigation. At the time, state agencies were still drafting the implementing rules and regulations for the amended Build-Operate-Transfer (BOT) Law, which introduced the "unsolicited proposal" in private sector investments.
Without seeking the needed approval of the NEDA’s Investment Coordinating Committee (ICC), as stipulated in the amended BOT Law, the NIA went ahead and entertained the unsolicited proposal of CE Casecnan Water and Energy Co. Inc., a subsidiary of the US firm MidAmerican Energy Holdings Co. (formerly known as California Energy).
In the early years of the contract, former US military official and West Point alumnus named Donald Michael O’Shei, sat on the California Energy Asia board. The Filipino director and board member was real estate tycoon Oscar Violago. Many former Ramos officials described O’Shei as a close friend of the then president, but Ramos would deny knowing the American in an interview with the PCIJ. Violago, meanwhile, is a cousin of Nueva Vizcaya Rep. Eleuterio Violago.
When NEDA ICC members pointed out that NIA may have violated the process, then NIA administrator Apolonio Bautista said they were not aware of the implementing rules of the amended BOT law despite the fact that his boss, then Agriculture Secretary Roberto Sebastian, actively lobbied for the liberal interpretation of the scope of BOT projects during the drafting of the additions to the law.
The Casecnan project delayed several government priority projects in the pipelilne because of questions on its economic viability and debates on the extension of a direct subsidy. Because, it was an unsolicited proposal, Casecnan was not supposed to receive any form of government guarantee, equity or subsidy.
The most contentious issue of the Casecnan contract was the provision requiring the NIA to buy the water from CalEnergy at a cost of more than P1 billion a year. The payments to CalEnergy are made yearly by the national government, and listed under the appropriations for the Department of Agriculture.
Several officials, including Emilia Boncodin who was then budget undersecretary, hesitated approving the Casecnan contract. "It was an expensive contract and we could not afford it," she told the PCIJ. Minutes of 1995 NEDA-ICC meetings also record her as saying that the P1-billion water delivery fees to be paid Casecnan would amount to a direct government subsidy, which is prohibited by the BOT law.
The legal questions on the subsidy to the Casecnan project would persist through later NEDA ICC meetings and delay approval of the contract, despite three presidential directives to "fast-track" the process and the attendance of several Cabinet members in the meetings to defend the project.
The latter included then presidential legal counsel and now Supreme Court justice Antonio Carpio Jr. One NEDA ICC meeting’s minutes quotes Carpio as saying that while the law prohibits government from giving subsidies and guarantees to unsolicited proposals, it allows "enhancements." The NEDA ICC later decided to refer the project to the Cabinet Committee, where it was approved.
But the contract had other flaws. Sen. Sergio Osmeña III said "the most ridiculous component" of the IPP contract is the $50-million tax rebate the government will pay to CalEnergy. If the government fails to give the tax refund, CalEnergy would be allowed to raise water delivery fees.
A senior NEDA ICC member said this specific provision was not in the draft contract that went through the committee’s scrutiny in 1995. This is the reason the Casecnan project was listed among those with "legal and financial issues" by the Arroyo administration-formed IPP review committee.
Early last year, top CalEnergy officials paid a courtesy call to then newly installed President Arroyo and handed her a bill claiming a tax refund of $45.6 million. The rebate paid by government bloated last year’s budget deficit to P145 billion.
As in the case of Casecnan, Ramos issued presidential directives to fast-track approval of the San Roque project. Minutes of a NEDA ICC meeting in August 1996 reveal that Ramos even designated then Budget and Management Secretary Salvador Enriquez Jr. to "trouble-shoot the delays being encountered" by the project at the committee level.
The government also extended the proponent a direct subsidy in the form of a $400-million loan from the Japan Export-Import Bank (now Japan Bank for International Cooperation or JBIC). Since the loan carried the government’s direct guarantee, this could be technically in violation of the BOT law. But the NEDA ICC approved the proposal, using the legal justification employed earlier in Casecnan.
Implementing the San Roque contract is the San Roque Multipurpose Project Inc. (SRMP), a consortium formed by Marubeni Corp., Site Phils. Holdings Inc., and Italian-Thai Development Public Co. Ltd. Among those who signed the Purchased Power Agreement contract between the consortium and Napocor was Ital-Thai’s Premchai Karnasuta, who also figured in the controversial PEA-Amari land deal, where several billions of pesos in bribes were paid to high officials.
Like Casecnan, San Roque provoked questions from NEDA ICC members. The multipurpose nature of the San Roque project required state outlays for infrastructure, to be taken out of the budgets of the Department of Public works and Highways (DPWH), Department of Environment and Natural Resources (DENR) and the NIA.
The JBIC loan was supposed to pay for the project’s nonpower components. But when the release of the loan’s last tranche was delayed due to JBIC’s concerns over the social acceptance of the project to the local community, the Ramos administration borrowed from Citibank at commercial rates. That decision passed through the Napocor board, but its financial impact on the government was not disclosed to the NEDA ICC, which thought it approved a much cheaper financing package for the project.
In July 2001, former SRMP legal counsel Mario Aglipay also wrote Interior and Local Government Secretary Jose Lina alleging that the firm falsified documents so it could charge Napocor millions of pesos in expropriation fees. Lina forwarded the matter to the Office of the Ombudsman, where it is now undergoing preliminary investigation.
According to Aglipay, the project required Napocor to buy land in Pangasinan and Benguet from which to source 42 million tons of filling material. The contract, however, allowed the SRMP to make advance payments for the land purchase, which it would later charge to Napocor. Aglipay said SRMP charged Napocor at least P100 million for costs it incurred to buy land in 1998 and 1999. But he said some of the supposed landowners submitted fake documents and made claims over land they could not have owned.
"The ocular inspections of the Regional Trial Court of Pangasinan over the said lands show that these lands are mainly the riverbed of the Agno River," the lawyer wrote. Yet, he said, "payments were even made while expropriation proceedings are pending."
Worse, said Aglipay, there was actually no need to buy the land because a 1983 government ruling had already reserved the area as "sand and gravel quarry resources precisely for use in the construction of the dam." (To be continued)