A pro-administration congressman has joined calls for a probe on the alleged anomalies in the awarding of the contract to operate the country’s power grid to a Filipino-Chinese group that is said to have discreet connections to President Arroyo and her family.
In Resolution 398, Bacolod City Rep. Monico Puentevella said a House probe should settle the controversy over the $3.95-billion winning bid of the consortium of Monte Oro Grid Resources Corp. for the 25-year contract to operate the power grids of the National Transmission Corp. or Transco. Monte Oro narrowly edged out San Miguel Energy whose bid was $3.905 billion.
He said a thorough investigation would help shield future privatization from anomalies as well as determine who should be held responsible for the irregularities.
He said the investigation should include officials of the Power Sector Assets and Liabilities Management Corp. or PSALM and of the companies that participated or were excluded from the bidding.
Puentevella said a probe should also establish why the La Costa group was not pre-qualified despite its bigger $6-billion offer.
“The difference between the offer of La Costa and the winning bid was seen by critics as very disadvantageous to the national government and raised doubt on the regularity of the bidding process,” he stressed.
La Costa is a consortium led by former Finance Secretary Roberto de Ocampo and businessman Salvador Zamora. Monte Oro is composed of State Grid Corp. of China and Calaca High Power Corp.
Port operator Enrique Razon and presidential brother Diosdado “Buboy” Macapagal are said to be behind Monte Oro.
Even PSALM president Jose Ibazeta was hounded by allegations of conflict of interest because of his being a board member of the International Container Terminal Services Inc., which is owned by Razon.
Ibazeta denied the allegations, saying he inhibited himself from the TransCo auction.
But opposition Rep. Teofisto Guingona III said PSALM should explain why it set an “indicative price” of only $3 billion for the TransCo concession despite its prior knowledge of La Costa’s $6-billion offer.
He said the indicative price was too low, considering that TransCo makes at least $400 million a year in net profits.
Puentevella noted that before the bidding started, two contenders – San Miguel Energy and Metro Pacific-led Twin Rivers – accused each other of violating the constitutional requirement that enterprises in the country should be at least 60 percent owned by Filipinos.
Twin Rivers also accused the San Miguel consortium of violating the cross-ownership restriction under Section 45 of the Electric Power Industry Reform Act or EPIRA, since it operates generation and distribution companies which are TransCo customers.
Puentebella pointed out that if the accusations were true, these firms should have been disqualified right from the beginning.
No change in ownership structure
PSALM assured yesterday that the composition of the group that bagged the 25-year concession contract to operate TransCo will not be changed.
“The concession corporation that will operate must consist of the same members of the consortium that participated in the bid,” PSALM said.
PSALM issued this statement to ensure that the winning concessionaire complies with the citizenship requirement as stipulated in the Constitution.
The bidding rules for TransCo require the winning bidder to first incorporate the concession company that will apply for the congressional franchise to run the country’s sole transmission system, and this corporation, in turn, must maintain its membership.
This means that the members of the Monte Oro-led consortium, once declared the winning bidder by PSALM, cannot include any new entities in the concession corporation.
Thus, the members of the consortium who were prequalified prior to the bid submission deadline will remain the same entities that should comprise the concession corporation.
PSALM said Congress will then have the opportunity to evaluate the members of the consortium in the deliberations for the franchise application.
The bidding rules and the transaction documents, PSALM noted, also contain restrictions in the change of equity of the concession corporation for a period of three years, unless, as in other franchises, Congress requires the concession corporation to conduct an initial public offering to open a portion of the ownership of the concession corporation to the public.
PSALM said it will officially declare the Monte Oro group as the winner within 30 days, after another round of review is made on the submitted documents.
The winning bidder will then apply for a franchise in Congress, which will take about one year.
The franchise will allow the group to pay up 25 percent of the bid price, with the balance of the bid amount to be paid within 20 years. The group has the option to prepay the government if it deems necessary.
A month after securing the franchise, the Monte Oro consortium has one month to take over the operations of the country’s national transmission highway.
Upon takeover, the consortium will have to pour in some $725 million until 2010 to upgrade and modernize the facilities of TransCo to be able to sustain the uninterrupted supply of power to customers.
No probe during holidays
The joint congressional power commission has deferred its investigation of the reported conflict of interest in the TransCo bidding, involving Ibazeta, the PSALM president.
Sen. Miriam Defensor Santiago, a co-chairperson of the commission, said the probe would not include Razon because the latter has promised to divest his two percent share in the Monte Oro group upon the awarding of the contract.
“What was referred to our power commission was only the question of the conflict of interest of the PSALM president because of his alleged association with Razon. The question of whether there was any irregularity in the bidding was apparently referred to the Blue Ribbon committee,” Santiago said.
Santiago stressed the Senate is in no position to block the signing of the deal with the Monte Oro group.
“The Blue Ribbon will have to conduct fact-finding if there is irregularity. But in the meantime, unless there’s a TRO (temporary restraining order) from the court, if PSALM proceeds with the award of the bid, then there’s nothing to prevent the winning bidder from executing or consummating the sale,” Santiago said.
Earlier, Walter Brown, Monte Oro chairman and president, said that Razon, through Sureste Properties, has approximately 1.49 percent indirect shareholdings in the winning consortium. Razon owns Sureste Properties, which owns 4.9 percent of Monte Oro. – With Aurea Calica and Christina Mendez