16 Jun 2006
This is to clarify issues raised by Mr. J.A. dela Cruz in his 8 June 2006 column entitled "The YNN Masinloc Express." Mr. Dela Cruz joins the long list of newspaper columnists who had aired virtually the same concerns, leading us to conclude that they had only one source for their respective columns. As Mr. Dela Cruz aptly put it: "Your guess is as good as mine."
The list includes Mr. Neal Cruz of the Inquirer ("A 1-2-3 in Masinloc power plant deal" ? 19 May 2006 and "More mysteries in botched Masinloc sale" ? 29 May 2006); Mr. Conrado R. Banal III of the Inquirer ("Bond on the run" ? 1 June 2006); Mr. Federico D. Pascual Jr. of the Philippine Star ("Masinloc bid winner unable to pay $227M" ? 4 June 2006); Ms. Mary Ann LL. Reyes ("How serious is gov't?" ? 31 May 2006); and Mr. Dan Mariano of the Manila Times ("Masinloc: Show me the money" ? 19 May 2006 and "Masinloc: Sweet deal turns sour" ? 22 May 2006).
Mr. Dela Cruz, quoting Senators Joker Arroyo, Nene Pimentel and Serge Osmeña, says that PSALM treated YNN "with kid gloves" by giving the consortium a "reprieve three times, the last one to end June 30, on the mere pretense of posting an additional $3-million bond to the original $11 million."
Mr. Dela Cruz also claims that instead of declaring a failure of bid and cashing in on the bond, PSALM "bent over backward to the point of breaking almost every rule on contract administration and, yes, rewriting the rules on the privatization of state assets."
We must point out that PSALM, in adhering to its mandate to privatize National Power Corporation's assets in an optimal manner, maintains that it is in the best interest of the government to give this transaction as much latitude to succeed without compromising bid rules and the terms of the contract. By just granting a few months extension, PSALM is simply minding its mandate to maximize the privatization proceeds that will be used to settle the debts of National Power.
Please be aware that per contract, once PSALM completes its conditions precedent, which it has, the corporation has the option to set the date for YNN to settle the upfront payment of $227,540,000.352. Under the contract, PSALM had 270 days, or until 2 December 2005, to complete its conditions precedent to close the transaction. It set 31 March 2006 as the original deadline for YNN to deliver the upfront payment. In the exercise of its prerogative under the contract, PSALM granted the first extension by moving the original deadline to 30 June 2006. But in doing so, the corporation required YNN to increase the performance bond by $3 million from $11 million to $14 million to ensure that the government's interests are adequately protected during the three-month extension.
PSALM's position has always been that it would rather get the whole bid price of $561.7 million for the Masinloc plant rather than the mere $11-million performance bond.
The $3-million increase in YNN's performance bond in consideration of this extension is an added benefit to the government if the consortium fails to deliver on its promise. Also, a rebidding cannot be conducted anytime soon and before the operation of the Wholesale Electricity Spot Market. But by granting the consortium a few months extension, PSALM endeavors to comply with its EPIRA mandate of maximizing proceeds. We must stress that during the extension, the performance bond continues to exist and, therefore, remains valid.
We would also like to assure the public that the Masinloc power plant continues to operate pending the turnover of the facility to its new owners as soon as the down payment is delivered. Being a new and, therefore, efficient plant, Masinloc is one of the power generation facilities that has contributed significantly in boosting the revenues and operating income of the National Power Corporation.
Mr. Dela Cruz also mentions YNN's "clout" to get Meralco to sign a "take, pay or else" supply agreement.
YNN requested that a supply contract with Meralco be a condition of the performance bond. PSALM, however, rejected the request.
PSALM is well aware that by adding the condition to the performance bond, it will change the terms of the Asset Purchase Agreement, in effect giving YNN better terms than what was originally offered to other bidders of the Masinloc plant. This, of course, is unfair to the other bidders and will certainly violate the "no post bidding negotiation" policy of PSALM. Thus, PSALM required YNN to amend the conditional performance bond and submit an unconditional one. YNN complied with this requirement.
We would like to stress that negotiations between YNN and Meralco over any power supply contract for the Masinloc plant are between the two parties. PSALM is not a party to any such negotiation, nor is it privy to the same.
PSALM's official position, including the actions it has taken on this matter, had been published in the media and could be accessed in our Web site. PSALM also reported this matter during the Joint Congressional Power Commission (JCPC) meeting held last 25 May 2006 and 8 June 2006.
Thank you very much for providing us the space to make these clarifications.
Strategic Communications and Partnership Division |