18 Jul 2006
On behalf of the PSALM Board of Directors, I write to signify my disappointment over the lack of objectivity and journalistic responsibility in the statements made by Mr. Conrado R. Banal III in his column Breaktime on July 18:
- Before accusing members of the Power Sector Assets and Liabilities Management Corporation (PSALM) Board of gifting themselves with “hard-earned tax money”, Mr. Banal could have first checked the simple fact that the Board did not receive the alleged “P10-million bonus” in 2004. It did approve the grant of a performance incentive to PSALM officials and employees which totalled P6.4 million and not P10 million, another simple fact that could be easily checked. We would have appreciated his giving us a chance to provide him basic information, at least for the proper context or basis for any substantial discussion on the issue.
- The sale of the 600-megawatt (MW) Masinloc coal-fired power plant was not the sole basis for the grant. Accomplishments included the bid out of five other power plants, power rate adjustments to reflect the true cost of power, and the transfer of the P200-billion debt of National Power to the national government as part of its mandate stipulated in the EPIRA. The debt transfer was key to getting the consent of the World Bank (WB), Asian Development Bank (ADB) and the Japan Bank for International Cooperation (JBIC), which in turn, is a requirement before PSALM can sell the assets. These are functions given by law on PSALM and our mandate is to implement them accordingly and above board, whether critics agree with privatization and debt management principles or not.
- Pursuant to EPIRA, National Power and PSALM have been negotiating with MERALCO since 2003 on a power supply contract for the plants being prepared for bidding. National Power/PSALM gave MERALCO an initial offer of P3.60 per kilowatt-hour (kWh) which was linked to the price of the fuel and other indices. The offer was 80 centavos less than the average regulated rate of around P4.40 per kWh in Luzon before the spot market began operations on June 26. However, no supply contract between National Power/PSALM and Meralco had been concluded.
- Despite the absence of a supply contract, PSALM decided to bid out Masinloc in December 2004 as there were indicators of investor interest in the plant even if it were sold on a purely merchant basis.
- After the December bidding, it was now up to the winning bidder, YNN Pacific Consortium, to obtain on its own a supply contract(s) with electric distribution utilities/electric cooperatives should it require such contract(s) to make its investments sustainable. National Power or PSALM were not in any way involved in any of these particular negotiations.
Thank you for allowing us some space in your newspaper.
(Sgd.) NIEVES L. OSORIO
President and CEO
Power Sector Assets and Liabilities Management Corp.