18 Jul 2006
I write to clarify the issues and questions raised by Mr. Conrado R. Banal III in his column Breaktime on July 11:
- YNN Pacific Consortium Inc. failed to deliver the $227.54-million upfront payment on June 30, 2006.The PSALM Board of Directors called on the $14.14-million performance bond, and the amount was collected and credited to the PSALM special trust account on July 4, 2006.
Consistent with the process, the PSALM Board, in its meeting on July 6, voted to issue the notice of termination of the contract. The notice was then issued on Friday, July 7, 2006.
- As stated in the contract, termination takes effect 30 days (August 6, 2006) after the notice is issued.
- This is not an extension, but a notice period - following standard practice --- required to be given to a party.
- Should YNN remit the US$227 million before the termination takes effect, the government will NOT return the forfeited performance bond, a stipulation YNN is aware of and respects.
- We maintain that public interest was protected throughout this transaction. Contrary to the opinion of critics, the decision to extend the original deadline of March 31 to June 30 was made because of public interest. The increase in the performance bond by an additional US$3 million as a result of the extension of the original deadline raised the collectible amount by 27%. The successful sale of Masinloc would have meant the entry of a new player and a broader ownership base in the electric power industry, as well as good revenue stream for government to be used for the payment of National Power debts.
- Under the EPIRA and its implementing rules, there is no specific capitalization requirement to bid for the generation assets of National Power. The initial bid bond of $9 million, or about P500 million, submitted by the YNN consortium when it submitted its bid for the Masinloc plant was an indicator that the investor had substantial assets. Great Pacific was a member of the consortium at the time YNN submitted and won the bid for the Masinloc plant.
While it is true that we suffered a setback in the privatization schedule, the government made sure its interests and credibility were protected by requiring a performance bond and then forfeiting on it promptly when the agreed-upon deadline was not met.
We continue to follow the process stipulated in our bidding rules and our contract. This is important to maintaining the credibility and transparency of our privatization process, which we believe are critical to investor confidence in the long term.
Thank you for allowing us some space in your newspaper.
Truly yours,
(Sgd.) FROILAN A. TAMPINCO
Vice President
Asset Management and Electricity Trading
Power Sector Assets and Liabilities Management Corp.