PSALM Board did not receive "P10-M Bonus"

17 Jul 2006

The members of the Power Sector Assets and Liabilities Management Corporation (PSALM) Board did not receive the "P10-million bonus" in 2004. It did grant a performance incentive to PSALM officials and employees for accomplishments made in that year, but the sale of the 600-megawatt (MW) Masinloc coal-fired power plant was not the sole basis for the grant.

This was clarified by PSALM President Nieves L. Osorio as she belied reports stating that the proceeds from the sale of the Masinloc facility were used to fund the Corporate Variable Incentive Award (CVIA).

Ms. Osorio pointed out that the CVIA amounted to around P6.4 million and not P10 million as erroneously reported. The money used for the CVIA was taken from corporate funds budgeted for incentives under the CY 2004 PSALM Corporate Operating Budget approved by the Department of Budget and Management. It did not come from privatization proceeds, she stressed.

"Masinloc was not the only key result area for 2004. It was bid out in December 2004 and while it was the largest plant to be bid out, it was only one of six plants that were bid out that year. PSALM had made other significant achievements, which the PSALM Board rightfully recognized," Pres. Osorio added.

"Privatization has various stages, each composed of sets of activities that require significant amounts of time and effort, regardless of the size of the plant. Hard work has been put in before an asset can be placed in the auction block," she noted.

Before the privatization program can go full swing, PSALM had to facilitate 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. PSALM had to secure individual consents for the plants, including Masinloc, which were bid out in 2004. After a series of negotiations, PSALM secured in March 2006 ADB's universal consent for the privatization of all generation and transmission assets of National Power. The Corporation is also concluding negotiations with the WB and JBIC for their respective universal consents.

Furthermore, PSALM also conducted activities to implement the assumption of loans owed by rural electric cooperatives to the National Electrification Administration (NEA) totaling P18 billion and renegotiated remaining IPP contracts with an estimated additional net present value savings of $6.5 million, or P364 million.

PSALM also generated additional P973 million in savings resulting from cost-cutting measures implemented in 2004.

"Effective governance entails recognition of merit. However, if the final judicial determination specifies that PSALM does not deserve or does not have legal basis for granting the CVIA, it will abide by the final determination and implement the appropriate ruling on the matter," Ms. Osorio said.

Strategic Communications and Partnership Division
Tel. No. (632) 9029067