Press Release
July 2, 2006


Senate Minority Leader Aquilino Q. Pimentel, Jr. (PDP-Laban) today warned that power rates would go up if the poorly-capitalized buyer of the Masinloc power plant is allowed to operate the facility and to enter a power supply agreement with the Manila Electric Company (Meralco) even after repeatedly failing to pay its financial obligation to the government.

Pimentel said the Power Sector Assets and Liabilities Management (PSALM) Corp. should have rescinded the sale of the 600-megawatt coal-fired plant to the YNN Pacific Consortium and confiscated the companys $14 million performance bond after reneging on the $227 million down payment by the third deadline on June 30 this year.

He maintained that PSALM should have declared a failure of bidding in view of YNN Pacifics repeated non-payment of the upfront fee. Thereafter, he said a rebidding of the Masinloc plant should be held instead of allowing YNN Consortium to enter into buyout deal with Ranhill Power Berhad, a Malaysian company.

The entry of Ranhill Power has exposed YNN Pacific for what it is -- a mere broker or conduit, and not a legitimate player in the power industry, the minority leader said.

Pimentel said it defies explanation why YNN Consortium with actual paid-up capital of only P625,000 was awarded the contract to purchase the Masinloc power plant at a price of $651 million.

Like a jigsaw puzzle whose pieces are beginning to fall into place, Pimentel said it has become crystal-clear that YNN Pacific gave a fantastic bid price to ensure it would beat rival buyers despite its doubtful financial capability and lack of credible track record in power generation.

Obviously, Pimentel said YNN Pacific, due to its thin financial resources, intended to source its financial obligation to the Philippine government largely from the sale of expensive power.

He cited reports about ongoing negotiation for a power supply agreement between Meralco and YNN Pacific, and that in exchange for the approval of such agreement, the government may give concessions to Meralco in the form of settling its $20 billion liability to the government and granting its pending application for a rate hike.

Citing authoritative studies, Pimentel said when the Masinloc plant was bidded out in 2004, its production cost was approximately P1.97 per kilowatt hour, one of the cheapest when its valuation was computed between $250 million and $350 million.

However, because of the extensions of the payment deadline granted by PSALM and increased costs of coal, Masinlocs production cost has risen to P2.05 per kwh with the $561 million bid price of YNN Pacific not yet factored into the cost.

Because of Masinloc deal, industry players foresee that power rates will go up. And again, the ordinary consumers will end up the losers, he said.

Pimentel said PSALM officials should be criminally and administratively charged for extending the payment period for YNN Pacific without justifiable reasons at the expense of the interest of the Philippine government.

Pimentel said the PSALM is under tremendous pressure to honor the purchase contract to YNN Pacific and to extend the payment deadline specially because its new foreign partner, Ranhill Berhad is said to be partly owned by leaders of the United Malay Nationalist Organization (UMNO) which has ties with the ruling Lakas-NUCD, headed by President Gloria Macapagal Arroyo and former President Fidel Ramos.

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