home

Camille P. Balagtas
People's TONIGHT
August 22, 2002

Drilon warns against loan contract between Comelec and DBP
==========================================================

Senate President Franklin Drilon warned yesterday the Commission on Elections (Comelec) and the Development Bank of the Philippines against entering into any loan agreement that will supposedly cover for the shortfall in the budget allocation of the poll body for the year 2003.

"The Comelec is pre-empting the legislature in assuming that Congress will indeed provide appropriations for the payments of its loan," he said.
Drilon issued the warning in the wake of reports that Comelec is trying to secure from the DBP a P5-billion loan, payable in ten years, to finance the implementation of its various modernization projects.

"Should both parties insist on the loan, the DBP would not have any guarantee that it can be paid as proposed, 'Drilon said. "Under the Constitution, no money shall be paid out of the Treasury except in pursuance of an appropriation made by law."

He added, "What if Congress refuses to appropriate funds in payment of the loan? DBP will be left holding the bag.'

Drilon said at present, there is no indication that Congress will enact the necessary appropriations.

"Congress cannot, at this point, give assurance to both the Comelec and the DBP that it will include in the future General Appropriations Acts the amount of money needed to pay the loan," he said.

Drilon reminded the Comelec and the DBP of a similar transaction in the past where the government and the Societe Generale Surveillance (SGS) entered into a loan contract despite objections from several lawmakers.

Eventually , the Congress refused to provide any appropriations for the contract, which left both the government and the SGS in a legal quandary. Up to this time, SGS cannot be paid for lack of any appropriation from Congress.1///camille p. balagtas


Camille P. Balagtas
People's TONIGHT
August 22, 2002 SENATE HEARING

CE CASECNAN DEBUNKS ALLEGATIONS PROJECT IS ONEROUS AND DISADVANTAGEOUS TO THE PHILIPPINES
=========================================================================================

CE Casecnan Water and Energy Company, Inc. (CE Casecnan) today clearly demonstrated to the Senate that the Casecnan Project contract is not onerous and disadvantageous to the Philippines as has been alleged.

CE Casecnan president David Baldwin emphasized that the project contract underwent extensive deliberations and negotiations, and was duly authorized and approved by the Philippine government through its relevant agencies. Negotiations were undertaken for almost two years from 1993 to 1995.

Turning to the cost of Casecnan's electricity, Baldwin stated: "Properly calculated, the output of the plant costs 1.8 pesos per kilowatt hour, among the cheapest sources of power in the Philippines. Combined with the project's irrigation benefits, the value of the Casecnan Project is clear."

The Casecnan project, which diverts water from two rivers through a 26-kilometer tunnel to a generating plant, then on to the Pantabangan Reservoir, was completed in 2001.

It will significantly contribute to enhancing the irrigation of approximately 102,000 hectares and newly irrigating some 35,000 hectares of rice fields in Central Luzon. The project also has a capacity of 150MW of electricity, and provides water to two existing nearby hydroelectric plants, allowing these plants to increase their output.

Achievement of commercial operation in 2001 began a 20-year cooperation period outlined in the project agreement. At the end of the 20-year period, CE Casecnan will turn over the project to the government at no cost, after which it is expected to continue commercial operation for an additional 30 years.

CE Casecnan Water and Energy Company, Inc. (CE Casecnan) reiterated that the commencement of international arbitration to require the National Irrigation Authority (NIA) to perform its contractual obligations to reimburse certain taxes paid during the construction of the Casecnan Multipurpose Irrigation Project is unrelated to the Senate blue ribbon committee proceedings.

"We are not short-circuiting the Senate proceedings. CE Casecnan participated in the hearings on August 8th and intends to participate in the next hearing on August 22 as requested," said David Baldwin, president of CE Casecnan.

Baldwin also clarified that "The Philippine government approached CE Casecnan in March of 2001 to discuss the tax reimbursement matter. We engaged in good faith negotiations which culminated in a definite agreement with NIA in May of this year."

"As request, we gave the government until the middle of July to obtain the final approvals for the settlement, which it unfortunately did not obtain. It was only then that we were left with no choice but to seek resolution of the dispute on this matter through arbitration, which is the method for resolving disputes regarding the party's rights under the BOT Project Agreement," he added.

Earlier, Administration Sen. Joker Arroyo, chairman of the Senate Blue Ribbon committee, said the primacy of his committee in conducting public hearings on the alleged lopsided Casecnan multi-purpose project contract entered into by an American firm, CalEnergy Casecnan Water and Energy Co. Inc. (CE Casecnan), with the National Irrigation Administration (NIA) in 1995 cannot be impaired by the filing of an arbitration suit by the American firm with the International Chamber of Commerce (ICC).

Arroyo said the arbitration suit filed with the Paris-based ICC very clearly seeks to "shortcircuit" the Senate Blue Ribbon committee proceedings.

While the filing of the suit is lamentable, he said, the committee will not be barred from resolving the issue as the Senate has the power to investigate, in aid of legislation, or to exercise its oversight functions.

"The committee hopes the CE Casecnan has not acted in bad faith. The Blue Ribbon hearings are held in the performance of legislative function and no outside proceedings can impair its primacy or integrity on matters before it," Arroyo said.

The suit is focused on the contractor's demand for a reimbursement on the $52 million it gave to the Philippine government representing its advance tax payment.

Opposition Sen. Sergio Osmeña had railed at an agreement entered into between CE Casecnan and the NIA where the $52 million would be $870 million in 20 years as computed at 48 percent interest, compounded.

Osmeña said the filing of the arbitration suit before the ICC would have a negative implication on the part of the contractor.

"Too early. There is no finding (by the committee) yet nor has the Executive Department revoked the contract," administration Sen. Ralph Recto, chairman of the Senate ways and means committee, said.

Opposition Sen. Edgardo J. Angara, president of the Laban ng Demokratikong Pilipino (LDP) party, said the suit is a "pre-emptive action" to prevent the Philippine government from investigating the firm which has resorted to filing a lawsuit.

Angara said the American firm has to explain before the US Securities and Exchange Commission (SEC) and the US Attorney General's Office why it gave away 30 percent of its equity to two firms as it gave the impression that it was bribery.

Osmeña said he was surprised to hear the testimony of Oscar Violago, president of San Lorenzo Ruiz Builders and a joint venture partner of CE Casecnan, that he was given a 15 percent equity share of the company because of his technical expertise that led to the reduction of the cost of the $700 million project.

The World Bank had estimated that the cost of the original Casecnan trans-basin project was $2 billion.

He said he was also surprised to learn that CE Casecnan also gave out another 15 percent equity share to Laprairie, a heavy equipment firm based in Canada's British Columbia.

Another opposition legislator, Sen. John H. Osmeña, said the filing of the arbitration suit is expected as the negotiation for the onerous provisions of the contract would get more touchy and tougher.

Osmeña said the filing of the suit will not stop the Senate probe and it will get "more interesting and detailed" in the days to come, he said.

"It is a counter-attack. Offense is the best defense," Osmeña remarked.

He cited reports that Violago is a close personal friend of the family of former President Ramos.

The Senate wants to investigate most of the 42 controversial Independent Power Producer (IPP) contracts signed by Ramos during his term although he had been warned by the World Bank not to sign more IPP contracts as the electric power to be produced by the originally small number of IPP contracts already met the country's power requirement.

The Osmeña cousins had charged that the total IPP contracts signed by Ramos have power ratings twice the power requirement of the country which was more than 6,000 megawatts.

Opposition Sen. Aquilino Q. Pimentel Jr. said the American firm should not have filed the arbitration suit "because it sets a very bad precedent."

He said the suit has the effect of trying to stopping the Senate in inquiry into issues raised before the committee.

Senate President Franklin M. Drilon said the Senate will continue its investigation and expose any irregularities.

"We will not be stampeded into approving contracts," he added.///camille p. balagtas