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As a
utility giant, the National Power Corp. (Napocor) has
monumental flaws not only in its business model but in
its sourcing of energy requirements, notably coal, the
dirty fuel where it has a budget of about P20 billion a
year.
Where
other firms come up with a hedging mechanism by which
they would know their costings, Napocor continues to
source its coal supplies from the spot market where it
is under the tender mercies of brokers and their ilk.
Thus, the electricity distributors have to face
ever-higher power costs that it would have to pass on to
consumers.
Napocor’s continued preference for the spot market as
against having a long-term coal-supply contracts does
not speak well of the vision of its management. Where
other industries, for instance, the Subdivision and
Housing Developers Association, came up with a
cement-supply contract with Holcim Cement that would
insulate it from the price spikes in cement for one
whole year, Napocor refuses to budge on its flawed
sourcing strategy. How flawed it is can be gleaned from
the $60 to $80 per metric ton that Steag power plant in
Mindanao and the Quezon power plant get for their coal,
as against double that price Napocor gets for its coal
requirements.
The need
for a long-term sourcing strategy for industries is at
the heart of each firm’s costing strategy. By insulating
themselves from the ups and downs of the supplies they
need—be it cement, bunker fuel or any other raw
material—the firm can have a better grasp of the
economics of the company. For Napocor, it could have
meant the nonpassing of the current 67.17-centavo
increase in the price of electricity. This pass-on
charge is a direct result of the higher price that the
government agency gets for its coal supplies, which
accounts for a third of the fuel requirements of Napocor
in
Luzon.
Aside
from a flawed business strategy, Napocor, it would seem,
is dealing with suppliers of dubious background. In
February, Napocor awarded a P320-million coal-purchase
contract to a local coal dealer known as Transpacific
Consolidated Resources. Checks we did on the outfit from
the Securities and Exchange Commission (SEC) three weeks
earlier, however, yielded negative results. Even the
supposed address of the company in Danarra Hotel
Business Center in Quezon City was not also as clear as
the company was said to have moved out.
We
understand that Transpacific teamed up with a certain PT
Marsiterio Marloan Rakarsat in bidding for Napocor’s
coal requirements. This mysterious turn of events on the
supposed supplier of multimillion peso coal contracts
does not speak well of the corporate-governance
standards that is supposed to be the hallmark of
government entities. Well, the bid opening date
commenced on February 15, 2008, and the award was given
on February 19. The bidding was covered by BAC (Bidding
and Awards Committee)-2008-014 which is headed by Juan
Guadarr. PT Marsiterio Marlloan, and its local
counterpart, Transpacific Consolidated Resources Inc.,
bagged three lots of 65,000 metric tons of steaming coal
for the Pagbilao power plant amounting to a total of
P320,639,104.50. Biddings for Napocor’s coal procurement
actually started early this year to meet the country’s
energy requirements. Also, on February 11 this year,
Napocor awarded nine lots of coal amounting to
P650,666,016 to Indonesian firm PT Indominco Mandiri as
per BAC-2008-008 for the Sual power plant. For the
duration of the year, other coal-supply contracts would
be inked and, guess what, the electricity consumers
would be staring at higher electricity rates.
The
energy equation in the country seems to lack the vision
necessary for a long-lasting strategy. Consider the
Power Sector Assets and Liabilities Management Corp.’s
program to privatize Napocor’s plants. While it is
already under way, here come the prospects for the
amendment of the Electric Power Industry reform Act (Epira)
of 2001. Yet, the program on the Epira is being blocked
by Napocor, for reasons the officials only know. Indeed,
if Napocor plants are fully privatized , Napocor
officials would lose their power to source the coal
supplies, among other perks. What gives?
Of
course, the foreign chambers have already weighed in on
the matter of the proposed amendments to the Epira, a
development that has, however, raised concerns from
proadministration and opposition senators. But it is the
sense of the business sector that there is no need to
revive the amendments to the Epira only for the sole
purpose of lowering the threshold of privatization from
70 percent to 50 percent. So what the Napocor
officialdom is doing now is seen as a rearguard action
by pushing for an amendment despite strong opposition
from the private sector and various local and
international business groups.
The
strong clamor of the foreign chambers, various business
groups and even the consumer groups and several
legislators paved the way for Congress to stop its
efforts to amend the Epira early this year. But with the
revival of the proposed amendments, there is a growing
cause of concern considering that more investments are
coming in and some foreign investors are keen on
investing in the power sector, particularly in the
planned sale of remaining Napocor assets.
Moves to
amend the Epira have also raised a howl of concern from
the Semiconductor and Electronics Industries in the
Philippines Inc.(Seipi) The semiconductor group is of
the view that legislators planning the amendment are
better off directing their collective wisdom on Napocor
so it could speed up the privatization. After all, the
complete privatization of Napocor would redound to the
good of the country’s electricity consumers, like lower
coal purchases, among other efficiencies.
In a
letter to House energy committee chairman Rep. Mikey
Arroyo on December 5, Seipi, through its chairman Arthur
J. Young and its president Ernie B. Santiago, reiterated
that they would like to encourage the committee to
direct the acceleration of Napocor privatization instead
of pursuing the amendment of the Epira. Seipi is the
leading and the biggest organization of foreign and
Filipino electronics companies in the
Philippines.
Seipi members include leading foreign and Filipino
players like Intel, Texas Instruments, Hitachi, Fujitsu,
Toshiba, NEC, Philips, Samsung, Analog Devices,
Fairchild, Sunpower, Cypress, Lexmark, Amkor
Technologies, IMI, Ionics and PSI Technologies.
The
electronics industry accounts for $30 billion or
two-thirds of total Philippine exports of merchandise
goods last year; invests an average of over $ 1 billion
annually; directly employs over 440,000 engineers,
technicians and operators; and provides the transfer of
best global practices on high-technology manufacturing
to Filipino workers. Seipi joined the long list of
groups of investors and businessmen urging the House
energy committee to instead urge the speedy
privatization of Napocor assets.
E-mail: hugagni@yahoo.com |
