MARINDUQUE POWER OUTAGES - PART 4

“3i POWER CONUNDRUMS”

So now we have Coastal Power Development Corporation and lts partner, Applied Research Technologies Philippines, referred to as a consortium, to supply power to Marinduque including the islands of Romblon and Tablas. A concession-type contract between the winning bidder and local electric cooperatives would be entered into; the framework of this concession did not require the private supplier to buy existing generation assets of the NPC; a hybrid diesel-wind energy solution for the power needs of these islands would be put into place; and the consortium is also referred to as Coastal Power Consortium or Coastal Consortium.

We note that the said bidders’ first envelopes (technical proposals) were opened on 25 August 2005 and the financial bids on 5 September 2005. Coastal Consortium emerged as the winning bidder having offered a lower electric generation service cost.

How did 3i Powergen, Inc. get into the picture then?

By the time the Power Supply Agreement (PSA) was scheduled for signing three weeks later, on Sept. 27, 2005, a new name has cropped up as “Supplier”: 3i Powergen, Inc.

The signed PSA is therefore now between 3i Powergen, Inc. and Marelco, Inc.

Marelco manager Bueno claimed to have opposed it by questioning the qualification of the new company: “Ilang beses na akong humarap at sinasabi ko na sa mga board members noon na iyan ang aming naging problema bakit na-qualify iyang 3i Powergen na iyan na pumasok dito. Hindi lang Marelco, ang kontrata ay para sa tatlong Isla, Marinduque, Romblon, Tablas. Iyan ay matagal ko ng kinokontra iyan na pag-aralang maigi.

“Ang chairman po ng bids and awards dito alam ko ay NAPOCOR. Two directors coming from each coop, dalawa sa Marinduque, dalawa sa Romblon, dalawa sa Tablas, chaired by NPC president.... Dahil iyong competitive selection process ng kung saan ay ginawa iyan ay hindi dito sa Marinduque, iyon po ay doon sa NAPOCOR na opisina sa main office.”

Marelco director Beethoven Arevalo: “Ang totoo po noon mga panahon na iyon hindi pa general manager si GM (Bueno) siya ay kinuha namin bilang consultant noong mga panahon na ginagawa ang competitive selection process o pagpipili ng mga bidders na sasali dito. At sa proseso po dahil ito ay programa ng DOE at alam natin na ang DOE ay gobyerno walang makakapigil dahil nga doon sa privatization ng NPC talagang walang makakapigil, kahit kami rin po ay ayaw namin noong mga panahon na iyan pero sinabi nila na wala ng choice kasi ang NPC privatized na, so ito po ay programa ng DOE. Kami naman sa first wave na sinasabi iyong 14 Island provinces, napasama ang Marinduque. So no choice po kami sumali sa programa ng gobyerno.”

Whichever way one may look at it, "bakit na-qualify yang 3i Powergen na pumasok dito“; “kinokontra ko yan na pag-aralang maigi”; then a Marelco director adds: “kahit kami rin po ay ayaw namin noong mga panahon na iyan pero sinabi nila na wala ng choice...” there was political pressure, clearly written all over the place, that explains why the PSA was signed. But what else are they not saying?

We then hear, as revealed by board member Jose Alvarez, during the Sept 30 public hearing about the presence during the historic signing, of the three Reyeses (former congressman Edmundo Reyes, former governor now congresswoman Carmencita Reyes and former provincial administrator Luisito Reyes), a milestone in Marinduque’s power solution.

Representing Marelco as signatory in 2005 was then coop president, Augusto Leo Livelo. Was he forced to sign the agreement then? Sources say he was. (A new coop president got elected in 2008, Joel Palatino, as Livelo ended his term of office).

We have previously stated that under the current system embraced by Marelco, it is “subject to the whims and caprices of any government agency” and this episode is merely a re-confirmation of the political pressures that Marelco is subjected to. No less than Cong. Mila Magsaysay had that much to say of electric cooperatives that do not register with the Cooperative Development Authority (CDA), (Solon hits NEA, May 19, 2009; congress.gov.ph)

Back to 3i Powergen:

(Photo: The site in Balogo)

Probably too scared, none from Marelco, before signing the contract even bothered to check the legal personality of the company in question. Not one of the so-called government consents that refer to permits, licenses, agreements, orders, certificates, registrations, clearances, etc. from government authorities were asked for by Marelco as basic pre-requisite.

As late as October 9, 2009, at the Marinduque Energy Summit during the open forum, this blogger asked the Marelco representatives if they ever possessed a copy of 3i Powergen’s Securities and Exchange Commission (SEC) registration papers, inasmuch as it is normal business practice to establish identities of contracting parties.

“Inaamin ko pong wala kaming pinanghahawakang SEC Registration ng 3i Powergen”, replied director B. Arevalo.

This response of course, implies that four years into the confusion, even with all the widespread scepticism, Marelco still does not know until now, anything about the company’s identity, their reasons for existence, their incorporators, authorized capital stock, or if the company has even secured the necessary consents from government agencies concerned.

Contracts such as the Power Supply Agreement (PSA) in question do specify the need to obtain such documents, among others, and to furnish the other party with copies of the same to achieve “effective date” (first business day immediately following the day on which the required documents are submitted). Within a specified period from the date of the agreement, said agreement shall be “deemed terminated” if those requirements do not occur.

In this contract, “within four (4) months from the date of the Agreement” was specified as the deadline (January 27, 2006), for the effective date to occur, otherwise the PSA “shall be deemed terminated”.

Nothing occurred within that period, yet the contract was not deemed terminated. But in view of the above-stated contract provision that had lapsed, this was the singular time when the SPA itself was under threat of outright termination.


The SPA involved investments of P 677-million, or combined investments for the Marinduque-Romblon-Tablas project of P 1.448-billion. What sort of political pressure then, or threat, or persuasion, or consideration, or temptation, or a combination of any of these came into the picture?

A short cut, remedy or one might even call it ‘going around the law’ would be to simply declare, way past the deadline, that those conditions have been met, fulfilled or achieved, contrary to fact. One might suppose that it wouldn’t be hard to see the color and shade of money painted in the background.

BM Alvarez: “Kung merong kotongan (extortion) na nangyari, ay nangyari noong 2006...” (Sept. 30, SP)

On March 2, 2006, the parties concerned did issue such a joint declaration of realization of the effective date of the agreement. In effect, the new date for the commercial operations of 3i would be by July 2007,16 months (not 18), after the “effective date”.

Through the SEC website’s online transaction feature, this blogger’s find is that 3i Powergen, Inc. merely reserved use of its name but has not registered to-date, four years after the Agreement. (Reservation of proposed company name may remain valid up to 90 days, but may be renewed and does not mean registration). To me, the company cannot be considered “a company registered and existing under the laws of the Philippines” as stated in the SPA and the contracting parties cannot waive these requirements.

Five months after what Marelco called an “extension” of the contract, we find almost similar news articles in Malaya, Aug. 6, 2006; Manila Bulletin, Aug. 6, 2006; Manila Standard Today, Aug. 7, 2006:

“...3i Powergen is 100 percent owned by Filipinos...is a joint venture of Applied Research Technologies Philippines Inc., Coastal Power Development Corp., Five Star Bus Co. Inc. and businessman Cesar Hernandez.

“...The Board of Investments granted incentives to the three hybrid wind-diesel plants of 3i Powergen Inc. (in Marinduque and Romblon), with combined investments of P1.448 billion. ...

“...All three plants will start commercial operations by February 2007.”

Came July 2007, there was still no 3i-produced power in Marinduque. By this time a new administration under Gov. Carrion who won the election in May 2007, was running the capitol.

On 3i’s new failure, VP Lagundi reasoned out: “Ang nangyari.... ay ang pagkakaantala ng pagpapalabas ng loan mula sa mga imbestor dahil sa nararanasang global financial crisis. Humihingi na ang mga ito ng PSA na pinagtibay ng ERC na nakabinbin naman sa ERC dahil sa hindi pakikipagtulungan ng tatlong kooperatiba kasama ang Marelco...

GM Bueno rebuked: “...hindi na kailangan pang pagtibayin ng ERC ang PSA para lamang mag-umpisa ang konstruksyon... sa mga pagpupulong ng Marelco kaharap si Atty. Lagundi inamin nito na nagsimula ang problema sa pera ng iniwan sila ng IFC ng nagsisimula na ang 3i. Naging istrikto ito at ginawang kondisyon bago maipalabas ang loan ang approved PSA at approved TCGR subalit ito ay hindi kasama sa pinirmahang PSA”. (Regular Session, SP, August 11, 2008).

IFC abandoning 3i? That’s news!

(Photo: Plant site in Balogo)

By August 11, 2008, in another SP meeting, Lagundi said proudly of the new 3i composition: “Ang 3i Powergen sa kasalukuyan ay binubuo ng tatlong korporasyon: Coastal Power Development, Iljin Electric Company at Korean Western Power Co.”

About a year later, Bueno was saying: “Hindi naging makatotohanan ang 3I Powergen, hindi sila nakapag deliver. Iyang 12.48 na iyan kung saan itatayo ang power plant sa Balogo Sta. Cruz. Kung sino man po ang taga Sta. Cruz kung mapapasyal kayo doon makikita natin ay puro hukay. Hinukay nila noong October 2006. Hanggang ngayon po hindi ko alam ang kanilang natapos doon sa proyekto na iyon.” (Jul 6, 2009, SP)

BM Raza: “...noong pinatawag po natin ang (vice) president ng 3I Powergen si Atty. Domingo Lagundi... he admitted in the session of the Sangguniang Panlalawigan that they are financially incapable to construct the facilities in compliance with the requirements of the obligation. In my view that would send a signal for Marelco’s board to finally decide to rescind or not to rescind the contract...” (July 6, 2009)

BM Alvarez: “...sinasabi na ni Atty. Lagundi na wala po talaga silang kakayahan at halos magmakaawa at umiyak dito. Actually ang nangyari po parang nag-speculate lang sila na may papasok. Iyon naman po ay practice na tinatanggap natin dahil meron naman silang kaugnayan sa ibat-iba pang mga negosyante subalit hindi katanggap-tanggap iyong katagalan ng proseso.” (July 6, 2009)

And this, dear Dave, is just the beginning...