MARINDUQUE POWER OUTAGES - PART 5

"SHOWING THE MAGIC TRICKS"

Now we know that the name of 3i Powergen. Inc. as contracting party appeared to have manifested from thin air on Sept. 27, 2005, with nobody, nobody raising any audible cry nor whimper about its origin - particularly the Marelco people and the so-called witnesses.

“... ang kontrata ay nakita na lamang niya (Bueno) bilang general manager ay ng aprobado na at hindi lumabas ang kanilang naging rekomendasyon.” (Minutes, Aug. 11, 2008, SP)

We also now know that 3i Powergen failed to meet the effective date of the PSA:
Bueno: “Dapat March 2007, ay 3i na ang naga-generate ng power sa Marinduque subalit mayroon pang intervening factor katulad ng ECC at iba pang government consent. Humingi ang 3i ng extension na natapos noong June 2007”. (Aug. 11, 2008, SP)

So even the ECC (Environmental Clearance Certificate), requirement was also apparently problematic. BM Allan Nepomuceno asks why Marelco allowed extension of the contract.

Bueno. “... walang extension na nangyayari at walang dokumento na nagsasabi na pinalawig ng Marelco ang kontrata nito sa 3i Powergen” (Minutes, Aug. 11, 2008, SP)

Probably missing the glaring double-talk said in the same sitting, nobody in the SP appeared to have winked an eye.

We also know that “nagsimula ang problema sa pera ng iniwan sila ng IFC (International Financial Center)” ng nagsisimula na ang 3i”. (Bueno, Aug. 11, 2008).

Now, that’s IFC, the World Bank's private sector investment arm abandoning 3i Powergen. Was that a surprise? As the transaction advisor engaged by government, particularly Napocor, for the introduction of private participation in power generation in missionary areas by way of divestitures of Power Supply Agreements (PSAs) between SPUG and Electricity Cooperatives (ECs), in favor of new power providers (NPPs), IFC’s departure early in the game from the 3i transaction was also apparently missed.

RESCISSION ISSUE

Nevertheless, we find the issue of rescission of contract being raised, to which Marelco’s position smells of the carotene of a performance bond:

“may mga safeguards naman nakapaloob sa kasunduan, katulad ng performance bond, ito ang patuloy pang pinag-aaralan ng kooperatiba.

“Sa ngayon ay komukunsulta ang Marelco sa abogado upang magbigay ng payo kung ano pang legal na hakbang ang puwede pa nilang gamitin, ayon kay G. Bueno”. (Minutes, Aug. 11, 2008, SP).

Eleven months later the same question on rescission was tossed again by the Sanggunian members but Marelco raises defenses:

Bueno’s defense: “... nagiging maingat ang pamunuan ng Marelco bago gumawa ng severe action tungkol diyan baka po mawala iyong hinahabol na mga damages.

“Iyan ay naka elevate na sa Junta Direktiva (board of directors), pinag-uusapan iyan ngayon dahil napakahirap po naman kung magiging hasty ang kanilang mga action ay baka iyong hinahabol na mga damages na naaayon sa kontrata ay mawala na lamang ng parang walang nangyari.” (Committee Hearing, July 9, 2009)

Director Garcia: “... meron doong provision for performance bond so sa akin pong pagkakaunawa baka kapag outrightly i-terminate natin iyon mawalan tayo ng personality to claim for that performance bond and alternatively seek for actual damages na baka ibalik sa amin ng 3i Powergen, (at sabihin) na since you have already terminated the contract between us ay hindi na puwedeng habulin ang performance bond, mag-claim na lang kayo ng damages (sic)”.

Performance bond definition: surety bond (a bond given to protect the recipient against loss in case the terms of a contract are not filled; a surety company assumes liability for nonperformance); a financial guarantee that a service will be provided or a contract will be satisfactorily completed.

PERFORMANCE BOND AFLOAT ALL AROUND

The performance bond in question purportedly involved the amount of P. 26-Million as surety or guarantee required to be posted by 3i Powergen, copy of which should be furnished Marelco on terms and conditions acceptable to the latter with effect from the ‘effective date’ to the end of term of the SPA.

Director Garcia: “...ayaw din naman namin na kung sakaling mag-desisyon kami (to rescind) ay masisi din kami, kasi baka ma-let go namin ang P26M na performance bond na aming gustong habulin doon sa 3I, sapagkat ang aming priority ngayon kung mahahabol namin sila doon sa performance bond makuha man lang iyon, mapangbayad sa NAPOCOR sa pagkakautang, gagawin namin iyon.”

Not satisfied with that reasoning, Garcia further warns of the difficulty in finding a new IPP: “Madali pong mag-rescind kahit hindi na natin habulin ang performance bond kung iyan po ang kagustuhan ng ating minamahal na Sangguniang Panlalawigan. Ang problema po ang paghahanap na naman po ng panibagong IPP magkakaroon na naman ng panibagong bidding process at kasama diyan ang NAPOCOR, ERC para makahanap ng panibagong IPP.” (July 9, 2008).


3i Powergen’s Lagundi assured that the performance bond was “renewed, intact and in place”, but cautiously added that any other legal questions related thereto would be answered by him in a legal forum. (Lagundi, August 11, 2009)

Mention of the performance bond as a safeguard being studied was first divulged by GM Bueno on Aug. 8, 2008. SP board member Querubin asked him again about a year later, on July 9, 2009 on the validity of the performance bond but Bueno responded cryptically, thus: “Iyon po ang na-determine actually kaya nga kumuha ng abogado ang Marelco para habulin iyon.”

Querubin raised the same question again during the Energy Summit on Oct. 9, 2009, about the possibility of Marelco running after “an empty bag”. No one stood to respond to him with a specific answer.

SMOKING DOCUMENT

We'd have to go back to an earlier mentioned document, “Joint Declaration of Realization of the Effective Date of the Power Supply Agreement between 3i Powergen, Inc. and Marinduque Electric Cooperative (Marelco)” which stated as follows:

“Pursuant to the Power Supply Agreement (PSA) executed on 27 September 2005 between 3i Powergen, Inc. and Marinduque Electric Cooperative (collectively referred to as the “Parties”), the Parties hereby declare:

“1. That the Conditions Precedent as enumerated in Section 3.2 of the PSA have been achieved or the deadline otherwise waived as provided in the 1st Supplemental Agreement to the Power Supply Agreement and Subsidy Agreement executed on 2 March 2006.

“2. That the Effective Date as defined in Section 3.2 of the PSA is hereby attained.

“In witness whereof, each of the Parties has caused this Declaration to be executed in more than one copy each of which shall be deemed to be an original as of the date of this Declaration.

“Marinduque Electric Cooperative
By: (Signed)
Augusto Leo M. Livelo, President

3i Powergen, Inc.
By: (Signed)
Manuel T. Castro, President

“Signed in the presence of:
(Signature of Witnesses)”



Now, “Conditions precedent” referred to above specifies that “Effective Date shall be the first business day immediately following the day on which all of the following shall have occurred”:

Corporate approvals (parties have furnished each other with copies of the resolutions adopted by its respective board of directors authorizing the execution, delivery and performance by it of the PSA, certified by its corporate secretary);

Government Consents (Parties have obtained government consents as applicable and indicated in Schedule D, and furnished each other with certified true copies of each consent, permit, approval or license. Now, “Schedule D” specifies BIR certificate of registration and registration of books and accounts; DOE accreditation of supplier as a private sector generation facility; SEC incorporation documents and SEC certificate approving the articles of incorporation; DENR environmental compliance certificate; Housing and Land Use Regulatory Board locational clearances; National Water Resources Board water use facilities; SSS registration as employer and registration of employees).

Legal Opinions (legal opinions of its general counsel certifying to each Party’s corporate standing as well as the due execution, validity and binding effect of the PSA on such party); Subsidy Agreement (execution of Subsidy Agreement between 3i Powergen, Marelco and NPC-SPUG); Possession and Operational Control of Subtransmission System (if Offtaker has opted to operate the Subtransmission System);

Performance Bond (Supplier shall have furnished Offtaker with a copy of a Performance Bond on terms and conditions acceptable to Offtaker in the amount of Php 26-Million that shall be in effect from Effective Date to the end of this PSA).

Phase In-Phase Out Arrangement (Supplier, Offtaker and NPC-SPUG have agreed on mutually acceptable terms); Project IRR (Supplier has furnished Offtaker with the Project Internal Rate of Return after financial close).

It has been earlier established that Marelco has not seen to-date 3i Powergen’s SEC registration papers. There’s one letter dated July 30, 2007, from NPC-SPUG to 3i Powergen stating that “3i should also be responsible in securing the required ECC from the Department of Environment and Natural Resources (DENR) and other regulatory agencies for its operation”, and as late as Aug 11, 2008, Bueno mentioned ECC issuance as an “intervening factor” (SP Minutes).

With respect to performance bond that is specified as a condition precedent, a copy of which Marelco should have been furnished with as its terms and conditions should be acceptable to Marelco”, why is it that two years have passed since its “elevation” to their Junta Direktiva” and referred to lawyers yet, Marelco still appears uncertain about its details?

SP board member Querubin talks of conspiracy and economic sabotage: “...maaring may sabwatan sa pagitan ng Marelco at 3i Powergen dahil sa kabila ng katotohanan na walang kapasidad ang huli na magsuplay ng kuryente patuloy pa rin ang kontrata... kaya maituturing na economic sabotage ang ginagawa ng Marelco at 3i Powergen dahil apektado ang ekonomiya ng lalawigan”. (Sept. 30,2009)

But what if the requirement for a performance bond, as in the case of one or possibly all of the government consents needed that was remedied through a one page sweep, was never fulfilled? We may seek endlessly but not a crisp performance bond find.

(to be continued)