“’Give us a break!’ Napocor president Cyril del Callar asks.”
by Ducky Paredes
Imagine this: The National Power Corporation (Napocor) has a contract to buy coal from a joint venture company composed of Indonesian firm PT Marsitero and its local partner Transpacific Consolidated Resources, Inc. (TCRI) which is capitalized at only P62,500 (paid-up) and, among whose incorporators are identified as Leslie and Ressie Ducut.
The contract with Napocor is worth P956 million! And, the new Energy Regulatory Commission Chairperson is Zenaida Ducut from the hometown of Gloria Arroyo! Wow!
“Give us a break!” Napocor president Cyril del Callar asks.
Del Callar dismisses the coal purchase issue as “recycled”: “We are not buying overpriced coal. We’ve bought nothing higher than what’s priced in the market. We’ve even asked some of the independent power producers (who are supplied by the joint venture through Napocor) to buy coal for themselves to see if they could get a supply that costs lower than what we got.
“The coal contracts we awarded to them were for coal priced at around $109 per metric ton. That’s already the price on delivery, which include freight costs and taxes. The selling price at the market now is around $165 per MT, and that’s for the coal alone and doesn’t include any other charges.”
Some persons keep bringing up this issue in the press, probably at the prodding of persons who have a beef with Napocor. Who are these? If you are thinking who I am thinking, you’re right!
The brickbats that Napocor had been getting rests mainly on the low paid-up capital of local partner TCRI. Additional fuel was thrown onto the fire when it was disclosed that two incorporators of TCRI had the same surname as the husband of former Rep. Zenaida Ducut, recently appointed ERC head. Zeny’s husband has declared that he is not at all related to Leslie and Ressie.
As far as the contract goes, it must be considered however that, as Napocor points out, the award was given not to TCRI itself but to the joint venture which is capitalized at $42.2 million (roughly P1.876 billion). PT Marsitero has an annual sales of $50 million. This Indonesian firm has a track record in the coal industry and, for 2006, its gross profits hit $15.58 million.
Thus, the joint venture has the capability to meet its contractual obligations to Napocor.
Is there anything wrong with the coal purchases of Napocor from the joint venture?
Let us ask the necessary questions: Did the award pass through public bidding and comply with all the requirements of law, including the government’s electronic procurement system as stated in Rep. Act 9184 or the Government Procurement Act?
Does the joint venture have the financial capability to deliver, at the required quantity, with the specified quality, at the agreed competitive price and at the indicated time line?
Del Callar says that the joint venture was the lowest bidder for two coal shipments worth almost P1 billion. The Feb. 12, 2008 bidding was won at $109 per metric ton. The March 5, 2008 winning bid was for $109.50 per metric ton. The awards were for a total of four shipments, each one involving 65,000 metric tons.
The Napocor president also points out that the contract provisions protected the interests of the government. The bid winner was required to put up a performance bond amounting to five percent of the total contract if in cash, 10 percent if in bank guaranty and 30 percent if in surety bond;
If the winning bidder failed to deliver, Napocor would have confiscated the performance bond, and the joint venture firm would have been blacklisted from participating in any future government biddings.
Napocor pays only once the first coal delivery reaches the Philippines within the period August 5-15. No delivery, no payment.
Del Callar points out that the two firms that compose the joint venture submitted all the required documents, properly authenticated by the appropriate government agencies.
The fact is that the price of coal has been tracking the price of oil, and this is one of the many major factors for the continuing increase in the price of the commodity. The manager of Napocor’s Fuel Management Department, Marilou dela Cruz, said that as of July 15, 2008 Chinese coal is priced at $200 per MT; Australian coal, $187.65 per MT and Indonesian coal $165 per Mt. These quotations do not include cost of freight and other charges.
Another relevant information disclosed is that the cost of freight to the Philippines is about 20 percent to 30 percent of the C&F price of coal.
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The official policy is that the Philippines should not be dependent on any one country for more than fifty percent of our coal supply requirements, as embodied in Department Order No. 002003-12-017 of the Department of Energy (DOE).
Napocor is also mandated (Under NP Board Resolution No. 2003-107) to secure 50 percent of its coal requirement through a long-term contract, which means two years, with option to renew for another year. The other 50 percent is done via spot purchases.
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hvp 07.22.08)
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