Philippine Daily Inquirer First Posted 00:48:00 07/19/2008
MANILA, Philippines—You don’t have to be a financial wizard to know that you cannot go far in business with P62,500. That kind of money may be enough to stock up a small “sari-sari” store [neighborhood variety store], but it cannot pay even one month’s rental for a tiny office in Makati. But it seems some people have the colossal good luck to hit the big time in no time at all and with so little money.
Transpacific Consolidated Resources Inc. (TCRI) is one such extremely lucky company. Registered in the Cebu office of the Securities and Exchange Commission in October 2007 with paid-up capital of only P62,500, it was awarded four months later a P956-million contract for the supply of coal by the National Power Corp. (Napocor). How it won, with virtually “laway lang ang capital” [literally, “only saliva for capital”], is a mystery that Napocor has to explain satisfactorily.
The debt-ridden, government-run, power-generation firm, of course, says TCRI won the contract fair and square. A Napocor spokesman said TCRI won the contract to supply 195,000 metric tons of coal in a competitive bidding held in late February. And there’s “no issue or irregularity with TCRI having a paid-up capital of only P62,500,” he was quoted as saying, because TCRI has a partner, PT Marsitero Marloan Prakarsa, an Indonesian firm. “Philippine corporation laws do not set a limit, cap, ceiling or floor on the amount of capitalization for local partners in a joint venture,” he pointed out.
Granted the law sets no floor on how much a local firm can invest in a joint venture with a foreign company, but is SEC registration all it takes to qualify to bid for a billion-peso contract in Napocor? What about the firm’s capacity to deliver the coal contracted for? TCRI’s track record in supplying coal was a big, fat zero when it first took part in the bidding. Yet, it won a contract to supply 65,000 metric tons of coal, worth about P319 million, in mid-February, and the P956-million contract two weeks later. Together these supply contracts add up to about P1.27 billion. Not bad for a company whose capital can buy just enough coal to fill a small truck.
How about Marsitero? The Napocor spokesman has been quoted as saying the Indonesian company has “a yearly business turnover of between $10 million and $50 million.” Given this volume of business transactions, Marsitero will be having a banner year this year with its two contracts with Napocor. But it won’t help put the company in the big league, as far as the coal industry is concerned.
Now if the size of the company matters little, what about its capacity to deliver the goods? Marsitero is a trading company which owns no coal mines. It simply gathers the output of small mines in Indonesia, which means that it cannot guarantee a uniform grade or quality of the coal it will deliver. Industry sources say mixing of coal of different grades simply isn’t done. If any blending is necessary, it is done by the power plant.
Being a trading company with no control over supplies, Marsitero also cannot assure delivery on time. Which is what has happened. The first contract for 65,000 metric tons was due for delivery in March. Under the second contract, deliveries were to be made in March, April and May. Until now, Marsitero has not delivered even one single lump of coal to Napocor’s Pagbilao power plant.
If the patience of Napocor officials is wearing thin, then they are not showing it. In fact, they have extended the delivery date for the first panamax, or 65,000 metric tons, to August. Are they waiting for Pagbilao to run out of coal before they act? How lucky can any company be?
Napocor officials were very accommodating in qualifying the new company with nothing to show by way of resources or performance. Now they are bending over backwards even as it struggles to meet its contractual obligations. Napocor can simply rescind the contract and hold another bidding, making sure that this time all the firms taking part have the financial capacity and reliable sources for their coal. So what’s keeping it from doing the right thing? Or who is keeping it from doing so?
This is one funny contract from beginning to end. But no one is laughing. An investigation by the Senate, as some senators have suggested, is in order.
Copyright 2008 Philippine Daily Inquirer. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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