Unnecessary delays

The entanglement of development projects in judicial wrangling has a tremendous impact not only on the economy but on the overall investment climate as well. The most recent proof of this is the dispute on the privatization of the Angat hydroelectric power plant in Bulacan.

In April 2010, Korea Water Resources Corp. (K-Water) offered $440.8 million for the 246-megawatt facility. The bid bested those of local groups including the Lopez family’s First Gen Corp., the Aboitizes of Cebu and San Miguel Corp. A month later, or on May 25, then newly appointed Chief Justice Renato Corona issued a “status quo ante” order preventing the state-run Power Sector Assets and Liabilities Management Corp. (PSALM) from awarding the contract to operate Angat’s hydroelectric power plant to K-Water. Organizations led by the Freedom from Debt Coalition (FDC) and the Akbayan party-list group had filed a petition for a temporary restraining order on the awarding of the contract, claiming that PSALM committed grave abuse of discretion when it conducted the bidding “in disregard of the people’s right to information, right to water and in violation of its mandate and the Constitution.”

According to the groups’ petition, PSALM abused its discretion when it allowed a foreign company to participate in the bidding in violation of the constitutional provision requiring companies engaged in the exploration and utilization of natural resources to be 60-percent-owned by Filipinos. FDC secretary general Milo Tanchuling had also claimed that the sale of the hydroelectric power plant to a foreign company put at risk Metro Manila’s main source of drinking water. (Angat Dam meets 97 percent of the water needs of some 12 million residents of Metro Manila and irrigates about 31,000 hectares of farmland across Bulacan and Pampanga.) Tanchuling warned that K-Water might sacrifice the people’s drinking water and irrigation needs to generate electricity to quickly recover its investment.

Last Oct. 9, after more than two years, the Supreme Court declared that the sale of the Angat power plant to K-Water was valid. In its decision, the high court said the sale did not violate the 40-percent foreign ownership limit required by the Constitution. Through Associate Justice Martin Villarama, the high court said “the construction, rehabilitation and development of hydropower plants are among those infrastructure projects which even wholly owned foreign corporations are allowed to undertake under the Amended Build-Operate-Transfer Law.”

The high court noted, however, that National Power Corp. could not transfer its water rights to K-Water as this would violate the Constitution and the Water Code. It pointed out that Napocor’s water rights remained an integral part of the state-owned utility firm’s jurisdiction and control over dams and reservoirs.

Unappeased, the petitioners filed in the high court last week a “motion for partial reconsideration,” asking it to reverse its ruling that effectively allowed a foreign company to own, operate and manage the Angat power plant.

This is difficult to understand. The Supreme Court had ruled that the bidding did not pertain to the water component, but only to the power plant, which even wholly owned foreign companies could own. Many existing power facilities have in fact been owned and operated by foreign companies since the Ramos administration in the 1990s.

The Supreme Court’s position regarding the water component of Angat has likewise been manifested by PSALM from the beginning, when it offered to prospective investors only the power component of the Angat complex. Also, shortly after the bidding in 2010, it said that as soon as K-Water had been officially declared the winning bidder, it would be obliged to operate and maintain the Angat hydroelectric plant at no cost to the government, and that the ownership of Angat Dam would remain with the government.

The Angat power plant has been generating less than its rated capacity; it is among the oldest power facilities, being commissioned in the 1960s. If not for the delays in its privatization due to the protracted court litigation, it could have been rehabilitated and made to generate more electricity. Given that the Philippines’ power supply remains critical, there should be no more delays like this one in the implementation of vital development projects.