Senate asked to probe NIA privatization deal

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05:54 AM November 30th, 2012

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November 30th, 2012 05:54 AM

MANILA, Philippines—The National Irrigation Administration (NIA) stands to lose some P114 million a year in revenues when it implements a highly questionable contract that privatizes the operations of its Baligatan mini-hydropower plant in Ramon town, Isabela, documents received by the Senate Blue Ribbon Committee have showed.

In their letter complaints, several Isabela irrigators and employees of the NIA-Magat River Integrated Irrigation System (Mariis) called on Senator Teofisto Guingona III, committee chairman, to immediately call for an investigation on the contract stipulating that NIA would hand over to a private company—Maslog 1 Hydropower Corp.—the management and operation of the Baligatan plant.

The complaint said the terms and conditions of the contract were deemed “grossly disadvantageous to the government while unduly benefitting those who will be managing and operating the plant.”

The six-megawatt Baligatan hydropower plant is a key component of NIA-Mariis which irrigates some 7,000 hectares of prime farmlands in Region 2. It produces 30 gigawatt-hours of electricity a year.

It is also one of the major earners in the irrigation system and is estimated to bring in P120 million in power revenues to the NIA.

Among the documents submitted to the committee were a copy of the memorandum of agreement dated June 14, 2012, and a copy of the memorandum of agreement dated April 12, 2012, between NIA and Maslog 1.

Both documents were signed by NIA Administrator Antonio Nangel and Maslog 1 president Diego Picardo.

Nangel could not be reached for comment as of press time on Thursday because he was reportedly attending a National Economic and Development Authority board meeting. His information officer refused to comment on the complaint.

The complaint questioned the urgency and need to put the plant under the management of a private company. It said there was really no need to privatize the operations of the plant.

The complainants said there was adequate funding from the national government for the operation of the entire Magat irrigation system, NIA’s second largest irrigation network.

A total of P30 billion in rehabilitation and repair funds were allocated recently to the NIA for the improvement of irrigation systems including Mariis.

No public bidding

The complaint also alleged that the NIA-Maslog 1 deal was anomalous because there was no board approval for it. NIA officials also allegedly violated the law when it awarded the management and operation contract of the power plant to a private company without public bidding.

At the very least, Maslog 1’s proposal to manage and operate Baligatan should have been subject to a so-called “Swiss challenge” under the Build-Operate-Transfer law and the Renewable Energy Act, the complaint said.

In the contract, NIA will receive five percent of the yearly gross revenues generated out of the operation of the plant which will be fully taken over by Maslog 1. This means NIA will be receiving about P6 million a year as its share in the operations of the power plant.

“Why would NIA agree to receive P6 million a year under the privatization contract when it generates P120 million a year if it operates the plant itself?” the complaint said.

“But what makes the transaction criminal is that the private contractor would just be taking over a fully functional and well-equipped government facility without putting in much in investments, then raking in millions of pesos in revenue. Niluto sa sariling mantika ang NIA, (NIA is being fried in its own lard),” the complaint said.

The complaint also pointed to a supposedly irregular part of the contract that appeared to benefit some NIA officials who are set to retire soon. The provision in Article 2 No. 18 of the contract commits Maslog 1 “to recognize a special purpose company that may be created to operate and maintain the power plant.”

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