Business Mirror
Published on Monday, 20 May 2013 20:34 Written by Ernesto Hilario
THE country’s recent credit-rating upgrades from Fitch Ratings, Standard & Poor’s and the Japan Credit Rating Agency Ltd. are widely believed to bring in more foreign direct investments that would further invigorate the economy.
Among the expected beneficiaries of the successive upgrades are the special economic zones (SEZ), such as the Clark Special Economic Zone in Pampanga and the Subic Bay Freeport Zone in Zambales. But that will happen only if the government guarantees policy consistency, and implements measures that reduce the cost of doing business here, especially in areas related to power and utilities.
The Luzon-wide blackout on May 8 highlights the unpredictable power situation not only in Mindanao but on the main island of Luzon as well, and the urgency of fast-tracking clean energy projects to guarantee stable supply amid the expected surge in power demand when the influx of investments spurs greater business activity, especially in SEZs like the Subic Freeport.
We all know that electricity drives business operations. Prospective investors are likely to bring money here only if they can be assured of stable power supply. They must be convinced to actually do business here, now that the recent blackout has revealed the slim power reserves even on the country’s biggest island.
Hence, pending energy projects like the one in Subic have to proceed at a much faster pace to ensure stable and adequate power by 2016, when the Department of Energy (DOE) projects a supply shortfall of 600 megawatts arising from greater demand. The Philippine Independent Power Producers Association concurs with the DOE warning, saying that at the current rate of 4.5 percent at which consumption is growing, the country needs another 600 MW by 2015. If the growth in consumption exceeds 4.5 percent, then the shortfall will be felt as early as 2014. The Employers Confederation of the Philippines and the Semiconductor and Electronics Industry in the Philippines Inc. have, likewise, voiced fears that any recurrence of the May 8 power outages or a disruption in normal electricity supply would have disastrous effects for the economy as a whole.
The precarious power-supply situation is not helped any by judicial rulings that encroach on decisions made by the Executive branch.
Take, for instance, the status of the Redondo Peninsula Energy Inc. (RP Energy) coal-fired thermal power plant project in Subic.
Two months ago, the Court of Appeals (CA) junked a petition by partylist groups and non-governmental organizations seeking a writ of kalikasan and a Temporary Environmental Protection Order against RP Energy’s Circulating Fluidized Bed Coal-Fired Thermal Power Plant in Barangay Cawag in Subic. However, it invalidated the environmental compliance certificate issued by the Deparment of Environment and Natural Resources (DENR) for the project, as well as the Lease and Development Agreement (LDA) entered into by Subic Bay Metropolitan Authority (SBMA) and RP Energy.
The CA division was correct in trashing the ecological doomsday scenarios painted by the petitioners that were apparently plucked from the Internet and without any validation from experts. In contrast, RP Energy presented documentation and expert testimonies proving that the project would use state-of-the art technology to ensure a safe, steady and affordable supply of power to the Luzon grid.
The January ruling by the CA sets a precedent because it stems from the first writ of kalikasan case against a power project. But it also has a negative impact that goes beyond RP Energy and the power industry as it threatens investments requiring ECCs and those in freeports and special economic zones across the country.
Why? Because the decision now places under a cloud of doubt all ECCs issued by the DENR in the past, and all of these may now be deemed invalid because of alleged wrong procedures as declared by the CA.
The CA ruling on RP Energy’s Subic power plant project will make investors have second thoughts about coming in despite the country’s credit upgrades because it will reinforce the business community’s concerns over unstable and inconsistent policies that hamper growth.
Moreover, if RP Energy is compelled to withdraw from the project, it would mean scrapping an environment-friendly project that would have provided an additional 600 MW of power to the Luzon grid at a time when Mindanao-style blackouts are in the offing.
The Philippine Energy Plan for 2012-2030 of the DOE says the Luzon grid alone would need an additional capacity of 10,500 MW onward to 2030. Thus, even with the credit upgrades, investors would still doubt whether the Philippines has the necessary energy infrastructure in place to sustain its economic momentum.
Even more discouraging to investors is that the CA ruling could pave the way for legal challenges to all ECCs issued to private firms, and all LDAs entered into by locators inside Subic and other special economic zones across the country. The CA ruling not only effectively deprives SBMA the power to approve projects within its sphere and its authority to govern the zones according to the law, it also implies all its locators are now operating illegally for not having valid LDAs with the agency. source
E-mail: ernhil@yahoo.com
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