Petilla Negotiates Angat Transaction’s Closing

Manila Bulletin 
By Myrna M. Velasco 
Published: June 24, 2013 
With many demands from the buyer’s side, Energy Secretary Carlos Jericho Petilla will be negotiating with the principals of winning bidder Korea Water Resources Corporation (K-Water) for the targeted closing of the $440.88 million Angat privatization deal within the year.
In an interview with reporters, the energy chief disclosed that he will be travelling to South Korea this June 25 to meet with K-Water chief executive officer Keun-ho Kim at the state-run water firm’s Daejeon headquarters.
“I am meeting them (K-Water), just about some issues of Angat and how we can have an amicable settlement to make sure everybody is benefitting from it,” Petilla said.
He acknowledged that one of the tricky issues to be discussed with K-Water would be the cost-sharing arrangement on the 15 cubic meters per second (cms) of water that will be utilized for the auxiliary units 4 and 5 of the Metropolitan Waterworks and Sewerage System.
“It’s one of the many topics involved. That’s just one, there are many other issues,” the energy chief admitted.
He further averred “because I am going to negotiate, I cannot tell you the details of what we are going to talk about…but what we are looking for is something beneficial to all parties involved.”
This early though, the government is being cautioned to be circumspect in the concessions it will be giving to K-Water, as the demanded improvement in the contract terms is reminiscent of the Piatco case – especially for conditions that had not been made available during the bidding process.
The Piatco doctrine prescribes that “any government action which permits any substantial variance between the conditions under which the bids are invited and the contract executed after the award thereof is a grave abuse of discretion amounting to lack or excess of jurisdiction which warrants proper judicial action.”
The privatization undertaken by the Power Sector Assets and Liabilities Management Corporation (PSALM) only covered the 218MW component of the Angat hydropower facility; excluding the 28MW portfolio of MWSS. The seller-firm targeted to close the transaction April this year, but when it hit snags, the energy chief stepped in.
The MWSS, via the Public-Private Partnership (PPP) Center, has been offering separately the auxiliary units to interested private sector investors for a rehabilitate-operate-maintain (ROM) arrangement. That deal will require the 15 cms water utilization to run the units.
Aside from cost-sharing on water utilization, the other demands of K-Water covered the payment of residual real property taxes of more than P300 million; proposed adjustment in the purchase price; inclusion of the Korea firm buyer in the technical group that will draft the Water Protocol for Angat, among others.
When asked about targets on closing date or the issuance of the certificate of effectivity (COE) which will finally call on K-Water’s payment for the Angat asset, Petilla noted that it must be done within the year.
“It’s (Angat closing) within the year, but if you ask for a date, I don’t have a date. Yet, it has to be settled as quickly as possible. End of the year is a bit late. We have to settle it as quickly as we can,” Petilla stressed.   source