May 31, 2006 (STAR) HIDDEN AGENDA By Mary Ann Ll. Reyes - Recent media commentaries and coffee shop talk have been centering on PSALM’s refusal to draw on the YNN performance bond despite the latter’s repeated inability to come up with its payment of US$227 million – already long overdue. Some have even started to question PSALM’s ability and desire to achieve the National Power Corp.’s mandated privatization.

Giving more credence to these suspicions was PSALM’s decision to again extend, this time to June 30, the deadline for YNN to pay up its US$227 mukkuib since the bid of YNN is supposedly one that is difficult to duplicate should PSALM call for a rebidding.

Many have been asking who is behind the YNN Pacific Consortium and why does it seem like PSALM is bending backwards to the point of risking its own reputation?

From what we’ve been able to gather, YNN’s local shareholder is a certain Sunny T. Sun. He also happens to be a distributor of Duraflex Wires and Cables and basically sells these and other products to power utilities like the Manila Electric Co. (Meralco).

YNN Holdings Corp. owns 60 percent of Duracom Mobile Power Corp., a small 108-megawatt barge-mounted independent power producer (IPP) in Navotas selling power to Meralco.

Disconcerting though is the information that Duracom may still have billions of pesos in loans that remain unpaid and need restructuring. But then again if PSALM did its homework, it would have known this by now.

PSALM also would have learned about the company being classified as financially distressed and of the rumors in financial circles that hundreds of millions are being paid each year to its principal via the holding company YNN Holdings Corp. in the form of marketing fees.

Mr. Sun’s partner in Duracom is East Asia Power Resources Corp. which in turn is owned by a bankrupt American company El Paso Energy. When the Duraco-El Paso partnership was formalized in 1993, the president and part-owner of East Asia’s Philippine operations was Jesus Alcordo, currently a commissioner of the powerful Energy Regulatory Commission (ERC).

The Sun-Alcordo relationship was further galvanized when they brought another 108-MW barge into the partnership under a sister company called East Asia Diesel Power Corp. Documents exposed by Senator Juan Ponce Enrile some years ago show that Alcordo agreed to pay Mr. Sun commissions running to about P0.15-P0.21/kwh or as high as P150 to 200 million per year and a success fee of US$3 million for securing contracts for the additional capacity.

Today we hear that the Sun-Alcordo relationship is still alive and kicking. We’ve been told that during the Masinloc saga, Alcordo’s nephew and son played key roles in a bungled attempt to bring in Australian partner Great Pacific Financial Corp. (Is it true that Alcordo’s nephew is CEO of Australia-based Great Pacific Investments?)

Industry insiders suspect that Alcordo may also have had a hand in granting Mr. Sun’s Duracom a 20-percent increase in its tariff rates in January 2004 – effectively giving them an additional P20 million per month in revenues.

More recent incidents have also been perceived as calibrated for Meralco to sign a contract with YNN.

The ERC official guidelines entitled "Amendment To The Guidelines For The Recovery Of Costs For The Generation Component Of The Distribution Utilities Rates", issued in Dec. 22, 2004, requires distribution utilities to certify that they have conducted public bidding in the procurement of new power supply contracts with generation companies.

This was clearly seen as a move to protect consumers and ensure transparency as distribution utilities source their power. Immediately thereafter, many of the utilities dutifully complied and publicized their requirements for power supply in the major dailies. But in a surprising move a few weeks ago, the ERC issued Resolution No. 21 which temporarily suspended the requirement of transparent public bidding for utilities procuring their power supplies. The resolution was issued with the inane excuse that the guidelines were being temporarily shelved because they forgot to conduct public hearings on them.

My coffee shop friends say that they hope this temporary freeze was not meant to conveniently open a window for Sunny Sun to sign a sweetheart contract between YNN and Meralco. What made them suspicious is that only three out of the five ERC commissioners signed Resolution No. 21, and Alcordo was one of them.

PSALM’s handling of Masinloc’s privatization shows how dangerously vulnerable the process is to hustlers and influence peddlers.

PSALM should seriously consider rebidding the Masinloc plant but with full Transition Supply Contracts, either from Meralco or some other Luzon utilities. In doing so, PSALM would generate more credible bidders willing to pay higher prices.

We understand that the government is losing up to P70 million in foregone interest for each month it delays receipt of the US$227 million from YNN. Maybe it’s time government shows it means business by calling on YNN’S bond if deadlines are not met.

Peso regains lost ground By Des Ferriols The Philippine Star 05/31/2006

The peso climbed yesterday on speculation overseas investors will buy the country’s stocks and bonds as investors return to riskier assets.

At the Philippine Dealing System (PDS), the peso gained by a substantial 19 centavos to close at 52.59 from Monday’s close of 52.78 to the dollar.

The currency has strengthened since Finance Secretary Margarito Teves said it would advance if the country’s economy improves, helping reduce its debt payments.

The peso touched the lowest since January on May 24 as investors sold shares for a second week on concern global growth will slow and damp demand for the nation’s exports.

"People are going to be getting back into stocks and that’s going to be a positive for the currency,’’ said Marcelo Ayes, first vice president for treasury in Manila at Equitable PCI Bank. " There’s still sustained growth in the economy, so sentiment is good."

The peso opened yesterday’s trading at 52.80 before hitting a high of 52.575 to a dollar.

Transaction was heavy at $629.27 million on an average rate of 52.654 to $1.

It may climb to 52.50 this week, said Ayes.The Bangko Sentral ng Pilipinas (BSP) said there was a month-end demand for dollars but there were also inflows from exports and overseas Filipino workers (OFWs).

OFW inflows normally peak at the end of May and early June as OFW families prepare for tuition expenses and the reopening of classes in June. Remittances would let up slightly after June and then peak again towards December.

Dealers also said that since offshore noise had settled down somewhat, the market now would have the opportunity to focus on the country’s fundamentals, including the fact that the Arroyo administration actually managed to generate a rare budget surplus in April.

Amid complaints by exporters about the appreciation of the peso against the dollar, the International Monetary Fund (IMF) said the level of the exchange rate was not a threat to the country’s medium-term competitiveness.

At the conclusion of its annual review of the country’s economic performance, the IMF said in its report that competition from China and the Asian region in general explained some of the recent weakness in export growth.

However, the IMF said the situation did not primarily reflect an overvalued exchange rate, pointing out that this was "rarely cited as a factor impeding investments in the Philippines."

Chief News Editor: Sol Jose Vanzi

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