DOJ OPINION NO. 025, s. 2003
April 11, 2003
Secretary Jose Isidro N. Camacho
Department of Finance
Manila
Sir:
Subject herein is the request for confirmation:
@
(b)
of the authority of the Secretary of Finance to issue a
Performance Undertaking for the obligations of the National
Power Corporation (NPC) under a twenty-five (25) year
Build-Operate-Transfer (BOT) contract covered by a Power
Purchase Agreement (PPA) entered into by and between NPC
and the Consortium of State Investment Trust, Inc. and Harbin
Power Engineering Company, Ltd. (Harbin); and
that the obligations expressed to be assumed by the Republic,
through the Department of Finance, in the above-mentioned
documents are, under the laws of the Philippines, legal, valid
and binding obligations of the Republic enforceable against it in
accordance with the terms thereof.
Likewise, and consolidated herein for being related to your instant request,
is the separate request of Finance Undersecretary Nieves L. Osorio "for the review
of the draft PU and the relevant documents and the processing of the subsequent
DOJ opinion". Specifically, review of the following documents is requested:
"1. Draft PU in the form presented under the Tenth Schedule of the
PPA Contract as agreed between DOF and SPDC;
2. Copy of the PPA dated 27 June 1998; and
3. Signed First and Second Amendment Agreements on the PPA
dated 2 March 2001 and 4 February 2003, respectively, both as approved by
the ICC on 29 November 2002 and confirmed by the NEDA Board on 10
December 2002".
In connection with the above-mentioned queries, the following facts are
Conyrgtt 1994-2015 CO Techncones Asia, ne. Opirons ofthe DU Sesttay 2014 1given:
‘The National Power Corporation and the Consortium of State Investment
Trust, Inc. and Harbin Power Engineering Company, Ltd. entered into a
Power Purchase Agreement (PPA) on 27 June 1998 for the construction of
200-MW baseload coal-fired power plant (the "Project"), the first ofits kind
in Mindanao, located in the coastal area of the Philippine Veteran
Investment Development Corporation (PHIVIDEC) Industrial Authority in
Tagoloan, Misamis Oriental. ‘The project aims to augment the Mindanao
grid’s baseload generating capacity to meet projected demand starting year
2006.
By virtue of an Accession Undertaking between the Consortium, NPC and
State Power Development Corporation (SPDC) (collectively referred to as
the "Parties") dated 27 June 1998, SPDC became a party to the PPA.
‘The Parties executed a First Amendment Agreement dated 2 March 2001
and a Second Amendment Agreement dated 4 February 2003 by. virtue of
which certain provisions of the PPA relating to, among others, the
computation of Energy Fees, project Milestone Dates, equipment
specifications and test procedures, the Operator's Nominated: Capacity and
the capital structure of SPDC, were amended, The First and Second
Amendment Agreements were approved/provided clearance by the
Investment Coordination Committee (ICC) on 29 November 2002 and
confirmed by the NEDA Board in its 10 December 2002 meeting. Annex A
gives the brief background of the project, nature of the approvals given by
the ICC and NPC financial obligations under the PPA, as amended.
The PPA, as amended, provides for the issuance of Performance
Undertaking (the "PU") in the form presented in its Tenth Schedule and
presented herein as Annex B.
Her Excellency President Gloria Macapagal Arroyo issued a Special
Authority in favor of the Secretary of Finance Jose Isidro N. Camacho fo
conclude, sign, execute, and deliver, for and in behalf of the Republic of the
Philippines, the PU in connection with the 200-MW Mindanao Coal-Fired
Power Project and any other deed or document of whatsoever kind and
nature which may be necessary or proper for the purpose of implementing
the PU.
In claiming that the Secretary of Finance has the authority to issue the PU,
you quote pertinent provisions of Chapter I, Title Il, Book IV of the Administrative
Code of 1987 (E.O. No. 292), to wit:
Sec. 1. Declaration of Policy. — It is the policy of the State
that the Department of Finance shall be primarily responsible for the sound
(Copyright 1994-2015 CO Techralogles Ala, ne. (Ophions of he O04 Seartary 2014 2and efficient management of the financial resources of the Government, its
subdivisions, agencies and instrumentalities,
Sec. 2. Mandate. — The Department shall be responsible for
the formulation, institutionalization and administration of fiscal policies in
coordination with other concerned subdivisions, agencies and
instrumentalities of government.
Moreover, the Department shall be responsible for the generation and
management of the financial resources of the government, ensuring that said
resources are generated and managed judiciously and in a manner supportive
of development objectives.
xxx XXX Xxx
Sec.3. Powers and Functions. — To accomplish its goals, the
Department shall:
3x xxx Xxx
(4) Act as custodian and manage all financial resources of the
national government;
XXX XXX XXX
(8) Coordinate with other government agencies on matters
conceming fiscal and monetary policies, credit, economic development,
international finance, trade and investment;
Xxx AX xx
You add that pursuant to Section 6, Chapter 2, Book IV of the same Code,
"(Qhe authority and responsibility for the exercise of the mandate of the
Department (of Finance) and for the discharge of its powers and functions shall be
vested in the Secretary".
Moreover, you state that the PU will be issued pursuant to Section 13.2.
of the Implementing Rules and Regulations of the BOT Law (R.A. No. 7718),
which provides that:
b. Government Undertakings — Government may provide any
form of direct or indirect support or contribution, such as but not limited to
the following, ..
XXX XxX XXX
Il refer to direct and indirect
ii, Credit Enhancement — This s!
‘Copyight 1994-2015 CD Techaclages Asta, Opinions ofthe DOY Sexetary 2014‘support to a development f by the pr proponent and/or
Agency/LGU concerned, the provision of which is contingent upon the
ocourrence of certain events and/or risks, as stipulated in the contract. Credit
enhancements arc allocated to the party that is best able to manage and
assume the consequences of the risk involved. Credit enhancements may
include, but are not limited to government guarantees on the performance,
or the obligation of the Agency/LGU under its contract with the proponent
subject to existing laws on indirect guarantees. ..."
You explain that the PU is a form of credit enhancement which, under the
provisions of Section 13.2.b.ii, above-quoted, the Republic of the Philippines,
acting through the Department of Finance, is authorized to provide; and that, as
such, the obligation expressed to be assumed by the Republic, through the
Department of Finance, under the PU is, under the laws of the Philippines, legal,
valid and binding obligations of the Republic enforceable against it in accordance
with the terms thereof.
As to the Project proposed to be covered by the PU, you state that the same
was a solicited proposal that went through the bidding process as provided under
the BOT Law and a PU was contemplated when the government first reviewed the
proposal; and that although the prohibition on direct government guarantee will not
apply for this Project, you would like to emphasize that the subject PU is not a
direct guarantee as defined under Section 2(n) of the BOT Law nor an assumption
by the government or by the NPC of SPDC's liability to the latter's creditors but an
affirmation and guarantee of NPC under its contract with the proponent.
Based on the foregoing representations, and in the light of the applicable
provisions of the 1987 Administrative Code, we confirm that the Secretary of
Finance has the authority to issue the subject performance undertaking.
In a previous opinion, this Department had the occasion to rule that a
government performance undertaking may be validly issued for projects to be
implemented under the BOT law. (0) The pertinent portions of the said opinion are
hereunder quoted, viz:
It is the declared policy of the State as embodied in Section 1 of the
Amended BOT Law to ‘recognize the indispensable role of the private sector
as the main engine for national growth and development and provide the
most appropriate incentives to mobilize private resources for the purpose of
financing the construction, operation and maintenance of infrastructure and
development projects normally financed and undertalxen by the Government’,
and which ‘shall include providing a climate of minimum government
regulations and procedures and specific government undertakings in support
(Copyright 1294-2015 CD Technolog Asia ne Opinions ofthe 00 Secretary 2014 4A reading of the legislative deliberations on R.A. No. 7718 discloses
that specific government undertakings may take the form of a performance
undertaking that certain non-financial obligations of the contracting
government agency shail be fulfilled. (Records of Senate Bill No. 1586)
In this connection, we invite attention to the provision of Rule 13,
Section 13.2(b) of the Implementing Rules and Regulations (IRR) of the
Amended BOT Law, which provides:
'Sec. 13.2 Investment Incentives.
— The following incentives will be made available to
project proponents:
XXX xX XxX
b. Government Undertaking. *2) Government
may provide any form of direct or indirect support or
contribution such as but not limited to the following:
XXX XxX XXX
ii, Credit. Enhancements. . Credit
enhancements may include a guarantee by
the Government on the performance of the
obligation of the agency/LGU under its
contract with the proponent, subject to
existing laws." °6)
The abovequoted provision of the IRR of the Amended BOT Law
clearly authorizes the issuance of a performance undertaking by the
government, subject to existing laws.”
In the instant case, it is our view that the performance undertaking may be
issued for the project and that the execution of the performance undertaking is
within the authority of the Secretary of Finance.
Pursuant to the Administrative Code of 1987, the Department "shall be
responsible for the formulation, institutionalization and administration of fiscal
policies in coordination with other concerned subdivisions, agencies and
instrumentalities of the government" 4“ and "for the generation and management
of the financial resources of the government . . ." 55)
As earlier pointed out, "(he authority and responsibility for the exercise of
‘Copyright 1994-2018 CD Tochnoioxes Al, ‘Ophians of he DO. Seerotay 2014 3the mandate of the Dep:
ment (of Finance) and for the discharge of its power.
functions shall be vested in the Secretary". 44
In any case, any question as to the authority of the Secretary of Financ
execute the subject performance undertaking is very clear from the Spec
Authority issued by the President on January 7, 2003. Please note that the Spec.
Authority explicitly designates and authorizes the Secretary of Finance
“negotiate, for and in behalf of the Republic of the Philippines, a Performanc
‘Undertaking in connection with the 200-MW Mindanao Coal-Fired Power Project’
and "conclude, sign, execute and deliver, for and in behalf of the Republic of the
Philippines, the Performance Undertaking in connection with the 200-MW
Mindanao Coal-Fired Power project and other deed or document of whatsoever
kind and nature which may be necessary or proper for the purpose of implementing
the Performance Undertaking". This Department has consistently held that a
presidential issuance, directive, proclamation or executive order, is presumed valid
and binding upon all offices and bureaus under the executive branch. 1)
On the requested review of the "draft PU and relevant documents",
referring, we take it to the PPA dated June 27, 1998 and the First and Second
Amendment Agreements dated March 2, 2001 and February 4, 2003, respectively,
hereunder stated are our comments/suggestions:
et
With reference to the PPA and its Amendment Agreements, this
Department generally accords respect to the findings of the
agencies on matters falling within their primary jurisdiction
such as in the instant case. We, therefore, defer to the Opinion
of the General Counsel of the NPC stating that "the obligations
expressed to be assumed by NPC in the Agreements are legal
and valid obligations binding on NPC enforceable in
accordance with the terms thereof" and the approval of said
Agreements by the National Economic and Development
Authority (NEDA). Moreover, it is noted that the subject
documents involve highly technical and policy matters which,
to our mind, are best addressed by that Department, NEDA and
the NPC, in particular. Technical matters are beyond the official
competence of this Department to review. 8)
With respect to the PU, we suggest that the last sentence of the
second paragraph which states that "[sluch obligations are
hereby affirmed and guaranteed by the Republic of the
Philippines" be rephrased as follows: "The Republic of the
Philippines hereby affirms and guarantees the performance by
‘Copyright 1998-2019 CO Technceges Ala ne Opinions af ie DOU Secreta 2014the NPC of its obligations under the Agreement". The
suggestion is consistent with your representation that the PU is
not a direct a guarantee but is merely "an affirmation and
guarantee of NPC under its contract with the proponent”
We also suggest the deletion of the last sentence in the third
paragraph thereof which states that "[he parties exclude any
right of application or appeal to any courts in connection with
any question of law arising in the course of arbitration or with
respect to any award made" and the inclusion, in lieu thereof, of
this statement: "The arbitral award shall not be enforceable
against the Republic of the Philippines when (a) the arbitral
tribunal did not have jurisdiction in accordance with its
jurisdictional rules, (b) the party against whom the award of
such tribunal was obtained had no notice of the proceedings, (c)
the award of the tribunal was obtained through collusion or
fraud, or was based on a clear mistake of law or fact, or (d) such
award is contrary to public policy in the Republic of the
Philippines."
Please be guided accordingly.
Very truly yours,
(SGD.) SIMEON A. DATUMANONG
Seeretary
Footnotes
1. Opinion No. 97, s. 1995
2. Now reads:
">. Government Undertakings. Government may provide any form of
irect or indirect support or contribution such as but not limited to the following,
subject to the conditions for unsolicited proposals as specified under Section 10.1
hereof'* (1999 IRR)
3, Now reads:
"ii, Credit Enhancements. This shall refer to direct and indirect support
toa development facility by the project proponent and/or Agenoy/LGU concemed,
the provision of which is contingent upon the occurrence of certain events and/or
risks, as stipulated in the contract. Credit enhancements are allocated to the party
that is best able to manage and assume the consequences of the tisk involved.
Credit enhancements may include but are not limited government guarantees on
CCopyngt 1994-2018 CD Technolenes Asa, Ine. (phic ofthe DOU Sazitary 2014 7the performance or the obligation of the Agency/LGU under its contract with the
proponent, subject to existing laws on indirect guarantees. Indirect guarantee shall
refer to an agreement whereby the Government or any of its agencies or local
government units assumes full or partial responsibility for or assists in
maintaining the financial standing of the project proponent or project company in
order that the project company/proponent avoids defaulting of the project loans,
subject to fulfillment of the project proponent/company of its undertakings and
obligations under the project agreement" (1999 IRR).
4, Section 2, Chapter 1, Title Il, Book IV.
3. Did.
6. Section 6, Chapter 2, Book IV, Executive Order No. 292, otherwise known as the
Administrative Code of 1987
7. Supra, No. 6, s. 2002; Nos, 73 and 64, s. 2001, and Nos. 100 and 99, s. 2000.
8. bid., No. 153, s. 1981.
DOJ OPINION NO. 050, s. 1999
July 6, 1999
Secretary Edgardo B. Espiritu
Department of Finance
Manila
Si
This Department is requested to render a legal opinion confirming the
authority and the legality of executing a Performance Undertaking (also referred to
as "Government Undertaking") by the National Government, which will guaranty
the compliance by the National Power Corporation (NPC) with its obligations to
Industrias Metalurgicas Pescarmona Sociedad Anonima (IMPSA), an Argentinian
firm, under the Build-Rehabilitate-Operate-Transfer (BROT) Agreement for the
Caliraya-Botocan-Kalayaan (CBK) Power Plant Complex (CBK Project), which is
supplemented by the Accession Undertaking executed on February 18, 1999
among IMPSA, the NPC and CBK Power Corporation.
‘The request for legal opinion, it appears, stems from the June 11, 1999 letter
of NPC President Federico Puno to the Secretary of Finance, endorsing IMPSA's
Copyright 1994-2015 CO Techocopes Aslan. ‘Opinions ef the DOU Secretary 2014 .request for the issuance of a Government Undertaking which was not contemplated
when the Government first reviewed the proposal for the CBK Project, stressing
the NPC's inadequate financial resources to sustain the project and the need for a
credit enhancement from the Government, and addressing IMPSA‘s request to the
discretion of the President and the Department of Finance. In this connection, this
Department notes that except for the Form of Performance Undertaking appended
to the BROT Agreement as Schedule 11, the Agreement itself, including the
portion containing the NPC's representations and warranties and the conditions
precedent, makes no specific mention about the execution of a Performance
Undertaking by the National Government,
Pursuant to the BROT Agreement, IMPSA shall finance, design, build,
rehabilitate, upgrade, expand, commission, test, operate, maintain and manage the
CBK Power Plant Complex under the terms and conditions of such Agreement in
accordance with the "BOT Law" for the purpose of regulating frequency,
generating electricity and providing ancillary services during the 25-year
Cooperation Period and shall transfer the CBK Complex to the NPC at the end of
such Cooperation Period, and, for its part, the NPC shall turn over the existing
facilities of the CBK Complex to IMPSA on the Turnover Date and pay to IMPSA
the Capital Recovery Fees (fees denominated in US dollars in respect of the
recovery of IMPSA's capital investment, including the return of investment) and
the Operation and Maintenance Fees (fees denominated in Philippine pesos in
respect of services supplied to the NPC) in accordance with Schedule 7 of the
Agreement and the other amounts provided for in the Agreement. By virtue of the
‘Accession Undertaking, CBK Power Corporation shall become a party to the
Agreement and shall perform and comply with all obligations of IMPSA under the
Agreement and shall assume and be entitled to all rights, benefits and interests of
IMPSA under the Agreement,
The Performance Undertaking subject matter of the instant query will
generally confirm that the NPC's obligations under the Agreement carry the full
faith and credit of the Republic of the Philippines and that the Republic of the
Philippines will see to it that the NPC shall be able to discharge at all times such
obligations as they fall due.
On June 17, 1999, a Full Powers Letter was signed by President Joseph
Ejercito Estrada, designating and authorizing the Secretary of Finance, or in his
absence, any one of the three Undersecretaries named, to sign, execute and deliver,
for and on behalf of the Republic of the Philippines, the Government Undertaking
in favor of IMPSA and CBK Power Corporation. The issuance of the Full Powers
Letter notwithstanding, opinion is requested confirming the authority and the
legality of executing a Performance Undertaking by the National Government on
‘Copyiaht 1998-2013 CD Technceges Asi, ‘Opinions ofthe DOs Seeclary 2044 °the NPC's obligations under the BROT Agreement.
Regrettably, this Department is unable to render the requested opinion. The
issuance of the Full Powers Letter by the President forecloses any question on the
authority of the Secretary of Finance to execute a Government Undertaking. By
settled policy, the Secretary of Justice does not pass upon a presidential issuance,
directive, proclamation or executive order, which is presumed to be valid or legal
and binding upon all offices and bureaus under the executive branch, including the
Department of Justice, unless so requested by the Office of the President itself
(Secretary of Justice Opinion No, 4, current series, citing previous opinions)
Moreover, the above-stated issue is within the discretionary power of the
Department of Finance, it being mandated by law to be primarily responsible "for
the sound and efficient management of the financial resources of the Government,
its subdivisions, agencies and instrumentalities" and "for the formulation,
institutionalization and administration of fiscal policies in coordination with other
concerned subdivisions, agencies and instrumentalities of government" (Sections 1
and 2, Chapter 1, Title Il, Book IV of the Administrative Code of 1987). Pursuant
to settled practice and precedents, the Secretary of Justice has consistently
refrained from expressing his views on matters which fall within the official
competence of another government office out of respect and deference for the
expertise of the office or agency having primary jurisdiction to resolve the matter
and for its familiarity with the policy repercussions of the resolution of the
question involved (Secretary of Justice Opinion Nos. 17 and 142, s. 1994).
Furthermore, the request does not present the complete factual situation
from which this Department may draw its premises and conclusions. The Secretary
of Justice does not render opinion on questions the resolution of which hinges on
factual matters which are not readily discernible from the query (Secretary of
Justice Opinion No. 117, s. 1989).
Should the Department of Finance decide to execute the proposed
Government Undertaking, this Department suggests the deletion of the last
sentence of the third paragraph thereof which states that "[f]he parties exclude any
right of application or appeal to any courts in connection with any question of law
arising in the course of arbitration or with respect to any award made" and the
replacement thereof by a statement which goes: "The arbitral award shall not be
enforceable against the Republic of the Philippines when (a) the arbitral tribunal
did not have jurisdiction in accordance with its jurisdictional rules, (b) the party
against whom the award of such tribunal was obtained had no notice of the
proceedings, (c) the award of the tribunal was obtained through collusion or fraud,
or was based on clear mistake of law or fact, or (d) such award is contrary to public
‘Copsight 1904-2018 CO Technologies Asia, ne ‘Opicine ofthe DOU Secretary 2014 0pol the Republic of the Philippines.” It is also suggested that the second
sentence of the last paragraph of such Government Undertaking dealing with the
exclusions to the waiver of immunity be modified to contemplate of "property of a
diplomatic or consular mission of the Philippines" instead of property which is
used by a diplomatic or consular mission of the Philippines.
Nonetheless, for information and guidance on the issue of legality of
executing a Government Undertaking, attached is a copy of this Department's
Opinion No. 62, s. 1995, addressed to then Undersecretaries Joemari D. Gerochi
and Romeo L. Bernardo.
Very truly yours,
(SGD.) JUSTICE SERAFIN R. CUEVAS:
Secretary
(Copyright 1998-2015 CO Tochncogles Asi, pions fhe 001 Secretary 2014Endnotes
1 Popup - Popup)
1. Opinion No. 97, s. 1995
2 Popup - Popup)
2 Now reads:
*, Government Undertakings. Government may provide any form of
direct or indirect support or contribution such as but not limited to the following,
subject to the conditions for unsolicited proposals as specified under Section 10.1
hereof" (1999 IRR)
3 (Popup - Popup)
3. Now reads:
|. Credit Enhancements. This shall refer to direct and indirect support
to a development facility by the project proponent and/or Agency/LGU concerned,
the provision of which is contingent upon the occurrence of certain events and/or
risks, as stipulated in the contract. Credit enhancements are allocated to the party
that is best able to manage and assume the consequences of the risk involved.
Credit enhancements may include but are not limited government guarantees on
the performance or the obligation of the Agency/LGU under its contract with the
proponent, subject to existing laws on indirect guarantees. Indirect guarantee shall
refer to an agreement whereby the Government or any of its agencies or local
government units assumes full or partial responsibility for or assists in
maintaining the financial standing of the project proponent or project company in.
order that the project company/proponent avoids defaulting of the project loans,
subject to fulfillment of the project proponent/company of its undertakings and
obligations under the project agreement” (1999 IRR).
4 (Popup - Popup)
4. — Section 2, Chapter 1, Title Il, Book IV.
5 (Popup - Popup)
5. Ibid.
6 (Popup - Popup)
CCopyighe 19962015 CD Technologies Asa Ie ‘Opinions ofthe DOS Secretary 2014 2Section 6, Chapter 2, Book IV, Executive Order No. 292, otherwise known as the
Administrative Code of 1987.
7 (Popup - Popup)
7. Supra, No. 6, s. 2002; Nos. 73 and 64, s. 2001, and Nos. 100 and 99, s, 2000.
8 (Popup - Popup)
8. Ibid., No. 153, s. 1981
‘Copyright 1998-2016 CO Teemnalogias Asa, ne (Opinions of re Secretar 2014 8Secretary Jose Isi
DOJ OPINION NO. 025, s. 2003
April 11, 2003
‘0 N. Camacho
Department of Finance
Manila
Sir:
Subject herein is the request for confirmation:
(@)
(b)
of the authority of the Secretary of Finance to issue a
Performance Undertaking for the obligations of the National
Power Corporation (NPC) under a twenty-five (25) year
Build-Operate-Transfer (BOT) contract covered by a Power
Purchase Agreement (PPA) entered into by and between NPC
and the Consortium of State Investment Trust, Inc. and Harbin
Power Engineering Company, Ltd. (Harbin); and
that the obligations expressed to be assumed by the Republic,
through the Department of Finance, in the above-mentioned
documents are, under the laws of the Philippines, legal, valid
and binding obligations of the Republic enforceable against it in
accordance with the terms thereof.
Likewise, and consolidated herein for being related to your instant request,
is the separate request of Finance Undersecretary Nieves L. Osorio "for the review
of the draft PU and the relevant documents and the processing of the subsequent
DOJ opinion". Specifically, review of the following documents is requested:
"1. Draft PU in the form presented under the Tenth Schedule of the
PPA Contract as agreed between DOF and SPDC;
2. Copy of the PPA dated 27 June 1998; and
3. Signed First and Second Amendment Agreements on the PPA
dated 2 March 2001 and 4 February 2003, respectively, both as approved by
the ICC on 29 November 2002 and confirmed by the NEDA Board on 10
December 2002"
In connection with the above-mentioned queries, the following facts are
Copyright 1904-2015 CD Techrologies Asa, Ine Onions efthe DOM Secretary 2014 1given:
‘The National Power Corporation and the Consortium of State Investment
Trust, Inc, and Harbin Power Engineering Company, Ltd. entered into a
Power Purchase Agreement (PPA) on 27 June 1998 for the construction of
200-MW baseload coal-fired power plant (the "Project"), the first of its kind
in Mindanao, located in the coastal area of the Philippine Veteran
Investment Development Corporation (PHIVIDEC) Industrial Authority in
Tagoloan, Misamis Oriental. The project aims to augment the Mindanao
grid’s baseload generating capacity to meet projected demand starting year
2006.
By virtue of an Accession Undertaking between the Consortium, NPC and
State Power Development Corporation (SPDC) (collectively referred to as
the "Parties") dated 27 June 1998, SPDC became a patty to the PPA.
The Parties executed a First Amendment Agreement dated 2 March 2001
and a Second Amendment Agreement dated 4 February 2003 by. virtue of
which certain provisions of the PPA relating to, among others, the
computation of Energy Fees, project Milestone Dates, equipment
specifications and test procedures, the Operator's Nominated Capacity and
the capital structure of SPDC, were amended. The First and Second
Amendment Agreements were approved/provided clearance by the
Investment Coordination Committee (ICC) on 29 November 2002 and
confirmed by the NEDA Board in its 10 December 2002 meeting. Annex A
gives the brief background of the project, nature of the approvals given by
the ICC and NPC financial obligations under the PPA, as amended.
The PPA, as amended, provides for the issuance of Performance
Undertaking (the "PU") in the form presented in its Tenth Schedule and
presented herein as Annex B,
Her Excellency President Gloria Macapagal Arroyo issued a Special
Authority in favor of the Secretary of Finance Jose Isidro N. Camacho to
conclude, sign, execute, and deliver, for and in behalf of the Republic of the
Philippines, the PU in connection with the 200-MW Mindanao Coal-Fired
Power Project and any other deed or document of whatsoever kind and
i nature which may be necessary or proper for the purpose of implementing
| the PU.
In claiming that the Secretary of Finance has the authority to issue the PU,
you quote pertinent provisions of Chapter I, Title Il, Book IV of the Administrative
Code of 1987 (E.0. No. 292), to wit:
Sec.1. Declaration of Policy. — It is the policy of the State
that the Department of Finance shall be primarily responsible for the sound
Copyright 1996-2015 CD Tecdneloges Asta, Orinions ofthe DO SeretaryZ014 2‘and efficient management of the financial resources of the Government, its
subdivisions, agencies and instrumentalities.
Sec.2. Mandate, — The Department shall be responsible for
the formulation, institutionalization and administration of fiscal policies in
coordination with other concerned subdivisions, agencies and.
instrumentalities of government.
Moreover, the Department shall be responsible for the generation and
management of the financial resources of the government, ensuring that said
resources are generated and managed judiciously and in a manner supportive
of development objectives.
HXx Xxx xxx
Sec.3. Powers and Functions. — To accomplish its goals, the
Department shall:
XXX xxx 2x
(4 Act as custodian and manage all financial resourees of the
national government;
XXX XK Xxx
(8) Coordinate with other government agencies on matters
concerning fiscal and monetary policies, credit, economic development,
international finance, trade and investment;
XXX. Xxx XXX
You add that pursuant to Section 6, Chapter 2, Book IV of the same Code,
"(he authority and responsibility for the exercise of the mandate of the
Department (of Finance) and for the discharge of its powers and functions shall be
vested in the Secretary”.
Moreover, you state that the PU will be issued pursuant to Section 13.2..ii
of the Implementing Rules and Regulations of the BOT Law (R.A. No. 7718),
which provides that:
b. Government Undertakings — Government may provide any
form of direct or indirect support or contribution, such as but not limited to
the following. .
2X XXX XX
ii. Credit Enhancement — This shall refer to direct and indirect
‘Copyright 1994-2018 CO Teekroogos Asia, Ine ‘Opinions of me DOS Seratary 2014 asupport to a development facility by the project proponent and/or
Agency/LGU concemed, the provision of which is contingent upon the
occurrence of certain events and/or risks, as stipulated in the contract, Credit
enhancements are allocated to the party that is best able to manage and
assume the consequences of the risk involved, Credit enhancements may
include, but are not limited to government guarantees on the performance,
or the obligation of the Ageney/LGU under its contract with the proponent
subject to existing laws on indirect guarantees. ..."
You explain that the PU is a form of credit enhancement which, under the
provisions of Section 13.2.b.ii, above-quoted, the Republic of the Philippines,
acting through the Department of Finance, is authorized to provide; and that, as
such, the obligation expressed to be assumed by the Republic, through the
Department of Finance, under the PU is, under the laws of the Philippines, legal,
valid and binding obligations of the Republic enforceable against it in accordance
with the terms thereof.
As to the Project proposed to be covered by the PU, you state that the same
was a solicited proposal that went through the bidding process as provided under
the BOT Law and a PU was contemplated when the government first reviewed the
proposal; and that although the prohibition on direct government guarantee will not
apply for this Project, you would like to emphasize that the subject PU is not a
direct guarantee as defined under Section 2(n) of the BOT Law nor an assumption
by the government or by the NPC of SPDC's liability to the latter's creditors but an
affirmation and guarantee of NPC under its contract with the proponent.
Based on the foregoing representations, and in the light of the applicable
provisions of the 1987 Administrative Code, we confirm that the Secretary of
Finance has the authority to issue the subject performance undertaking,
In a previous opinion, this Department had the occasion to rule that a
government performance undertaking may be validly issued for projects to be
implemented under the BOT law. ) The pertinent portions of the said opinion are
hereunder quoted, viz:
It is the declared policy of the State as embodied in Section 1 of the
Amended BOT Law to ‘recognize the indispensable role of the private sector
as the main engine for national growth and development and provide the
most appropriate incentives to mobilize private resources for the purpose of
financing the construction, operation and maintenance of infrastructure and
development projects normally financed and undertaken by the Government’,
and which ‘shall include providing a climate of minimum government
regulations and procedures and specific goverment undertakings in support
(Copyright 19942015 CO Technologies Asa, ne Opinions of he DOU Secttar 200% 4of the private sector’.
A reading of the legislative deliberations on R.A. No, 7718 discloses
that specific government undertakings may take the form of a performance
undertaking that certain non-financial obligations of the contracting
government agency shall be fulfilled. (Records of Senate Bill No. 1586)
In this connection, we invite attention to the provision of Rule 13,
Section 13.2(b) of the Implementing Rules and Regulations (IRR) of the
Amended BOT Law, which provides:
‘Sec. 13.2 _ Investment Incentives.
— The following incentives will be made available to
project proponents:
XXX Xxx XXX
b. Government Undertaking. >2) Government
may provide any form of direct or indirect support or
contribution such as but not limited to the following:
XXX XXX. XXX
ii, Credit’ Enhancements. . . .. Credit
enhancements may include a guarantee by
the Government on the performance of the
obligation of the agency/LGU under its
contract with the proponent, subject to
existing laws." 53)
The abovequoted provision of the IRR of the Amended BOT Law
clearly authorizes the issuance of a performance undertaking by the
government, subject to existing laws."
In the instant case, it is our view that the performance undertaking may be
issued for the project and that the execution of the performance undertaking is
within the authority of the Secretary of Finance.
Pursuant to the Administrative Code of 1987, the Department "shall be
responsible for the formulation, institutionalization and administration of fiscal
policies in coordination with other concerned subdivisions, agencies and
instrumentalities of the government” “> and "for the generation and management
of the financial resources of the government . .." 33
As earlier pointed out, "(he authority and responsibility for the exercise of
Copyright 1994-2015 CD Technologies Ala ne. (Opinions athe DOU Secretary 2014 5the mandate of the Department (of Finance) and for the discharge of its powers and
functions shall be vested in the Secretary". «®
In any case, any question as to the authority of the Secretary of Finance to
execute the subject performance undertaking is very clear from the Special
Authority issued by the President on January 7, 2003. Please note that the Special
Authority explicitly designates and authorizes the Secretary of Finance to
"negotiate, for and in behalf of the Republic of the Philippines, a Performance
‘Undertaking in connection with the 200-MW Mindanao Coal-Fired Power Project"
and "conclude, sign, execute and deliver, for and in behalf of the Republic of the
Philippines, the Performance Undertaking in connection with the 200-MW
Mindanao Coal-Fired Power project and other deed or document of whatsoever
kind and nature which may be necessary or proper for the purpose of implementing
the Performance Undertaking". This Department has consistently held that a
presidential issuance, directive, proclamation or executive order, is presumed valid
and binding upon al offices and bureaus under the executive branch. 7
On the requested review of the "draft PU and relevant documents",
referring, we take it to the PPA dated June 27, 1998 and the First and Second
Amendment Agreements dated March 2, 2001 and February 4, 2003, respectively,
hereunder stated are our comments/suggestions:
1 With reference to the PPA and its Amendment Agreements, this
Department generally accords respect to the findings of the
agencies on matters falling within their primary jurisdiction
such as in the instant case. We, therefore, defer to the Opinion
of the General Counsel of the NPC stating that "the obligations
expressed to be assumed by NPC in the Agreements are legal
and valid obligations binding on NPC enforceable in
accordance with the terms thereof" and the approval of said
Agreements by the National Economic and Development
Authority (NEDA). Moreover, it is noted that the subject
documents involve highly technical and policy matters which,
to our mind, are best addressed by that Department, NEDA and
the NPC, in particular. Technical matters are beyond the official
competence of this Department to review. *®
2. With respect to the PU, we suggest that the last sentence of the
second paragraph which states that "[sJuch obligations are
hereby affirmed and guaranteed by the Republic of the
Philippines" be rephrased as follows: "The Republic of the
Philippines hereby affirms and guarantees the performance by
Copyright 19962015 CD Technologies Ast, ‘Oinons ofthe DOM Secretary 2014 6the NPC of its obligations under the Agreement’. The
suggestion is consistent with your representation that the PU is
not a direct a guarantee but is merely "an affirmation and
guarantee of NPC under its contract with the proponent",
‘We also suggest the deletion of the last sentence in the third
paragraph thereof which states that "[t]he parties exclude any
right of application or appeal to any courts in connection with
any question of law arising in the course of arbitration or with
respect to any award made" and the inclusion, in lieu thereof, of
this statement: "The arbitral award shall not be enforceable
against the Republic of the Philippines when (a) the arbitral
tribunal did not have jurisdiction in accordance with its
jurisdictional rules, (b) the party against whom the award of
such tribunal was obtained had no notice of the proceedings, (c)
the award of the tribunal was obtained through collusion or
fraud, or was based on a clear mistake of law or fact, or (d) such.
award is contrary to public policy in the Republic of the
Philippines."
Please be guided accordingly.
Very truly yours,
(SGD.) SIMEON A. DATUMANONG:
Secretary
Footnotes
1. Opinion No. 97, s. 1995
2, Now reads:
"p. Government Undertakings. Government may provide any form of
direct or indirect support or contribution such as but not limited to the following,
subject to the conditions for unsolicited proposals as specified under Section 10.1
hereof" (1999 IRR)
Credit Enhancements. This shall refer to direct and indirect support
toa development facility by the project proponent and/or Agency/LGU concerned,
the provision of which is contingent upon the occurrence of certain events and/or
risks, as stipulated in the contract. Credit enhancements are allocated to the party
that is best able to manage and assume the consequences of the tisk involved.
Credit enhancements may include but are not limited government guarantees on
Conyight 1998-2015 CO Techoclopes Aslan. (pions othe DOU Secretary 2014 7the performance or the obligation of the Agency/LGU under its contract with the
proponent, subject to existing laws on indirect guarantees. Indirect guarantee shall
refer to an agreement whereby the Government or any of its agencies or local
government units assumes full or partial responsibility for or assists in
maintaining the financial standing of the project proponent or project company in
order that the project company/proponent avoids defaulting of the project loans,
subject to fulfillment of the project proponent/company of its undertakings and
obligations under the project agreement" (1999 IRR).
Section 2, Chapter 1, Title II, Book IV.
Ibid.
Section 6, Chapter 2, Book IV, Executive Order No, 292, otherwise known as the
Administrative Code of 1987.
7. Supra, No. 6, s. 2002; Nos. 73 and 64, s. 2001, and Nos. 100 and 99, s. 2000.
Ibid., No. 153, s. 1981.
ae
DOJ OPINION NO. 050, s. 1999
July 6, 1999
Secretary Edgardo B. Espiritu
Department of Finance
Manila
Sir:
This Department is requested to render a legal opinion confirming the
authority and the legality of executing a Performance Undertaking (also referred to
as "Government Undertaking") by the National Government, which will guaranty
the compliance by the National Power Corporation (NPC) with its obligations to
Industrias Metalurgicas Pescarmona Sociedad Anonima (IMPSA), an Argentinian
firm, under the Build-Rehabilitate-Operate-Transfer (BROT) Agreement for the
Caliraya-Botocan-Kalayaan (CBK) Power Plant Complex (CBK Project), which is
supplemented by the Accession Undertaking executed on February 18, 1999
among IMPSA, the NPC and CBK Power Corporation.
The request for legal opinion, it appears, stems from the June 11, 1999 letter
of NPC President Federico Puno to the Secretary of Finance, endorsing IMPSA’s
‘Copyright 1996-2018 CD Teeoodes Ase (Opinions of 2 04 Secretary 2014 6request for the issuance of a Government Undertaking which was not contemplated
when the Government first reviewed the proposal for the CBK Project, stressing
the NPC's inadequate financial resources to sustain the project and the need for a
credit enhancement from the Government, and addressing IMPSA's request to the
discretion of the President and the Department of Finance. In this connection, this
Department notes that except for the Form of Performance Undertaking appended
to the BROT Agreement as Schedule 11, the Agreement itself, including the
portion containing the NPC's representations and warranties and the conditions
precedent, makes no specific mention about the execution of a Performance
Undertaking by the National Government.
Pursuant to the BROT Agreement, IMPSA shall finance, design, build,
rehabilitate, upgrade, expand, commission, test, operate, maintain and manage the
CBK Power Plant Complex under the terms and conditions of such Agreement in
accordance with the "BOT Law" for the purpose of regulating frequency,
generating electricity and providing ancillary services during the 25-year
Cooperation Period and shall transfer the CBK Complex to the NPC at the end of
such Cooperation Period, and, for its part, the NPC shall turn over the existing
facilities of the CBK Complex to IMPSA on the Turnover Date and pay to IMPSA.
the Capital Recovery Fees (fees denominated in US dollars in respect of the
recovery of IMPSA's capital investment, including the return of investment) and
the Operation and Maintenance Fees (fees denominated in Philippine pesos in
respect of services supplied to the NPC) in accordance with Schedule 7 of the
‘Agreement and the other amounts provided for in the Agreement. By virtue of the
‘Accession Undertaking, CBK Power Corporation shall become a party to the
Agreement and shall perform and comply with all obligations of IMPSA under the
Agreement and shall assume and be entitled to all rights, benefits and interests of
IMPSA under the Agreement.
The Performance Undertaking subject matter of the instant query will
generally confirm that the NPC's obligations under the Agreement carry the full
faith and credit of the Republic of the Philippines and that the Republic of the
Philippines will see to it that the NPC shall be able to discharge at all times such
obligations as they fall due.
On June 17, 1999, a Full Powers Letter was signed by President Joseph
Bjercito Estrada, designating and authorizing the Secretary of Finance, or in his
absence, any one of the three Undersecretaries named, to sign, execute and deliver,
for and on behalf of the Republic of the Philippines, the Government Undertaking
in favor of IMPSA and CBK Power Corporation. The issuance of the Full Powers
Letter notwithstanding, opinion is requested confirming the authority and the
legality of executing a Performance Undertaking by the National Government on
CConyngtt 1994-2018 CO Techroowes Asa In. Opiions af he DOJ Secretary 2014 °the NPC's obligations under the BROT Agreement.
Regrettably, this Department is unable to render the requested opinion. The
issuance of the Full Powers Letter by the President forecloses any question on the
authority of the Secretary of Finance to execute a Government Undertaking. By
settled policy, the Secretary of Justice does not pass upon a presidential issuance,
directive, proclamation or executive order, which is presumed to be valid or legal
and binding upon all offices and bureaus under the executive branch, including the
Department of Justice, unless so requested by the Office of the President itself
(Secretary of Justice Opinion No. 4, current series, citing previous opinions).
Moreover, the above-stated issue is within the discretionary power of the
Department of Finance, it being mandated by law to be primarily responsible "for
the sound and efficient management of the financial resources of the Government,
its subdivisions, agencies and instrumentalities" and "for the formulation,
institutionalization and administration of fiscal policies in coordination with other
concerned subdivisions, agencies and instrumentalities of government" (Sections 1
and 2, Chapter 1, Title II, Book IV of the Administrative Code of 1987). Pursuant
to settled practice and precedents, the Secretary of Justice has consistently
refrained from expressing his views on matters which fall within the official
competence of another government office out of respect and deference for the
expertise of the office or agency having primary jurisdiction to resolve the matter
and for its familiarity with the policy repercussions of the resolution of the
question involved (Secretary of Justice Opinion Nos. 17 and 142, s. 1994).
Furthermore, the request does not present the complete factual situation
from which this Department may draw its premises and conclusions. The Secretary
of Justice does not render opinion on questions the resolution of which hinges on
factual matters which are not readily discernible from the query (Secretary of
Justice Opinion No. 117, s. 1989).
Should the Department of Finance decide to execute the proposed
Government Undertaking, this Department suggests the deletion of the last
sentence of the third paragraph thereof which states that "[tJhe parties exclude any
right of application or appeal to any courts in connection with any question of law
atising in the course of arbitration or with respect to any award made" and the
replacement thereof by a statement which goes: "The arbitral award shall not be
enforceable against the Republic of the Philippines when (a) the arbitral tribunal
did not have jurisdiction in accordance with its jurisdictional rules, (b) the party
against whom the award of such tribunal was obtained had no notice of the
proceedings, (c) the award of the tribunal was obtained through collusion or fraud,
or was based on clear mistake of law or fact, or (d) such award is contrary to public
(Copyright 1994-2015 CO Teehnoages Aca ie ‘Opiiens ofthe DOU Sect 2014 10policy in the Republic of the Philippines.” It is also suggested that the second
sentence of the last paragraph of such Government Undertaking dealing with the
exclusions to the waiver of immunity be modified to contemplate of "property of a
diplomatic or consular mission of the Philippines" instead of property which is
used by a diplomatic or consular mission of the Philippines.
Nonetheless, for information and guidance on the issue of legality of
executing a Government Undertaking, attached is a copy of this Department's
Opinion No. 62, s. 1995, addressed to then Undersecretaries Joemari D. Gerochi
and Romeo L. Bernardo.
Very truly yours,
(SGD.) JUSTICE SERAFIN R. CUEVAS
Secretary
DOJ OPINION NO. 085, s. 1985
July 29, 1985
‘The Secretary-Gener:
Office of the Prime Minister
Executive House
Manila
Sir:
‘This has reference to the within letter of the Secretary-General of the
International Centre for the Settlement of Investment Disputes ("ICSID") inviting
attention of the Philippine Government to Article 54(2) of the Convention on the
Settlement of Investment Disputes (the "Convention") regarding "the designation
of the court or other authority as competent for the recognition and enforcement of
arbitral awards rendered pursuant to the Convention". You have forwarded this
Letter to this Ministry "for appropriate action".
(Copyright 1994-2015 CO Technolages Asia, ne (Opens of the 004 Seertar2014 "Article 54 of the abovesaid Convention provides as follows:
(1) Each Contracting State shall recognize an award rendered
pursuant to this Convention as binding and enforce the pecuniary obligations
imposed by that award within its territories as if it were final judgment of a
court in that State. A Contracting State with a federal constitution may
enforce such an award in or through its federal courts and may provide that
such courts shall treat the award as if it were a final judgment of the courts
ofa constituent state.
(2) _A patty secking recognition or enforcement in the temtitories of
a Contracting State shall furnish to a competent court or other authority
which such State shall have designated for this purpose a copy of the award
certified by the Secretary-General, Each Contracting State shall notify The
Secretary-General of the designation of the competent court or other
authority for this purpose and of any subsequent change in such
designation. m
(3) Execution of the award shall be governed by the laws
conceming the execution; of judgments in force in the State in whose
territories such execution is sought." (Emphasis supplied),
In this jurisdiction a foreign judgment, ic., one which is rendered by a court
other than a Philippine court, is enforced either by filing an action o raising it as
an answer, the reason being that the Philippine courts should have an opportunity
to pass judicially upon the efficacy of such judgment. (Gorayeb vs. Bashim, 50
Phil. 22) While the said ruling was promulgated under the former Rules of Court,
it has been said that the said rule still obtains under the present Rules of Court.
(Salonga, Private International Law, 1967 Ed., p. 500) The same rule prevails in
America jurisdictions.
"Unless it is so provided by statute in the state where enforcement is
sought, a judgment recovered in one state is not executory in another state in
the sense that final process for its enforcement could issue on merely filing
or docketing the judgment, as in the case of a domestic judgment. The
‘enforcement in one state of a judgment of another state is in pursuance of the
constitutional provision giving ‘full faith and credit’ to such judgments,
which require states to afford like means of enforcing foreign and domestic
judgment, but such provision relates only to the effect of such judgments as
evidence or as a bar to further litigation, and in order to proceed for the
collection or enforcement of a judgment recovered in another state the
creditor must first sue on it in the State where he wishes to enforce it and
recover a judgment on it.” (50 CIS. p. 495-496)
‘Thus, an arbitral award rendered pursuant to the Convention may be
‘Copyght 1994-2016 CD Techalages Al, Opinions ef tie DON Secretar 2014 2enforced in the Philippines only by filing an action for such enforcement in the
proper forum or raising the award as a defense in an answer, as the case may be
whichever appropriate. This view finds support in the third paragraph of the
abovequoted provisions of the Convention which states that the [execution] of the
award shall be covered by the laws concerning the execution of judgments in force
in the State in whose territories such execution is sought". As earlier pointed out,
this particular provision is a protection against "erroneous or improper judgments,
considering that under Section 50, Rule 39 of the Revised Rules of Court, a foreign
judgment may be overturned by cvidence of want of jurisdiction or of notice,
collusion, fraud or clear mistake of law or fact.” (Ops. No. 149, s. 1978)
With the above observations on the interpretation and application of Article
54 of the Convention, in the light of existing procedure in the Philippine judicial
system, it is our view that "the competent court or authorities" for purposes of
Section 54(2) of the Convention should be the municipal trial courts, the municipal
circuit trial courts, the metropolitan trial courts and the regional trial courts. This is
so since the aforementioned courts are the agencies of the Philippine legal system
that hear and decide judicial cases at first instance. As to which of these courts
shall cases for enforcement of an ICSID arbitral award be filed would depend upon
the subject matter of the award. ..
Accordingly, we may inform the ICSID Secretary-General that the
municipal trial courts, the municipal circuit courts, the metropolitan trial courts and
the regional trial courts are the competent courts in the Philippines for purposes of
recognition and enforcement of arbitral awards rendered pursuant to the
Convention on the Settlement of Investment Disputes.
Very truly yours,
(SGD.) ESTELITO P. MENDOZA
Minister of Justice
(Copy 1996:2075 CD Technolgies Asa le. ‘Options ofthe DOU Seeeiary 2014 18Endnotes
1 (Popup - Popup)
1, Opinion No. 97, s. 1995
2 (Popup - Popup)
Now reads:
"b, Government Undertakings. Government may provide any form of
direct or indirect support or contribution such as but not limited to the following,
subject to the conditions for unsolicited proposals as specified under Section 10.1
hereof.” (1999 IRR)
3 (Popup - Popup)
3. Now reads:
"ii. Credit Enhancements. This shall refer to direct and indirect support
to a development facility by the project proponent and/or Agency/LGU concerned,
the provision of which is contingent upon the occurrence of certain events and/or
risks, as stipulated in the contract. Credit enhancements are allocated to the party
that is best able to manage and assume the consequences of the risk involved.
Credit enhancements may include but are not limited government guarantees on
the performance or the obligation of the Agency/LGU under its contract with the
proponent, subject to existing laws on indirect guarantees. Indirect guarantee shall
refer to an agreement whereby the Government or any of its agencies or local
government units assumes full or partial responsibility for or assists in
maintaining the financial standing of the project proponent or project company in
order that the project company/proponent avoids defaulting of the project loans,
subject to fulfillment of the project proponent/company of its undertakings and
obligations under the project agreement" (1999 IRR).
4 (Popup - Popup)
4, Section 2, Chapter 1, Title Il, Book IV.
5 (Popup - Popup)
5. Ibid.
6 (Popup - Popup)
‘Copyright 1966-2018 CD Teeknolones Asa in Opinions of ie 004 Secretary 2014 1“‘Section 6, Chapter 2, Book IV, Executive Order No. 292, otherwise known as the
Administrative Code of 1987.
7 (Popup - Popup)
. 2002; Nos, 73 and 64, s. 2001, and Nos. 100 and 99, s. 2000.
7. Supra, No.
8 Popup - Popup)
8. Ibid., No, 153, s. 1981.
(Copyrign! 1994-2018 CD Tecmoloyies Asia nc. ‘Opinions of he DOV Seeetary 2014
16With the above observations on the interpretation and application of Article
54 of the Convention, in the light of existing procedure in the Philippine judicial
system, it is our view that "the competent court or authorities” for purposes of
Section 54(2) of the Conyention should be the municipal trial courts, the municipal
circuit trial courts, the metropolitan trial courts and the regional trial courts. This
so since the aforementioned courts are the agencies of the Philippine legal system
that hear and decide judicial cases at first instance. As to which of these courts
shall cases for enforcement of an ICSID arbitral award be filed would depend upon
the subject matter of the award. ..
Copyright 19962015 CD Tectralogies Asa, ne ‘Ophions offre DOV Secretary 2014 1DOJ OPINION NO. 025, s. 2003
April 11, 2003
Secretary Jose Isidro N. Camacho
Subject herein is the request for confirmation:
@
(b)
of the authority of the Secretary of Finance to issue a
Performance Undertaking for the obligations of the National
Power Corporation (NPC) under a twenty-five (25) year
Build-Operate-Transfer (BOT) contract covered by a Power
Purchase Agreement (PPA) entered into by and between NPC
and the Consortium of State Investment Trust, Inc, and Harbin
Power Engineering Company, Ltd. (Harbin); and
that the obligations expressed to be assumed by the Republic,
through the Department of Finance, in the above-mentioned
documents are, under the laws of the Philippines, legal, valid
and binding obligations of the Republic enforceable against it in
accordance with the terms thereof.
Likewise, and consolidated herein for being related to your instant request,
is the separate request of Finance Undersecretary Nieves L. Osorio "for the review
of the draft PU and the relevant documents and the processing of the subsequent
DOI opinion’. Specifically, review of the following documents is requested:
Draft PU in the form presented under the Tenth Schedule of the
PPA Contract as agreed between DOF and SPDC;
2. Copy of the PPA dated 27 June 1998; and
3. Signed First and Second Amendment Agreements on the PPA
dated 2 March 2001 and 4 February 2003, respectively, both as approved by
the ICC on 29 November 2002 and confirmed by the NEDA Board on 10
December 2002",
In connection with the above-mentioned queries, the following facts are
‘Copyrignt 19942015 CO Technlages Asa ne. ‘Opinions of he DO Secatary 2014given:
The National Power Corporation and the Consortium of State Investment
‘Trust, Ine. and Harbin Power Engineering Coinpany, Ltd. entered into a
Power Purchase Agreement (PPA) on 27 June 1998 for the construction of
200-MW baseload coal-fired power plant (the "Project"), the first of its kind
in Mindanao, located in the coastal area of the Philippine Veteran
Investment Development Corporation (PHIVIDEC) Industrial Authority in
Tagoloan, Misamis Oriental, The project aims to augment the Mindanao
arid’s baseload generating capacity to mect projected demand starting year
2006.
By virtue of an Accession Undertaking between the Consortium, NPC and
State Power Development Corporation (SPDC) (collectively referred to as
the "Parties") dated 27 June 1998, SPDC became a party to the PPA.
The Parties executed a First Amendment Agreement dated 2 March 2001
and a Second Amendment Agreement dated 4 February 2003 by. virtue of
which certain provisions of the PPA reli to, among others, the
computation of Energy Fees, project Milestone Dates, equipment
specifications and test procedures, the Operator's Nominated Capacity and
the capital structure of SPDC, were amended. The First and Second
Amendment Agreements were approved/provided clearance by the
Investment Coordination Committee (ICC) on 29 November 2002 and
confirmed by the NEDA Board in its 10 December 2002 meeting. Annex A
ives the brief background of the project, nature of the approvals given by
the ICC and NPC financial obligations under the PPA, as amended.
The PPA, as amended, provides for the issuance of Performance
Undertaking (the "PU") in the form presented in its Tenth Schedule and
presented herein as Armex B.
Her Excellency President Gloria Macapagal Arroyo issued a Special
Authority in favor of the Secretary of Finance Jose Isidro N. Camacho to
conclude, sign, execute, and deliver, for and in behalf of the Republic of the
Philippines, the PU in connection with the 200-MW Mindanao Coal-Fired
Power Project and any other deed or document of whatsoever kind and
nature which may be necessary or proper for the purpose of implementing
the PU,
In claiming that the Secretary of Finance has the authority to issue the PU,
you quote pertinent provisions of Chapter I, Title Il, Book IV of the Administrative
Code of 1987 (E.0. No. 292), to wit:
Sec. 1. Declaration of Policy. — It is the policy of the State
that the Department of Finance shall be primarily responsible for the sound
‘Copyright 1994-2015 CO Technologies Asia, ne ‘Opinions of te DOM Secretary 2014 2