1.

The sale of AHEPP to K-water, a fully foreign owned corporation is violative of the
nationality requirement of Article X11 Section 2 of the 1987 Constitution.

In its decision upholding the sale of AHEPP to K-Water, the SC relied on the DOJ opinion which
declared that when the waters from the Angat river moves to the Angat dam, the waters are
“extracted” from their natural source and it may therefore be the subject of ordinary commerce
and utilized even by fully-foreign owned corporations such as K-water. This opinion was based
on the US case of US vs State of New York which declared that the bottling for sale and selling
of mineral water from the Saratoga springs may be subject to taxation because the water had been
removed from its natural source.

Art. 12 Sec. 2 of the 1987 Constitution provides that natural resources of the country are owned
by the state and therefore the exploration, discovery and utilization of these resources shall be
under the full control of the state with the latter directly undertaking such activities or through
entering into co-production, joint venture, or production sharing agreements with Filipino
Citizens or corporations or associations at least sixty percentum of whose capital is owned by
such citizens. This provision of the constitution is clear and free from ambiguity that a fully
foreign owned corporation such as K-water cannot own the AHEPP as such would constitute a
violation of the nationality requirement.

We contend that there was a misapplication of the doctrine as the cases are very different from
each other. In this case, the water is not permanently removed from the dam when it is utilized by
the AHEPP. Hydraulic energy which is what is generated by the AHEPP is generated through a
storage plant or reservoir (dam). In the generation of hydraulic energy, the water falls from a
higher elevation to a lower one in order to release its stored energy, it then goes into a turbine
where the falling water is converted into mechanical energy, it is then converted into electrical
energy when is passes through a rotor. After that, the water exists through the draft tube where it
rejoins the riverbed in an area called the after bay. The waters in the Angat River are not
extracted therefrom when it enters the Angat Dam for temporary holding, or when it is utilized by
the AHEPP in the production of hydropower as it is eventually released to form part of the Angat
reservoir. 

We therefore conclude that the decision of the Supreme Court in allowing the sale of the AHEPP
to K-water was based on the illogical conclusion that once water is removed from its natural
source which is the Angat river and enters the facilities of the Angat dam and eventually, the
AHEPP, it ceases to be a part of the natural resources of the country and becomes the subject of
ordinary commerce and may be acquired by foreigners. 

2. The permission given by the NPC to K-water to utilize the water right grated to it is in
contravention of the water code which states that only Filipino citizens and corporations
60% of whose capital is owned by Filipinos may be granted water rights.

In the disposition of the SC, it stated that the NPC shall continue to be the holder of the water
permit although the operations and day-to-day management of the AHEPP is turned over to K-
water and NPC would grant the former authority to utilize the waters from the Angat Dam to be
utilized by the AHEPP in the generation of electricity. It was also held that while PSALM was
mandated to transfer the ownership of the AHEPP, the water resources shall remain under the full
supervision and control of the state and therefore there is no express requirement for the transfer
of water rights in all cases where the operation will be turned over to the private sector.