New Philippine Revolutions Special Report

Last April 28, the National Power Corporation (NAPOCOR) and the Power Sector Assets Liabilities Management
Corporation (PSALM) opened the bid for the sale of 246-megawatt Angats hydroelectric plant. The sale, touted as the first big-ticket item in the auction block is now being hotly contested by some of the countrys biggest conglomerates. Six of the countrys largest companies, the Ayala Group, the Lopez Group, Metro Pacific Investments, Phinma Group, Aboitiz Power and San Miguel Corporation are locked in a fierce battle to acquire the governments crown jewel. SN Norway, a partner of the Aboitizes and K-Power, a Korean power company have taken a great interest in the sale. KPower just posted a US$ 440.8 million bid, the first to offer a multi-billion peso price tag for the power plant. What is interesting in this bid is it involves very close associates of the new Aquino administration. And there are suspicions that some of the bidders are interested not just on the power plants but on the administration of the dam itself.

The Titanic Battle for Angat

Peoples Expose

Vol. 1, no. 1 July-Aug 2010

What is clearly on sale is Angats hydroelectric power plants

that produces 3% of the countrys energy needs. In its March 2010 statement, the PSALM said the dam itself is not for sale. There is, however, a very clear campaign by some of the bidders to force government to hand over the administration of the dam itself to private companies. And they used what some claims to be an artificial water shortage to justify their bid for the dam. Last June 1, the Maynilad Water said in a statement that it has successfully lowered the pilferage of water to about 53%. Maynilad was able to address over 29,000 leaks compared to a little over 10,000 leaks during the same period in 2009. The 190% increase in resolved leaks translated to nearly 109 million liters a day (MLD) of recovered water. The firm of Metro Pacific Investments Corporation, together with DM Consunji claimed that it is now in the position to improve its water services to its concession areas. Maynilad Water concession area covers the cities of Manila (all but portions of San Andres & Sta Ana), Quezon City (west of San Juan River, West Avenue, EDSA, Congressional, Mindanao Avenue, the northern part starting from the Districts of the Holy Spirit & Batasan Hills), Makati (west of South Super Hi-way), Caloocan, Pasay, Paranaque, Las Pinas, Muntinlupa, Valenzuela, Navotas and Malabon all in Metro Manila; Cavite City, and the towns of Bacoor, Imus, Kawit, Noveleta and Rosario, all in Cavite Province.

The water utility buys its water from the Metropolitan Waterworks and Sewerage Systems (MWSS), an agency under the Department of Public Works and Highways. On June 30, former Maynilad President Rogelio Babes Singson took over the operations of the Department of Public Works and Highways (DPWH). Meanwhile, another water executive, this time from Manila Water, an Ayala firm, took over the energy department portfolio. Upon his assumption to office, Singson made an attempt to sit as chairman of the MWSS board, a clear conflict of interest. He was repulsed. A few days after their public statement that they are now in the position to further improve water services in their concession area, Maynilad broke the news of water shortages. These shortages were reported in all of Maynilads service areas, affecting more than 5.3 million families living in the Metropolis. As soon as the water shortage hit the newspapers, Singson immediately attacked the National Power Corporation (Napocor). Together with Jose Allado, MWSS administrator, Singson said that it was Napocors fault when the energy firm allowed the release of 3-months worth of water reserves during the height of Typhoon Ondoy. Singson practically accused the Napocor of mismanagement. People were surprised why Singson accused a fellow Cabinet

member of mismanagement. Most thought that it was because of a former rivalry, since Singson formerly sat as President of Maynilad water while new Energy secretary Jose Almendras is once Manila Waters president. The real reason became evident when on July 21, Ayala Group of Companies and Metro Pacific Investments Corporation went public and announced that they are interested to assist the MWSS in asking President Aquino to transfer the control of Angat dam, from Napocor to MWSS. So, it was clear that Singsons tirades against his former water business colleague was simply a play, a farce if you will, to justify a public clamor for the transfer of the dam to the MWSS. And Napocor, it seems, is not entirely out to fight its rights to the dam, a clear indication of collusion between Almendras and his former bosses over at Ayala Group of Companies who want nothing more than a foot inside the energy sector. Though the proposal was coursed through MWSS deputy administrator Macra Cruz, it was clear that there were marks of intervention from the Ayala-Metro Pacific group. Cruzs appeal echoes what Maynilad and Manila Water have been saying before the media, days after the water shortage broke out. At this very moment, the National Power Corporation or Napocor has full control of the dams and power plants throughout the country. Under the EPIRA law, sale of power plants does not necessarily lead to the sale of dams and non-energy infrastructure. Under Rule 23 of the Epira, government retains full control and management of the dam. What is being sold at the auction block right this very minute is the hydroelectric plant. Yet, what is now being proposed is for the government to give its rights to the administration of the dam itself to private business groups. The MWSS proposal is tainted with malice. It also smacks of a clear strategy to countermand the sale of the hydroelectric plants. Imagine this--the PSALM has now opened the bid and here you have a group of bidders seeking to practically steal the rug under the feet of whoever wins the bidding. By seeking the administration of the dam, the MetroPac-Ayala Group of Companies want to control the amount of power that is to be generated by the hydroelectric plant. The plant depends on water in the Angat dam reservoir. Whoever controls the dam, controls the generated power. Cruz said it is high time for government to prioritize water instead of power, echoing what MetroPac through Maynilad and the Ayala Group, through Manila Water said in an earlier public statement.

Aside from this, joint management of the dam will allow private concessionaires, MetroPacific and Ayala Group of Companies to control the price of water sold to them. Clearly, this proposal smacks of malice and conflict of interest. While they are in the thick of bidding for Angats hydroelectric plants, the Lopez-MetroPac-Ayala group wants to practically take over the entire Angat dam operations. Big Business ties with the New Aquino administration The Lopez-Ayala-Pangilinan group is taking a bold stance for one simple reason--it enjoys tremendous political capital with the new administration. The group supported the presidential bid of new Philippine president Benigno Simeon Aquino III. It also has very strong ties with the men behind Aquinos administration, particularly former Senator Mar Roxas and the Hyatt 10 group. Sources say the groups support was coursed thru Cesar Purisima, now Aquinos finance secretary. Aquinos public works secretary Rogelio Singson used to head Maynilad water, a company under the Metro Pacific Investments Corporation of Manny Pangilinan. Jose Almendras, who was taken in by Aquino as his energy secretary, is another water man. He is a former executive of Manila Water, a company owned by the Ayala Group of Companies. Singsons and Almendras entry in the government service are highly irregular. It came at the precise time when two of their former companies are bidding for the Angat hydroelectric power plants. What is so controversial about these appointments is the fact that they occupied two government agencies involved in the bidding and sale of Angat. Almendras heads the Department of Energy, which the PSALM reports to. Almendras appointed Atty. Maria Luz Caminero as PSALM head. Caminero used to be an associate of the law firm of former Supreme Court Justice Fidel Purisima, father of Hyatt 10 member and now Finance secretary Cesar Purisima. Sources say, Almendras entry in the energy department is preparatory to the eventual entry of the Ayala Group of Companies into the energy industry. As early as 2007, the Ayala Group of Companies has expressed its desire to enter into the energy sector, the only sector which the countrys biggest real estate developer has failed to dominate. In 2008, an opportunity presented itself before the Group. Ayala, however, refused and instead waited for the elections to end before taking another stab at the energy game. Singson, meanwhile, serves as ex-officio chairman of MWSS. The MWSS is the one that supplies water to Maynilad and Manila Water. Shortly after the sale of Angat, the administration of the dam will remain with the Napocor and the National Water Resources

Board, an agency attached under the Department of Environment and Natural Resources. Singson opposes the sale simply because it wants Maynilad to take control of the dam. The strategy is simple---if the group of Ayala-MetroPac and the Lopezes fail to get Angats hydroelectric plants, then, they intend to get the dam instead, using more of their political capital than their combined financial might. And why is this group positioning like that in this early in the game? Sources say, the Group thinks that the bidding for Angat is actually more ceremonial than anything. Many people think that San Miguel Corporation, a conglomerate headed by President Noynoy Aquinos uncle Danding Cojuangco, will successfully acquire Angats hydroelectric power plants. The Angat Dam Bidding From the initial five groups, the number of investors grew to 12. The first five includes Trans-Asia Oil and Energy Development Corporation, San Miguel Corporation, Aboitiz Power Corporation and its partner SN Power of Norway and First General Corporation. Trans-Asia Oil and Energy Development Corporation is engaged primarily in power generation and supply, with secondary investments in petroleum and mineral exploration. According to its corporate information, power generation and supply is its main business and revenue source. Trans-Asia is the brainchild of Ramon del Rosario Jr, President of Philma Properties and close Aquino family associate. Oscar Hilado is the companys chairman, along with Magdaleno Aberraccin. Hilado, sources say, was involved in the Noynoy Aquino electoral campaign. The company owns a 3.2 MW power plant which supplies power in the island of Guimaras in the Visyas. Recently, Trans Asia Oil and Energy Corporation acquired a new company: CIP II power Corporation, which owns a power plant and distribution facilities located at Carmelray Industrial Park II, Calamba City, Laguna. The 21 MW power plant supplies power to 50 companies and factories inside the industrial park. First Gen is a company owned by the Lopez group who now has several joint venture projects with DM Consunji. DM Consunji is a partner of Metro Pacific Investment Corporation in Maynilad Water. First Gen has just acquired the Pantabangan-Masiway Hydroelectric Power Plant in Nueva Ecija for US$ 129 million. It is bidding through its company, the Energy Development Corporation. Sources say, First Gen does not have enough financial muscle to make it to the end game. Ayala Corporation, which owns Manila Water and MetroPacific Investment Corporations Maynilad Water signed a joint venture agreement to bid for Angat dam. This is the first try of Ayala

Corporation into the energy sector. It first expressed interests in entering the picture in 2008, only to withdraw and says that energy assets are overpriced. The two conglomerates agreed to join forces behind Michigan Power Incorporated, an Ayala Company unit. Later, First Gen joined the fray. The merger of forces is expected. The Lopezes which controls First Gen, are business partners of PLDT, a company managed by MetroPacific Investment Corporations Manny Pangilinan. This group has one thing in mindprevent their businesses from crumbling under the weight of San Miguel Corporation. Since the re-assumption of Danding Cojuangco as chairman and president of SMC, the food giant has undertaken a frenetic bid to diversify its interests. After dominating the food manufacturing and beverage industries, San Miguel then directed its sights on telecommunications and power. San Miguel is now one foot inside the telecommunications industry with the establishment of a telecommunications firm allied with Qatar telecommunications. The energy sector is another business stumping ground of San Miguel. It owns Petron Corporation, one of three oil giants in the Philippines. It has another foot at the banking industry, with Bank of Commerce and another at the coal mining sector, with its newly acquired Daguma Agro Minerals Incorporated, Bonanza Energy Resources Incorporated and Sultan Energy Mining and Development Corporation. Meanwhile, SMCs infrastructure projects now include the upgrade of Caticlan airport, the construction of the North Luzon East Expressway, and the Metro Rail Transport-Line 7. All are Build-Operate-Transfer (BOT) projects that offer long-term benefits to the company. San Miguel Corporation, meanwhile, is the only Philippine company without a partner. The Danding Cojuangco-owned corporation has already spent close to 2 billion dollars buying three power plants: Limay Combined-Cycle Power Plant (Bataan), Sual Coal-Fired Power Plant (Pangasinan) and the Ilijan Combined Cycle Power Plant in Batangas. San Rogue dam is another power plant being managed by San Miguel. All in all, these power plants generated revenues of up to P 11.4 billion for the first three quarters of 2010 alone. A new player, Korea Water Resources Development Corp. (K-Water) is the only official bidder for the Angat Dam. They posted a US$ 440.88 million bid for the hydroelectric plant. At present, there are at least five in Angat: San Miguel Corporation Aboitiz Group and its partner SN Energy Development Corporation, Ayala-Lopez Group. (5) big investors interested of Danding Cojuangco, the Norway, Trans-Asia Oil and K-Power and the MetroPac-

Who wins among the titans of business this time? Danding Cojuangco silently supported the presidential bid of his nephew, now Philippine president Benigno Simeon Aquino III last May 10 elections. His brother Tonyboy donated 100 million pesos to fuel Noynoys bid, while his daughter also took an active part in the campaigns. Though the Nationalist Peoples Coalition (NPC), the political party of Danding did not formally allies itself with the Liberals, it nonetheless, silently supported Aquinos electoral campaign through Senator Chiz Escudero. Trans-Asias Ramon del Rosario Jr. is a well-known campaigner for Aquino. The del Rosarios are close family friends of the Aquinos since 1986. Del Rosario even served as a Cabinet member of Noynoy Aquinos mother, the late president Cory Aquino. Though PLDT and MetroPacs Manny Pangilinan gave and supported former president Joseph Estradas bid for the presidency, Pangilinan still has very strong backers inside the Aquino administration. His close ties with Cesar Purisima and members of the Hyatt 10 are an open secret. Likewise, Pangilinan has very strong ties with the Lopezes, who are close Aquino supporters and business associates. During the elections, the Lopezes allowed the use of their television network to propagate Aquinos news. And we all know how close the Ayalas are to former president Cory Aquino. Who will then take the governments crown jewel, the Angat dam? Sources say San Miguel Corporation still has enough financial muscle to force a showdown with the MetroPac-Ayala-Lopez group. Despite spending close to US$ 2 billion in acquiring power plants, San Miguel still has lots of money to spend for another one. On the other hand, the MetroPac-Ayala-Lopez group is not entirely in a very good position to contest San Miguel. One, the Lopezes already spent close US$130 million acquiring two power plants. Its other businesses do not generate more than what San Miguel is generating from its diversified businesses. The Ayala Group, which derives its income from real estate developments, is not entirely as strong as San Miguel. Ayalas total assets is just 232 billion pesos. Net combined income stands at P 8.2 billion pesos. Its businesses are being affected by the fast expansion of SM Prime Properties and even Robinsons which have penetrated the real estate and mall development sector. So it is not entirely surprising that Ayala teams itself up with its telecommunications rival, to bid for Angat. Ayalas entry into the energy industry is logical, since its other business rivals are deriving huge revenues from this sector than other businesses. Now, who will win in this titanic battle for Angat dam? Sources told me that San Miguel is really poised to get this one. One, it has enormous political capital to spend with and two, it clearly is in a better financial position than the other groups. The MetroPac-Ayala-Lopez does not have a political party with

which to dangle before a New President. The group, however, has substantial linkages or ties with the presidents men and has direct access to him. I think that the bidding will go down the wire, without presidential intervention. When this happens, San Miguel Corporation will clearly win the battle this time over Pangilinan. Danding Cojuangcos men fought Pangilinan for Meralco and lost. Now, Danding is in the best position to win it over Pangilinan this time with Angat. With this clearly in the horizon, the question remains as to what will this group do to countermand San Miguels eventual takeover of Angat? You guessed it rightuse its political capital to maneuver the administration of the dam itself to them. If the Aquino administration agrees, then, Angat Dam will be transformed into a battle ground between Cojuangco and Pangilinan-Ayala group once again.

New Philippine Revolutions Special Edition Peoples Expose is a monthly online publication.
It seeks to expose the dealings happening inside the New Aquino administration. It does not mince words. It tells it like it is. It is simply interested in the Truth. It is free to all those who want to know what is happening around them. You are free to distribute this to your friends and colleagues. You may send your questions and inquiries to mangubat.patricio@gmail.com Patricio Mangubat is the web pseudonym of a former professor of History and Communications. He is deeply involved in strategic marketing communications. He maintains three popular blog sites and writes for Filipino Voices and Blogwatch. He is also a member of various international online organizations.