SC OKs sale of Angat power plant to Korean firm

by Ira Pedrasa,

Posted at Oct 24 2012 06:11 PM | Updated as of Oct 25 2012 07:20 PM

MANILA (UPDATED) - The Supreme Court has approved the privatization of the power generation component of the multi-purpose Angat complex in Bulacan, paving the way for its sale to Korea Water Resources Corporation (K-Water).

In a decision penned by Justice Martin S. Villarama, Jr., the high court said the Power Sector Assets and Liabilities and Management Corp. (PSALM) “committed no grave abuse of discretion when it commenced the sale process" of the Angat hydro-electric power plant pursuant to the Electric Power Industry Reform Act (EPIRA).

However, the water component of the complex will remain under the jurisdiction of the National Power Corp. (NPC), the 13-1 decision said.

The hydro-electric plant generates 218 megawatts.

Under the law, PSALM is tasked to sell the power generation assets of the government. In a text message, PSALM President Emmanuel Ledesma Jr. said: “I welcome the ruling of the court and PSALM will abide by all conditions in the decision.”

The high court dismissed the contention of several non-government agencies and militant groups that PSALM did not follow proper bidding procedures in selling the hydropower complex facility.

The same petition had also argued that the sale to a fully-owned foreign corporation may lead to exploitation of the water aspect of the facility.

Based on court documents, the petitioners claimed the complex will be “in dire danger of being wholly-owned by a Korean corporation which probably merely considers it as just another business opportunity, and as such cannot be expected to observe and ensure the smooth facilitation of the more critical purposes of water supply and irrigation.”

Angat Dam is the source of 97% of Metro Manila’s water supply, as well as irrigation for farmlands in 20 municipalities and towns in Pampanga and Bulacan.

Bidding process

The high court did not see any wrongdoing on the part of PSALM in disposing the asset based on records on the procurement processes. It said the stakeholders, including other bidders, were given enough lead time to bid for the asset.

An operations and maintenance agreement was executed on April 28, 2010 for the “administration, rehabilitation, operation, preservation and maintenance, by K-Water as the eventual owner of the AHEPP, of the Non-Power Components meaning the Angat Dam, non-power equipment, facilities, installations, and appurtenant devices and structures, including the water sourced from the Angat Reservoir.”

One of those who questioned the transaction was Metropolitan Waterworks and Sewerage System (MWSS), which claimed it also has control over the complex because of the reservoir that churns out water allocation for its customers.

The high court said, however, that NPC has authority over Angat Dam and the reservoir per its charter, Republic Act 6395. This law extends NPC’s corporate life up to 2036.

“Since the NPC remains in control of the operation of the dam by virtue of water rights granted to it…there is no legal impediment to foreign-owned companies undertaking the generation of electric power using waters already appropriated by NPC, the holder of water permit,” the high court explained.

Furthermore, EPIRA opened the business of power generation to the private sector. Thus, “power generation shall not be considered a public utility operation.”

The water component is a different matter, however.

The SC said that only Filipino citizens and corporations, 60% of whose capital is owned by Filipinos, may be granted water rights based on the Water Code.

EPIRA also did not authorize NPC to assign or transfer its water rights in case of transfer of operation of facilities or assets, the SC said.

To address the issue, the SC said the NPC shall therefore “continue to be the holder of the [water permit] issued by the National Water Resources Board.”

As such, “we hold that NPC shall continue to be the holder of the water permit even as the operational control and day-to-day management of the AHEPP is turned over to K-Water under the terms and conditions…”