WikiLeaks cable: US expected Congress bribes in TransCo deal

by Jojo Malig,

Posted at Aug 31 2011 09:42 PM | Updated as of Sep 01 2011 05:42 AM

MANILA, Philippines - The US embassy expected money to change hands in Philippine Congress before it granted a franchise to a consortium in 2007 to operate the Philippine National Transmission Company (TransCo), a cable published by whistleblower group WikiLeaks said.
Cable 07MANILA3966, which was allegedly sent by the US Ambassador Kristie Kenney to the State Department and the Department of Treasury, said the TransCo project was hounded by corruption allegations, like "any major privatization in the Philippines."

"It is unlikely that we will ever know whether collusion took place in this bidding, or whether there were other irregularities," it said.  "There is a consensus among  Filipinos that Congress will get its share when the franchise comes before it."

With the highest offer of $3.95 billion, the consortium of Monte Oro Grid Resources Corp., led by businessman Enrique Razon, comprising the State Grid Corporation of China and Calaca High Power Corp., won in an auction conducted by the Power Sector Assets and Liabilities Management (PSALM) Corp. for the right to operate TransCo for 25 years in 2007.

It defeated the $3.905-billion bid made by San Miguel Energy, a unit of San Miguel Corporation; Dutch firm TPG Aurora BV; and Malaysia's TNB Prai Sdn Bhd.

Jose Ibazeta, then PSALM president chief executive officer, later assured that there were no irregularities the bidding process.

"We are very happy about the successful turnout of the bidding for TransCo. PSALM handled the privatization of the government’s transmission business with utmost transparency and judiciousness," he told media.

US embassy casts doubts on TransCo deal

The US embassy cable, however, cast doubts on the TransCo deal.

It said the government had 30 days to review Monte Oro's documents to verify that the submission meets all technical  requirements. 

"The winner will then have to seek a franchise from  Congress.  Our contacts believe that Congress will grant the  concession, but that numerous bribes will have to be paid in the process," the memo said.

"Accusations of improprieties in the bidding process may complicate, but are ultimately unlikely to deter, congressional approval," it added.

The cable also discussed what it called as "widespread speculation about possible corruption or conflict of interest in the bidding process."

"Some accusations focus on the participation in the  Monte Oro Group of Ricky Razon, the owner of port operator  International Container Terminal Services and a strong supporter of  President Arroyo, and Diosdado 'Buboy' Macapagal, Jr., President  Arroyo's brother," it said. 

"Muckrakers highlight the long-term business relationship between Razon and Jose Ibazeta, the official  responsible for the privatization process.  Other conspiracy theorists suggest that the bids are 'too close to each other and to  the reserve price, for comfort' and that they may have been negotiated among the bidders," it added.
"One participant told us that his company was offered such a deal during the fourth round," said the cable, citing an unnamed embassy source who alleged of collusion in the TransCo bidding.
"One prospective bidder, disqualified for insufficient financial resources, has already filed a case against the government alleging bias in the process," it said.

US firm said bidding process fair

The cable admitted that the US embassy was "in close contact" with one bidder, "Texas Pacific Group which (via Newbridge Asia LLP) held a 35% share in the losing bidder."

"This consortium also participated in the fourth round, but  ultimately did not bid in that round as bidding documents did not  meet international standards and were not bankable. On December 4, Ambassador met with Ernie Bower, representative of Texas Pacific Group. Bower said the bidding document issues had all been resolved," it said. "On December 14, Bower told EconOff that the bidding process seemed to have been fair and open."

Kenney, who reportedly sent the embassy memo, had a brief comment Wednesday about another diplomatic cable released by WikiLeaks that referred to her alleged unflattering remarks about the late President Cory Aquino.

"Don't believe all you read," she said on microblogging site Twitter.

Kenney is now US ambassador to Thailand.