Metro Manila has been lucky. Apart from power outages

Transcription

1 48 INFRASTRUCTURE RP power situation critical The power situation in the country is now in dire straits with several power outages felt in portions of Luzon, majority of the Visayas, and provinces in Southern Mindanao. The Department of Energy (DOE) has classified the Visayas, especially the Cebu-Negros-Panay grid, under red-alert and Mindanao as problematic, and is urging for more new investments even as it fast-tracked the approval of a number of power projects. Metro Manila has been lucky. Apart from power outages caused by unusual circumstances (e.g. natural calamities like Ondoy, a fire burning Meralco s main transformers), the metropolis still enjoys a relatively stable supply of electricity. But the same cannot be said for the rest of the country. In the province of Catanduanes in the Bicol Region, for instance, First Catanduanes Electric Cooperative (FICELCO) reported about 60 hours of power outages a month since Meanwhile, the Cebu-Negros-Panay grid has been experiencing rotating 4-6 hours blackouts for nearly 2 years and its situation has now reach red-alert level with the supply at a 30% deficit and getting worse. And now Southern Mindanao, where Metro Davao is located, is suffering from rotating blackouts caused by tight supply that leave little room for maintenance shut down work for existing generation facilities. According to Energy undersecretary Zamzamin Ampatuan, there are already indications that the COMMITTED POWER PROJECTS LOCATION OWNER CAPACITY COMMISSION DATE GRID ENERGY TYPE Bataan GN Power 600 MW 2011 Luzon Coal Northern Negros, Panay Panay Energy Development Corp. 164 MW 2010 Visayas Coal Naga KEPCO-SPC 200 MW 2011 Visayas Coal Toledo, Cebu Cebu Energy Development Corp. 246 MW 1Q2010 (1 st 82MW); 2Q2010 (2 nd 82MW); 1Q2011(3 rd 82MW) Visayas Coal Mina, Iloilo Green Power Panay 17.5 MW 2011 Visayas Biomass Nasulo Energy Development Corp. 20 MW 2011 Visayas Geothermal Cagayan de Oro Minergy 8 MW 2011 Mindanao Hydro Davao del Sur Hedcor Sibulan 42.5 MW 2009 (26 MW); 1Q2010 (16.5 MW) Mindanao Hydro Cotabato PNOC-EDC Mindanao 3 50 MW 2014 Mindanao Geothermal TOTAL COMMITTED CAPACITY 1,348 MW Source: DOE, Updated Philippine Energy Development Plan

2 INFRASTRUCTURE 49 entire Mindanao is on the brink of an island-wide power shortage, even with the building of 3 new power plants in the next 5 years. With blackouts becoming more frequent, business groups especially in the most affected areas of Visayas and Mindanao have been clamoring for the DOE to provide a clearer picture of the real power situation and what both the private sector and government can do to solve the shortage. The business sector is worried that the power projects the DOE has lined up won t come in time. Based on DOE s updated Philippine Energy Development Plan (PEDP), the country is expecting 9 new power generation plants between 2009 to 2014, a total Bureaucracy has led to cancellations. of 1,348 MW of additional capacity (see table on committed projects). However, there are no guarantees that these committed projects would eventually push through. In fact, 2 power plants previously listed with the DOE as committed projects DMCI Power s 100MW coal plant for Iloilo and Cepalco s 8MW hydroplant for Cayagan de Oro slated for commercial operations for 2010 had been shelved or temporarily put on hold. ON-GOING POWER PROJECTS (AS OF NOV. 2009) GRID Luzon Visayas Mindanao LOCATION POWER PROJECTS Concepcion-Clark, Batangas Transmission Reinforcement Project; Luzon Upgrading Project; Hermosa Balintawak Relocation Project; and Binan-Sucat Project. Northern Panay Backbone Transmission Project Maramag-Bunawan Transmission Project in North Cotabato; Abaga-Kirahon Transmission Project; Kirahon-Maramag Transmission Line Source: DOE, National Grid Corporation of the Philippines INDICATIVE POWER PROJECTS (LUZON) OWNER NEW CAPACITY (MW) COMMISSION DATE GRID ESTIMATED PROJECT COST ENERGY TYPE San Leonardo, Nueva Ecija Geen Power Nueva Ecija Phils., Inc Luzon $61.25 mil. Biomass Isabela Lucky PPH International Inc Luzon P 1 bil. Biomass Sto Thomas, Batangas Mariwasa Siam Ceramics inc. 45 Luzon $157.5 mil. Biomass Redondo Peninsula, Subic Aboitiz Power 300 Luzon Coal Albay Energy Development Corporation (EDC) Luzon Geothermal Sorsogon Energy Development Corporation (EDC) Luzon Geothermal Catanduanes, Albay Sunwest Water & Electric Power co. (Suweco) 2.1 Dec Luzon P mil. Hydro Catanduanes, Albay Sunwest Water & Electric Power co. (Suweco) 1.5 Dec Luzon P mil. Hydro Catanduanes, Albay Sunwest Water & Electric Power co. (Suweco) 1.58 Dec Luzon $3.16 mil. Hydro Catanduanes, Albay Sunwest Water & Electric Power co. (Suweco) 2.4 3Q 2010 Luzon P mil. Hydro Ifugao Province Hydrocore Corp. 4.5 Luzon $9 mil. Hydro Benguet Hedcor Inc Luzon $240 mil. Hydro Benguet Hedcor Inc. 40 Luzon $80 mil. Hydro Ilagan, isabela Kabayan, Benguet Balbalan, Kalinga Pasi, Kalinga Pasi, Kalinga Luzon $120 mil. Hydro Luzon $90 mil. Hydro Luzon $48 mil. Hydro Luzon $ 44 mil. Hydro Luzon $40 mil. Hydro Baco, Oriental Mindoro Luzon $36 mil. Hydro Malampaya, Palawan PNOC- EC 300 Luzon Natural Gas Burgos, Ilocos Norte Energy Development Corporation (EDC) 86 3Q 2010 Luzon $215 mil. Wind Dodan, Aparri, Cagayan Northwind Development Corp. 40 Luzon $100 mil. Wind Pagudpud, Ilocos Norte Northern Luzon UPC Asia Corp. 50 Luzon $125 mil. Wind Sual, Pangasinan PetroEnergy Resources Corp. 30 Luzon $75 mil. Wind Pasuguin-Burgos, ilocos Norte Energy Logics Philippines Inc. 120 Luzon $300 mil. Wind Pagudpud, Ilocos Norte UPC Renewables 80 3Q2011 Luzon $200 mil. Wind TOTAL CAPACITY

3 50 INFRASTRUCTURE INDICATIVE POWER PROJECTS (VISAYAS) LOCATION OWNER NEW CAPACITY (MW) COMMISSION DATE GRID ESTIMATED PROJECT COST ENERGY TYPE San Carlos City, Negros Occidental San Carlos Bioenergy, Inc Visayas $34.65mil. Biomass Southern Negros Energy Development Corporation (EDC) Visayas Geothermal Southern Negros Energy Development Corporation (EDC) Visayas Geothermal Southern Leyte Geo Energy Development Corporation (EDC) Visayas Geothermal Calino, Iloilo Visayas $40 mil. Hydro Madalag, Aklan Oriental Energy & Power Generation Co. 18 Visayas P2.5 Bil. Hydro Barangay Isogo, Bugasong, Antique Sunwest Water & Electric Power co. (Suweco) 8 Visayas $40 mil. Hydro Sta. Catalina, Negros Oriental La Libertad, Negros Oriental Valencia, Negros Oriental Visayas $90 mil. Hydro Visayas $66 mil. Hydro Visayas $22 mil. Hydro Siaton, Negros Oriental Visayas $10.8 mil. Hydro Mindoro Deep Ocean Power Philippines (DOPPI) Visayas Ocean Panay Deep Ocean Power Philippines (DOPPI) Visayas Ocean Guimaras Is., Iloilo Trans-Asia Oil and Energy Development Corp (1 st 8Mw); 2014 (expand to 54MW) Visayas $20 mil. Wind Boracay Is., Aklan Energy Development Corporation (EDC) 5 Visayas $12.5 mil. Wind Nabas, Aklan PetroEnergy Resources Corp. 30 Visayas $75 mil. Wind TOTAL CAPACITY INDICATIVE POWER PROJECTS (MINDANAO) LOCATION OWNER It is much better to pay higher rates (of electricity) than having no power at all. NEW CAPACITY (MW) COMMISSION DATE GRID ESTIMATED PROJECT COST ENERGY TYPE Cotabato Conal Holdings Corp (1st 100MW); 2014 (next 100MW) Mindanao P21.3 Billion Coal Davao Aboitiz Power 34.5 Mindanao $69 mil. Hydro TOTAL CAPACITY Source: WBF Database The DOE has expressed several times the urgency of putting up new power plants, citing that although many are showing interest to put up new generating capacity, very few actually do. At present, the list of indicative power projects is long, and with the passage of the Renewable Energy (RE) Law, seems to be growing by the week (see table on indicative projects), but these projects still have to undergo the process of getting permits from national agencies and local governments and secure energy service contracts a small feat by itself, and had been the downfall of several, earlier power projects. The DOE is also concerned that while there is keen interest in putting up RE projects, there are very few indicative projects for base load capacities. Existing base load capacities are very old and some have been de-rated, aggravating the already tight supply in the system. Likewise, a lot of the indicative projects are heavily concentrated in Luzon and the Visayas. Presently, the DOE reported that there are several on-going power projects to address the power shortage supply, but all are in the area of transmission. These projects conducted by the National Grid Corporation of the Philippines (NGCP) in coordination with the DOE would at least improve the power situation in the medium term through the improvement in efficiency of power distribution. The Philippine Chamber of Commerce and Industry (PCCI) had declared that they back all kinds of new investments in power generation, including the possibility of setting up a nuclear power plant, if this means averting a possible power shortage in the very near future. As the group of Cebu businessmen puts it, it is much better to pay higher rates (of electricity) than having no power at all. Something that those complaining of high power cost seem to forget. It s a repeat of the Aquino years when blackouts became a daily occurrence. Power at any cost was demanded and Ramos provided it, but the cost was high. It could be the same again. Power privatization update The privatization level for the National Power Corp. (Napocor) power generation assets now stands at 81%, finally breaching the 70% requirement prescribed under the Electric Power Industry Reform Act (EPIRA). The Power Sector Assets and Liabilities Management (PSALM) is setting its sights on fulfilling another requirement the 70% privatization of Napocor s Independent Power Producer Administrator (IPPA) contracts.

4 INFRASTRUCTURE 51 Eight years after the passing of the EPIRA in 2001, and 5 years delayed, the PSALM had achieved one of the more important requirements of the EPIRA privatization of 70% of Napocor generation assets. As of November 2009, the level of privatization stood at 81% generation assets successfully sold and 19% left for sale (see graph below). PSALM was able to breach its target when it sold 2 of the biggest power plants in its line-up the 600MW Calaca Coal to DMCI Holdings in August and the 620MW Limay Diesel to San Miguel in October. In November, PSALM sold to SPC Power Corp. the 55MW Naga Land-based Gas Turbine Plant and declared that this would be the last power generating asset it will bid out this year. Following the negotiated sale of the Naga facility to SPC Power for $1.08 million, PSALM has bid out a total rated capacity of 1,780MW this year, spread among 7 generating plants. PSALM s privatization efforts since it started bidding out Napocor s power generation plants in 2001 has so far yielded $3 billion for the government from 4,561.63MW from 22 assets sold (see table on generation assets sold). According to the Department of Energy (DOE), it has lined up several more generating assets to be sold in 2010 and Privatization stands at 81%. 81% FOR SALE PRIVATIZATION STATUS OF NPC GEN ASSETS (as of November 2009) 19% FOR SALE GENERATING ASSETS SOLD AS OF NOVEMBER 2009 POWER PLANT RATED CAPACITY (IN MW) LOCATION WINNING BIDDER WINNING BID PRICE (US$) LUZON Ambuklao- Binga Hydro 175 Bokud & Itogon, Benguet SN Aboitiz Power Hydro Inc. $325 Mil. Barit Hydro 1.8 Camarines Sur Atty. Ramon I. Constancio $0.48 Mil. Bataan Thermal (retired) 225 Limay, Bataan Rubenori, Inc. $2.86 Mil. Cawayan Hydro 0.4 Guinlajon, Sorsogon Sorsogon II Electric Cooperative, Inc. $0.41 Mil. Magat Hydro 360 Ramon, Isabela SN Aboitiz Power Hydro Inc. $530 Mil. Manila Thermal (retired) 200 Ermita, Manila Gagasan Steel $2.5 Mil. Masinloc Coal 600 Masinloc, Zambales Masinloc-Power Partners Co. Ltd. $930 Mil. Calaca Coal 600 Batangas DMCI Holdings $ Mil. Limay Diesel 620 Bataan San Miguel Energy Corporation $13.5 Mil. Tiwi-Makban Albay, Laguna/Batangas AP Renewables Inc. $ Mil. Pantabangan-Masiway Hydro 112 Nueva Ecija First Gen Hydropower Corp. $129 Mil. VISAYAS Amlan Hydro 0.8 Negros Oriental ICS Renewables Inc. $0.23 Mil. Bohol & Panay Diesel Dampas, Tagbilaran SPC Power Corp. $5.86 Mil. Cebu II Diesel (retired) 54 Talavera, Cebu Taifu Metal Exchange Corp. $0.46 Mil. Naga Land-Based Gas Turbine Plant 55 Cebu SPC Power Corp. $1.01 Mil. Palinpinon-Tongonan Geothermal Power 305 Negros Oriental, Leyte Green Core Geothermal Inc. $220 Mil. Loboc Hydro 1.2 Loboc, Bohol Sta. Clara International Corp. $1.42 Mil. MINDANAO Agusan Hydro 1.6 M. Fortrich, Bukidnon First Generation Holdings $1.53 Mil. Apalaya & Gen San Diesel (retired) Misamis Oriental & South Cotabato TEC Industries Inc. $1.49 Mil. Power Barge Agusan del Norte Therma Marine Inc. (Aboitiz Power) $16 Mil. Power Barge Compostela Valley Therma Marine Inc. (Aboitiz Power) $14 Mil. Talomo Hydro 3.5 Mintal, Davao City Hydro Electric Development Corporation $1.37 Mil. TOTAL $3, MIL. Source: PSALM

5 52 INFRASTRUCTURE IPPA AUCTION SCHEDULE POWER PLANT CAPACITY LOCATION OPERATOR Phase 1 (sold to San Miguel & Therma Luzon) Sual Coal Units 1&2 1,000 MW Pangasinan Team Energy Phils. (formerly Mirant Power ) Pagbilao Coal Units 1&2 700 MW Quezon Team Energy Phils. PHASE 2 Casecnan Multi-purpose Hydro 340 MW Nueva Ecija California Energy Casecnan Water & Energy Co. San Roque Multi-purpose Hydro 140 MW San Manuel, Pangasinan Marubeni Corp. and Kansai Electric Power Co. Bakun Hyrdo 70 MW Benguet, Ilocos Sur Aboitiz Power Corp with Pacific Hydro Ltd. PHASE 3 Iligan Natural Gas Combined Cycle 1,200 MW Batangas Kepco-Ilijan Corp. Bauang Diesel Plant 215 MW Zambales Bauang Power Corp. Subic Diesel Plant 116 MW Subic Enron Power Corp. AUCTION SCHEDULE OF GENERATING ASSETS 2010 POWER PLANT RATED CAPACITY (MW) Sucat Thermal Power Plant (Decommissioned) 850 Angat Hydroelectric Plant 246 Bauang Diesel Fired Plant Navotas Diesel Plant 310 Bacon Manito Geothermal Complex 150 Iligan Diesel Power Plant 114 TOTAL RATED CAPACITY POWER PLANT RATED CAPACITY (MW) Agus 1-7 & Pulangi Malaya 650 Power Barges 101, 102, 103, Cebu Coal I & II 110 Cebu Diesel I 39 TOTAL RATED CAPACITY Source: PSALM PSALM is having trouble getting enough interest for its IPPA contracts. With the required level for privatization of generating assets met, PSALM is now setting its sights on achieving the other requirement mandated by EPIRA prior to full open access the 70% privatization of all IPPA contracts. It s not going to be easy. Similar to the troubles encountered in the sale of Napocor s generating assets, PSALM is having trouble getting enough interest for its IPPA contracts. The first attempt at auction last June 2009 failed when interested bidders submitted lower than expected prices. And the Sual and Pagbilao plants, which were the 1st phase of the IPPA contract bidding, were supposedly the easiest to sell in the group. A re-bidding held last August finally sold the Sual and Pagbilao contracts to San Miguel Energy Corporation and Therma Luzon Inc, respectively. PSALM aims to transfer the management and control of at least 70% of the total energy output of the IPP power plants under contract with Napocor to the IPPAs by As of November 2009, PSALM has so far achieved 34.66% of this target. Start of bidding procedure for Phase II is set for December Bataan nuclear plant feasible KEPCO Official verification reports submitted by Korea Electric Power Co. (KEPCO) to Napocor shows that the revival of the mothballed Bataan Nuclear Power Plant (BNPP) is highly feasible. This was determined after KEPCO s inspection of the BNPP s nuclear reactor and steam engine turbines showed that the equipment is intact and in good state. In a status update submitted to the DOE and Napocor regarding the condition of the mothballed 630MW Bataan Nuclear Power Plant (BNPP), KEPCO reported that, though the BNPP has been shut down for 25 years, the facilities of the primary system are relatively in good state, (but) some equipment of the secondary system has been corroded by salty air and humidity and most parts of the water supply facilities should be rebuilt. With the main equipment and facilities the nuclear reactor and steam engine turbines intact and in good condition, KEPCO declared that the revival of the BNPP is highly feasible. The site inspection was conducted by a team of engineers and specialists in mechanics, nuclear and electric power formed by KEPCO. KEPCO s verification report on the state of the equipment in BNPP is part of the feasibility study being undertaken by the company. In November 2008, KEPCO signed a memorandum of understanding (MOU) with Napocor to submit a feasibility study on BNPP. Kepco formed 3 teams of experts for the project the Korea Hydro and Nuclear Power, Korea Plant Service and Engineering and Samchang Co. Ltd. KEPCO has yet to release the results of the feasibility study but is expected to submit the final report a month after the status update and site inspection. Congress had originally allocated P100 million for the feasibility study and inspection of BNPP but KEPCO chose to do it for free. The Napocor-KEPCO MOU, which is nonexclusive, is valid for 3 years and covers, among other provisions, activities related to the feasibility of the possible rehabilitation of the BNPP. Napocor targets May 2010 to submit its recommendations regarding the possible rehabilitation of the BNPP for the next administration to consider. Napocor will base its recommendations on the result of the feasibility study provided by KEPCO. At present, there is a pending bill in Congress that was filed by Pangasinan Representative Mark Conjuangco to allocate P1 billion to rehabilitate the BNPP. The Bataan Nuclear Power Plant Commissioning Act of 2008 proposes to have BNPP start commercial operations in 2012 and help prevent a

6 INFRASTRUCTURE 53 Government must first address the country s aversion to nuclear power. power crisis from gripping the Philippines. According to Rep. Conjuangco, consumers can be charged an extra 5 centavos per kilowatt hour (kwh) to raise the needed P1 billion cost of rehabilitation of BNPP. BNPP is seen as a cheaper and faster (and cleaner) alternative to the problems of power shortage in the Philippines as nuclear power is slated to bring power rates in Luzon down from P4.50 kwh to P2.50 kwh. Reviving BNPP, however, will prove to be easier studied than done. Nuclear power is a highly charged and emotional topic in the Philippines. More controversial than coal-fired power plants, nuclear power faced stiff opposition from various (ignorant) militant, environment and Church groups. In fact, stiff opposition is one of the reasons that the BNPP was disallowed to operate in the 1980s. Built during the Marcos regime for $2.3 billion, the Philippines first nuclear power plant never started commercial operations due to concerns over its safety, disposal of nuclear wastes as well as charges of overpricing. Recent technological advancements have made the operation of a nuclear plant and the disposal of nuclear wastes safer and more reliable. And yet despite all the independent studies, testimonials of experts and success stories in other countries, Philippine society in general remains adamant in shunning the thought of using nuclear power. Should the government decide to abandon the plan to rehabilitate and revive the BNPP but still pursue a nuclear power program, Napocor had announced that it might develop the BNPP into a training center. The training center will be used by a nuclear core group, which the government will form, and tasked with the exploration of opportunities to put up future nuclear power plants in the country. But before the government considers this alternative use for BNPP and entertains thoughts of building other nuclear power plants in the future, it must first address an entire country s aversion to nuclear power. DOE awards 87 renewable energy contracts The Energy department has awarded 87 renewable energy (RE) service contracts to 18 firms that committed to invest a total of P90.4 billion. The contracts covered the development of biomass, geothermal, hydropower, ocean, solar and wind energy resources in line with the Renewable Energy Act of Five contracts were conversions from existing service agreements involving geothermal and hydro power. New projects compose the remainder of the service contracts, which are projected to generate a combined 4,000MW of electricity. The service contracts were awarded to the following: Altenergy Philippine Holdings Corp. Constellation Energy Corp. Trans-Asia Renewable Energy Corp. DOST-industrial Technology Development Institute Mindanao Energy Systems First Gen Mindanao Hydro Power Corp. Century Peak Energy Corp. AV Garcia Power Systems Benguet Electric Cooperative and Luck PPH International Unisan Biogen Corp. AP Renewables Deep Ocean Power Philippines Energy Development Corporation PNOC-Renewables Corp. First Gen Bukidnon Power Corporation Luzon Hydro Corporation HEDCOR, Inc. The DOE also endorsed to the Office of the President the conversion of existing geothermal agreements with foreign contractor Chevron Geothermal Philippine Holdings, Inc. to service contracts. The conversion, according to the DOE, is necessary to keep up with the provisions of the Renewable Energy Act. In September, DOE awarded 7 contracts to 6 companies with investments expected to reach $1 billion. These projects, once operational, are estimated to produce 379 MW. DOE Secretary Angelo Reyes said that the government has generated close to P5 million in processing fees from the new renewable energy deals. Among fiscal incentives offered to renewable energy developers are Income tax holiday for the first 7 years of operation; Tax exemption on carbon credits; Duty-free importation of RE machinery, equipment and materials; Net operating loss carry-over (NOLCO); Corporate tax rate of 10% on net taxable income after 7 years of ITH; Accelerated depreciation; Tax credit on domestic capital equipment and services; and Exemption from value added tax (VAT) of power generated from renewable energy sources. Non-fiscal incentives, meanwhile, include the mandatory use of power generated from RE facilities in power grids and priority purchase and transmission of renewable energy power by grid system operators. Earlier, International Finance Corporation (IFC) resident representative to the Philippines Jesse Ang said IFC has been aggressively looking at the Philippines as the country in Asia with the most number of tremendous opportunities when it comes to developing renewable energy sources. RE developers in the country may expect greater financial assistance from the IFC in the coming years as the private investment arm of the World Bank said it intends to double its global portfolio investment for renewable projects to $3 billion for 2009 to 2011

7 54 INFRASTRUCTURE RECENT RE VENTURES Deep Ocean Power Philippines Trans-Asia Renewable Energy Corp. Century Peak Energy Corp. PNOC Renewables Corp. Altenergy Philippine Holdings Corp. First Gen Mindanao Hydro Power Corp. The local unit of California-based Deep Ocean Power is starting to develop 2 sites out of 36 possible locations to develop deep ocean power technology. The 2 sites are expected to go on stream by 2012 and generate up to 40MW of electricity. Average investment is at $2.5 million per MW. The firm recently obtained 10 wind energy contracts from the Energy Department that cover a combined area of 22,000 hectares. Trans-Asia will construct wind projects in 38 sites around the country that could generate up to 400MW of power. The projects would entail investment of up to $1 billion. The firm said it will build 18 mini-hydro power facilities costing around $150 million. The mini-hydro projects will be put up in Benguet, Negros Occidental, Iloilo and Antique. The renewable energy arm of PNOC has teamed up with foreign and local investors for the construction of 11 hydro projects, which will have a total power generating capacity of 270MW. The Filipino-owned company has signed a joint venture agreement with Energy Japan Corp. and Korea East West Power Corp. for the development of wind energy projects with potential capacity of 30MW to 40MW. The Lopez-led firm announced in October its plan of constructing 7 hydro power projects that will have a combined capacity of 98 MW. Areas expected to benefit from the firm s projects are Bukidnon and the Agusan provinces. from $1.3 billion last year. IFC s renewable energy program in the Philippines, the Sustainable Energy Finance Project, supports the creation of a commercial financing market for energy efficiency and renewable energy projects in the country. BCDA seeks private partner for SCTEX State-owned Bases Conversion and Development Authority (BCDA) has opened the bidding for the contract to operate and maintain (O&M) the Subic-Clark-Tarlac Expressway (SCTEX). The new O&M contractor will also become BCDA s joint-venture partner. BCDA needs a private sector partner to meet its financial obligations and improve the financial viability of the toll project. The BCDA is seeking a joint venture partnership with whoever will win the O&M of the SCTEX. In October, BCDA formally opened the bidding for the O&M contract and at least 2 groups the Metro Pacific Tollways Corp. (MPTC) and San Miguel Corporation (SMC) have expressed their interest. The winning bidder will take over from the current contractor, Tollways Management Corp. (TMC), whose contract expires in April The MPTC and TMC are subsidiary companies of the conglomerate Metro Pacific Investment Corp. (MPIC). The BCDA is eyeing a joint venture with the next O&M contractor to fund the annual interest and loan amortization it owes to the Japan International Cooperation Agency (JICA). BCDA had availed of 2 loans from JICA to build SCTEX an original loan amounting to P19 billion for the construction of the toll road and a supplemental loan of P7 billion for construction of exchanges and the cost escalation of the project, totaling P26 billion. BCDA needs to raise an estimated P1.2 billion (loan amortization plus interest) representing the 1st service payment to JICA by BCDA started looking at several options to shore up its finances when it realized that the proceeds from the current operation of SCTEX would not be enough to cover for the annual JICA loan payments. BCDA is paying the current O&M operator P27 million a month for road maintenance, salaries to toll tellers, ambulance, medics and fire-fighting equipment, etc.. Add to this overhead the double whammy of lower-than-expected volume of traffic in SCTEX and the agency s inability to get the needed toll rate of P2.40 per kilometer from the Toll Regulatory Board (TRB), and BCDA found itself in financial distress. According to BCDA Vice President Isaac Puno, the number of vehicles plying the SCTEX has not measured up to the study conducted by the Pacific Consultants of Japan, which estimated 35,000 vehicles using SCTEX for the 1st year of operation. SCTEX started slow with only 8,000 vehicles per day and gradually improved to an average of 16,000 vehicles towards the end of And although the current average number of vehicles plying the road increased to 20,000 in recent months, this is not enough to give BCDA the needed revenue to service its debt. Since April 20, 2008 (start of SCTEX commercial operations) to August 1, 2009, proceeds from the expressway have amounted to only P500 million. The lower-than-expected vehicular traffic was compounded by the TRB s refusal to approve their requested 40-cents increase from the current P2 per kilometer toll rate. BCDA had originally intended to augment its revenues through lease income from the development of service areas such as gasoline stations and food concessionaires along the SCTEX, but bidding failed 3 times already prompting BCDA to begin negotiations instead. Partnership with the next O&M contractor is now seen as BCDA s remaining option to improve its financial standing. A minimum bid price of P38.9 billion for the 33.5-year life concession for the O&M contract had been set by BCDA. The minimum bid price would help fund the 1st annual loan payment to JICA and cover the financial charges of the Department of Finance (DoF). SCTEX is considered the longest expressway in the Philippines, linking Subic Bay Free Port to Diosdado Macapagal Airport at the Clark Economic Zone in Pampanga. It opened in 2008 and was embraced by the business sector and the driving public. However the global economic slowdown and the oil crisis of 2008 drastically reduced vehicular traffic, consequently affecting the viability of the toll project. Rehab works would take 3 to 6 months The Department of Public Works and Highways (DPWH) announced that it will take 3 to 6 months to complete all the rehabilitation works and repairs of the roads and bridges destroyed by tropical storms Ondoy and Pepeng. But limited funds and bad weather are hampering the agency s efforts. Initially the DPWH announced that it would take only 3 months to repair all the damage caused by the super-typhoons Ondoy and Pepeng. But intermittent bad weather, threats of more typhoons and lack of funding pushed back rehabilitation efforts. According the DPWH s newly appointed Secretary Victor Domingo, rehabilitation and repair works in Luzon would

8 INFRASTRUCTURE 55 now take 6 months or longer if the agency did not receive the additional funds it requested. I was shocked to learn that we have no money to rehabilitate this much damage, said Mr. Domingo. DPWH has about P3 billion remaining in its current budget for maintenance and repair, but this would not be enough to fix all the damage in road infrastructure created by the typhoons. Also, the P3 billion fund has not been released yet to the agency by the Department of Budget and Management (DBM). According to Undersecretary Romeo Momo, the DPWH would need some P5 billion more to complete infrastructure repairs within the prescribed timeline of 3 to 6 months. DPWH had already submitted to Congress its petition to get the additional funds from the P12-billion supplemental budget approved by Congress for the calamity-related rehabilitation efforts. This supplemental budget was sourced from the government s proceeds in the Malampaya natural gas project. But it appears now that the DPWH would need to wait for grants from bilateral and multilateral donors to get financing for its rehabilitation projects. We have to wait for our government to firm up borrowings from the international financing community but that is not acceptable. We cannot wait forever, Mr. Momo said. The DPWH reported that a total of 28 bridges, 34 flood control structures and 295 road sections in 8 regions from Ilocos to Bicol were affected by heavy floods and landslides brought about by the recent typhoons. Damaged roadways and bridges include: Banaue Mayoyao Road in Ifugao; Calanan Pinukpuk-Abbut Road in Kalinga; Manila North Road and Rosario; Pugo Road in Ilocos; Palico-Balayan Road and Cawong Bridge; Diokno Highway; and Marikina-Infanta Road in Calabarzon. The Office of Civil Defense estimates damage to infrastructure and agriculture reaching P30 billion, including more than 500 schools, close to P1 billion in irrigation and flood control projects and at least P26 million for roads and bridges. The DPWH was recently granted an exception on the ban on public works set by the Commission on Elections (Comelec) ahead of the 2010 elections. Under the Comelec rules and regulations, DPWH is normally not allowed to bid or release funds or award new projects 45 days before and after local elections. However, the extent of damage and amount of repair work needed has prompted Comelec to lift the ban for DPWH foreign-funded rehabilitation projects. meanwhile, DPWH draws up a master plan control and drainage projects nationwide. According to DPWH Regional Director Rolando Asis, the agency has identified 12 keyriver basins in different parts of the country where frequency of overflows, bank collapse, landslides and flash floods were likely to happen. There are now studies being conducted to determine the feasibility of building flood-control projects in the areas. However, the issue is not the lack of plans, but the lack of funding. Since 2002, funds for flood control were barely augmented and have in fact gone down in proportion to the total budget allocated to the DPWH. In 2002, the nationwide flood control budget stood at P5.34 billion or 11% of the total agency budget; in 2009, this stood at P6.21 billion or less than 5% of the total outlay (see graph). From 2002 to 2009, a total of P48 billion was allocated to flood control and drainage projects, including expenses for salaries, operations, and actual capital investments. Likewise, foreign-funded flood control projects have slowed down from a peak of P6.1 billion in 2007 to only P3.4 billion this year. The reality is flood control projects have never been on top of the priorities of the government even though it is amongst the claimed accomplishment in the President s State of the Nation Address (SONA). Typically, the government prioritizes the building of roads, ports and bridges. This lack of priority meant that out of 15 projects that could have saved people in Metro Manila from floods, 9 have not yet been started (see related table). From 1988 to 2009, only 4 flood-control projects were completed (see related table). DPWH S PROPOSED MASTER PLAN OF FLOOD CONTROL AND DRAINAGE PROJECTS PACKAGE 1 PACKAGE 2 PACKAGE 3 PACKAGE Agos in CALABARZON (Region 4A) 2. Yawa/Basud/Quirangay in Bicol Region (Region 5) 3. Amburayan in Ilocos Region (Region 1) 4. CAR 1. Balete in MIMAROPA (Region 4B) 2. Aklan River in Western Visayas (Region 6) 3. Dungcaan (Pagbangaan) in Eastern Visayas (Region 8) 1. Guinabasan in Central Visayas (Region 7) 2. Lake Mainit-Tubay in Caraga (Region 13) 3. Iponan in Northern Mindanao (Region 10) 1. Tumaga in Zamboanga Peninsula (Region 9) 2. Lipadas in Davao (Region 11) 3. Silway-Popong Sinaual (Polomok) in SOCCSKSARGEN (Region 12). TREND IN DPWH BUDGET FOR FLOOD CONTROL (in P Billion) The Department of Public Works and Highways (DPWH) is preparing a master plan of flood-control projects as a reaction to criticism that the government has been neglecting to invest in the proper infrastructure that could have mitigated the worst flooding in Metro Manila in 40 years. The Department of Public Works and Highways (DPWH) is mapping out a master plan to construct 12 more multi-billion flood 6 4 '02 '03 '04 '05 '06 '07 '08 '09

9 56 INFRASTRUCTURE FLOOD CONTROL PROJECTS NOT YET STARTED The Marikina Spillway Drainage Improvement in the Core Area of Metropolitan Manila Valenzuela-Obando-Meycauayan Area Drainage System Improvement Project The South to West Laguna Lakeshore Dike Project East Manggahan Floodway Area Flood Mitigation Projet Integrated Drainage Improvement Project in the Ninoy Aquino International Airport and Surrounding Areas The San Juan River Flood Control Project The Upper Marikina River Improvement Project ESTIMATED PROJECT COST P17.6 Billion P15.3 Billion 10.8 billion P9 Billion P 8.3 billion P7.9 Billion P5.7 Billion P3 Billion ON-GOING FLOOD CONTROL PROJECTS ESTIMATED PROJECT COST Camanava Flood Control Project P5.1 Billion Pasig-Marikina River Channel Improvement Project (Phase 1) P4.6 Billion COMPLETED FLOOD CONTROL PROJECTS, The Metro Manila Flood Control Project West Manggahan Floodway Manggahan Floodway Project The Effective Flood Control Operation and Warning System Project (EFCOS) The Rehabilitation of Flood Control Operation and Warning System (EFCOS) in Metro Manila ESTIMATED PROJECT COST P5.2 Billion P1.5 Billion P600 Million P500 Million From 1988 to 2009, only 4 floodcontrol projects were completed. To find a long-term solution to the threats of damage caused by typhoons in the country, the DWPH would need to not only be properly funded but find the balance between accomplishing the projects that makes the incumbent administration look good, and finishing the projects that may not win votes but save lives.