Blackest Hole
Blackest hole
Updated 07:06am (Mla time) Sept 11, 2004
Juan Mercado
WHY is the government seemingly powerless in containing the runaway fiscal deficit? Easily a major reason is the National Power Corp. It has a total debt of P1.4 trillion. That is over 30 percent of the national government debt of P3.3 trillion. Its losses this year are expected to reach P115 billion--already two-thirds of the total net losses that all 49 government-owned and -controlled corporations (GOCCs) are expected to incur this year. In short, Napocor is the mother of all bleeding GOCCs! It is the chief millstone around the neck of the nation.
But oh, the Arroyo administration wants to tighten the millstone around the people further, making it even heavier. It wants taxpayers to shoulder the P20 billion in additional subsidy to GOCCs under the proposed 2005 budget. This does not include the interest payment of Napocor's debt: P36.7 billion this year. A lawmaker has called Napocor's fantastic debt as the "black hole" in the government's finances.
How has it come to this? Since the Marcos dictatorship, especially with the construction of the Bataan Nuclear Power Plant, Napocor has been bleeding. Its financial problems have been inextricably linked with the government's fiscal and debt woes. From 1981 to 1986, it is said that Napocor accounted for 46 percent of the deficits of all the GOCCs. Since the 1990s, the losses have continued to grow--from P4 billion in 1998 to P13 billion in 2000 to P34 billion in 2003.
The nuclear plant has been the single biggest cause of Napocor's losses. It was built at a staggering $1.2 billion during its time. But it has not produced a single watt of electricity because it was built on a fault line and is defective.
Nevertheless, the Aquino administration chose to honor the debt incurred by the Marcos kleptocracy in building the plant. Thus, the nation ensured the security of the US creditors who made possible the loan to build a nuclear plant on a fault line by Westinghouse, which couldn't care less if it was building a dangerous plant as long as it got the juicy, graft-ridden contract. When the Aquino administration chose the legal way to remedy the onerous contract, it lost in the US courts, which, of course, chose to protect US interests.
Now, Westinghouse has been paid many times over, as well as the US banks that loaned an American-cornered project. The close Marcos associate who brokered the deal has gotten away with murder, and the government is paying for an onerous and oppressive debt that threatens to foreclose the republic.
When the power crisis struck in the early 1990s, the Ramos administration hastily approved deals with the independent power purchasers (IPP). In so doing, he guaranteed the profits of the IPPs even if the normal business risks such as the currency devaluation and fuel price increases were absorbed by Napocor. According to a paper prepared by Maitet Diokno-Pascual of the Institute of Popular Democracy, President Arroyo made matters worse when in 2002, in response to consumer protests against the purchased power adjustments (PPA) that benefit the IPPs, she imposed a cap on what Napocor could recover from consumers for the contracts with the IPPs. She reduced the PPA charge from P1.25 kilowatt hour down to 40 centavos and also cut Napocor's revenues by 85 centavos per kWh. She ordered a review of the contracts but all that her team could renegotiate with the IPPs were savings of 9 centavos per kWh. Whether or not the committee she assigned intentionally bungled the negotiations, we don't know. What we know is that Napocor's losses ballooned from P4 billion in 2001 to P34 billion a year later.
Worse, the government allowed Meralco to buy power from the IPPs, some of them Meralco's own, violating the power distributor's contract to buy power from Napocor.
Thus, while the government ensures the profitability of the IPPs, it cannot seem to ensure the profitability of Napocor. It cannot even ensure that power distributors honor their contracts with Napocor. Wittingly or unwittingly, the government itself may be bleeding--and killing--its own firm.
What picture do we see here? Napocor's massive debt problem and the government's own fiscal woes have been created by a combination of mismanagement, corruption and lack of transparency and accountability. Napocor is a classic case of rent-seeking, influence-peddling, and corruption, abetted by government's penchant for hiding the books, evading the issue, and not consulting the public, who ultimately would have to bear with the depredations of the corrupt in and out of government. Napocor is not only the blackest hole, it is also the dirtiest hole.
Updated 07:06am (Mla time) Sept 11, 2004
Juan Mercado
WHY is the government seemingly powerless in containing the runaway fiscal deficit? Easily a major reason is the National Power Corp. It has a total debt of P1.4 trillion. That is over 30 percent of the national government debt of P3.3 trillion. Its losses this year are expected to reach P115 billion--already two-thirds of the total net losses that all 49 government-owned and -controlled corporations (GOCCs) are expected to incur this year. In short, Napocor is the mother of all bleeding GOCCs! It is the chief millstone around the neck of the nation.
But oh, the Arroyo administration wants to tighten the millstone around the people further, making it even heavier. It wants taxpayers to shoulder the P20 billion in additional subsidy to GOCCs under the proposed 2005 budget. This does not include the interest payment of Napocor's debt: P36.7 billion this year. A lawmaker has called Napocor's fantastic debt as the "black hole" in the government's finances.
How has it come to this? Since the Marcos dictatorship, especially with the construction of the Bataan Nuclear Power Plant, Napocor has been bleeding. Its financial problems have been inextricably linked with the government's fiscal and debt woes. From 1981 to 1986, it is said that Napocor accounted for 46 percent of the deficits of all the GOCCs. Since the 1990s, the losses have continued to grow--from P4 billion in 1998 to P13 billion in 2000 to P34 billion in 2003.
The nuclear plant has been the single biggest cause of Napocor's losses. It was built at a staggering $1.2 billion during its time. But it has not produced a single watt of electricity because it was built on a fault line and is defective.
Nevertheless, the Aquino administration chose to honor the debt incurred by the Marcos kleptocracy in building the plant. Thus, the nation ensured the security of the US creditors who made possible the loan to build a nuclear plant on a fault line by Westinghouse, which couldn't care less if it was building a dangerous plant as long as it got the juicy, graft-ridden contract. When the Aquino administration chose the legal way to remedy the onerous contract, it lost in the US courts, which, of course, chose to protect US interests.
Now, Westinghouse has been paid many times over, as well as the US banks that loaned an American-cornered project. The close Marcos associate who brokered the deal has gotten away with murder, and the government is paying for an onerous and oppressive debt that threatens to foreclose the republic.
When the power crisis struck in the early 1990s, the Ramos administration hastily approved deals with the independent power purchasers (IPP). In so doing, he guaranteed the profits of the IPPs even if the normal business risks such as the currency devaluation and fuel price increases were absorbed by Napocor. According to a paper prepared by Maitet Diokno-Pascual of the Institute of Popular Democracy, President Arroyo made matters worse when in 2002, in response to consumer protests against the purchased power adjustments (PPA) that benefit the IPPs, she imposed a cap on what Napocor could recover from consumers for the contracts with the IPPs. She reduced the PPA charge from P1.25 kilowatt hour down to 40 centavos and also cut Napocor's revenues by 85 centavos per kWh. She ordered a review of the contracts but all that her team could renegotiate with the IPPs were savings of 9 centavos per kWh. Whether or not the committee she assigned intentionally bungled the negotiations, we don't know. What we know is that Napocor's losses ballooned from P4 billion in 2001 to P34 billion a year later.
Worse, the government allowed Meralco to buy power from the IPPs, some of them Meralco's own, violating the power distributor's contract to buy power from Napocor.
Thus, while the government ensures the profitability of the IPPs, it cannot seem to ensure the profitability of Napocor. It cannot even ensure that power distributors honor their contracts with Napocor. Wittingly or unwittingly, the government itself may be bleeding--and killing--its own firm.
What picture do we see here? Napocor's massive debt problem and the government's own fiscal woes have been created by a combination of mismanagement, corruption and lack of transparency and accountability. Napocor is a classic case of rent-seeking, influence-peddling, and corruption, abetted by government's penchant for hiding the books, evading the issue, and not consulting the public, who ultimately would have to bear with the depredations of the corrupt in and out of government. Napocor is not only the blackest hole, it is also the dirtiest hole.
posted by Dante at 12:51 PM
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