PGMA's Speech during the Inauguration Ceremony of the 500-MW San Lorenzo Combined-Cycle Power Plant and the Unveiling of the 2003-2012 Philippine Energy Plan

Sta. Rita Karsada, Batangas City (28 Jan 2003)

THANK YOU VERY MUCH SECRETARY VINCE PEREZ.

THE MEMBERS OF THE DIPLOMATIC CORPS; GERMAN AMBASSADOR, AMBASSADOR JESS AND UNITED KINGDOM AMBASSADOR, AMBASSADOR DIAMOND; OUR AMBASSADOR TO THE UK, AMBASSADOR BAUTISTA; OFFICERS OF THE FIRST GAS POWER AND LOPEZ GROUP OF COMPANY LED BY MR. OSCAR LOPEZ AND THE MEMBERS OF THE LOPEZ FAMILY; AND PETER GARRUCHO; OFFICIALS OF BATANGAS; GOVERNOR MANDANAS; MAYOR DIMACUHA; MY CABINET OFFICER FOR REGIONAL DEVELOPMENT FOR BATANGAS, SECRETARY NANI PEREZ; AND BARANGAY CAPTAIN PEREZ OF BARANGAY STA. RITA APLAYA; DR. URBANGKE, REPRESENTING SIEMENS; CAPTAINS AND MOVERS OF INDUSTRY; OTHER SENIOR GOVERNMENT OFFICIALS AND LOCAL EXECUTIVES; OTHER OFFICERS AND STAFF FIRST GAS POWER CORPORATION; DISTINGUISHED GUESTS, LADIES AND GENTLEMEN:

FIRST OF ALL, CONGRATULATIONS TO THE INVESTORS OF THIS 500 MILLION DOLLAR POWER PLANT. THIS, AS OSCAR LOPEZ SAID, IS THE SECOND TWIN OF A 1.5-BILLION DOLLAR INVESTMENT IN TWO POWER PLANTS FOR 1,500 MEGAWATTS. NOW, WE KNOW HOW MUCH IT TAKES TO INVEST IN POWER -- 1 MILLION DOLLARS PER MEGAWATT. THAT'S A GOOD RULE OF THUMB. I CAME TO THIS INAUGURATION FOR SEVERAL REASONS. ONE IS, I WANT TO LET THE WORLD AND THE CREDITORS KNOW THAT MERALCO AND THE PHILIPPINE GOVERNMENT ARE NOT FIGHTING EACH OTHER. AND SECOND, BECAUSE THE SAN LORENZO POWER PLANT AND ITS OTHER TWIN, THE STA. RITA POWER PLANT HAVE FAR REACHING IMPLICATIONS TO OUR NATIONAL DEVELOPMENT.

THEY ARE INSTRUMENTAL IN BRINGING UP OUR INDIGENOUS ENERGY SOURCE LEVEL TO MORE THAN 53 PERCENT.

STABLE ENERGY -- OH, I HAVE TO GREET OUR MEMBERS OF THE POWER COMMISSION, THE CHAIRMAN, CONGRESSMAN BADILLES AND THE VICE CHAIRMAN, CONGRESSMAN BUTCH ABAD -- AND THEY KNOW VERY WELL, THAT'S WHY THEY ARE HERE, THAT STABLE ENERGY IS AN IMPORTANT INSTITUTION OF A STRONG PHILIPPINE REPUBLIC. INDUSTRIES WILL NOT BE COMPETITIVE WITHOUT COMPETITIVE POWER COSTS. AND THE FILIPINO HOME WILL NOT BE A PEACEFUL AND JOYFUL HOME IF IT CANNOT BE LIT WITHOUT BREAKING THE FAMILY BUDGET.

NOONG AKO'Y UNANG NAGING PANGULO, ANG NAABUTAN KONG PRESYO NG KURYENTE AY PANGALAWANG PINAKAMATAAS SA BUONG ASYA. ITO ANG DAHILAN KUNG BAKIT NAPAKAMAHAL ANG PRESYO NG MGA BILIHIN NA NAMANA KO NOONG UNA AKO'Y UMUPO BILANG PANGULO. NGUNIT SA MGA UNANG REPORMANG GINAWA NATIN, NABABA ANG PRESYO NG KURYENTE SA NAKARARAMI AT NAGING PANG-ANIM NA LAMANG TAYO, HINDI NA PANGALAWA SA PINAKAMAHAL NA KURYENTE SA ASYA. AT ANG ATING INFLATION RATE AY BUMABA RIN, PINAKAMABABA SA MAHIGIT SA LABINLIMANG TAON. NGUNIT HINDI PA TAPOS ANG ATING REPORMA.

THE POWER SECTOR IS THE KEY REFORM AREA THAT WE MUST ADDRESS TODAY.

PEOPLE THINK WE HAVE AN OVERSUPPLY OF POWER, BUT THIS IS TRUE ONLY FOR TODAY AND ONLY FOR THE LUZON GRID. IF WE DON'T ACT NOW, AND ACT FAST, WE WILL HAVE A SERIOUS POWER SHORTAGE IN THE VISAYAS BY NEXT YEAR, IN MINDANAO BY 2006, AND IN LUZON BY 2008.

STUDIES FROM THE ASIAN DEVELOPMENT BANK AND VARIOUS OTHER FINANCIAL AND TECHNICAL ADVISERS INDICATE THAT WE WILL NEED MORE THAN AN ADDITIONAL 6,000 MEGAWATTS OF GENERATING CAPACITY OVER THE NEXT 10 YEARS, IF WE ARE TO AVOID SHORTAGES: 4,500 FOR LUZON, 1,000 FOR THE VISAYAS, AND 700 FOR MINDANAO. AND SINCE WE'VE LEARNED THAT BY THE RULE OF THUMB, IT'S ONE MILLION DOLLARS PER MEGAWATT, THEN YOU KNOW HOW MUCH IT WILL COST TO BUILD 6,000 MEGAWATTS. MOST OF YOU HERE KNOW ALSO THAT AT LEAST THREE YEARS LEAD TIME IS NEEDED FROM PLANNING TO CONSTRUCTION AND TO OPERATION TO SET UP A POWER PLANT. THUS, WE NEED TO ACT NOW.

WE SHOULD NOT BE CAUGHT FLAT-FOOTED BY BROWNOUTS AND POWER OUTAGES, PARTICULARLY FOR THE VISAYAS WHERE WE ARE ALREADY BEHIND SCHEDULE.

TODAY, I WOULD LIKE TO SHARE WITH YOU SOME HIGHLIGHTS OF THE PHILIPPINE ENERGY PLAN.

ISUSULONG NATIN ANG PAGSASAGAWA NG REPORMA SA KURYENTE, UPANG MASIGURO ANG SAPAT AT MAAASAHANG KURYENTE PARA SA PAMAYANAN AT INDUSTRIYA. I INITIATED THE REFORM PROGRAM, AND I THANK CONGRESSMAN BADILLES AND CONGRESSMAN BUTCH ABAD HERE FOR THEIR VERY, VERY HARD WORK DURING THAT PERIOD RIGHT AFTER EDSA II, WITH THE PASSAGE OF THE ELECTRIC POWER INDUSTRY REFORM ACT OR EPIRA IN EARLY 2001, SOON AFTER I BECAME PRESIDENT, AFTER A DELAY OF ABOUT SEVEN YEARS.

NOW, TODAY, WE ARE GIVING PRIME ATTENTION TO PANAY, WHICH HAS NO INDIGENOUS ENERGY AND IS FARTHEST FROM THE GEOTHERMAL SOURCES IN LEYTE. EVEN TODAY, PANAY'S DEMAND FOR 190 MEGAWATTS IS BIGGER THAN ITS CURRENT TOTAL DEPENDABLE CAPACITY OF 138 MEGAWATTS. THUS, ON FEBRUARY 1, I WILL DELIVER A POWER BARGE TO PANAY WHILE WE AWAIT THE INVESTMENTS THAT WILL ADDRESS THE SHORTAGE MORE PERMANENTLY. ON THAT DAY, ON FEBRUARY 1ST, I SHALL ROLL OUT OUR POWER SECTOR PROGRAM FOR THE VISAYAS AND MINDANAO.

BUT NOW, LET ME TALK FIRST ABOUT LUZON. FOR LUZON, WE SHALL PROMOTE CLEANER ENERGY LIKE WHAT WE HAVE HERE IN THE SAN LORENZO PLANT. WE SHALL GIVE PRIORITY TO NATURAL GAS, GEOTHERMAL AND WIND POWER PROVIDED THE COST IS COMPETITIVE. SO, I ASK SHELL TO MAKE THE COST COMPETITIVE.

ACCORDINGLY, WE SHALL FAST-TRACK THE PRIVATIZATION OF THE SUCAT AND LIMAY POWER PLANTS TO ALLOW INVESTORS SUFFICIENT TIME TO CONVERT THESE PLANTS TO NATURAL GAS. INVESTORS WILL HAVE THE OPTION TO USE REASONABLY-PRICED INDIGENOUS OR IMPORTED NATURAL GAS.

TO COMPLEMENT THESE EFFORTS, I AM INSTRUCTING THE PNOC TO SPEARHEAD THE DEVELOPMENT OF THE BATANGAS-BANILA AND BATAAN-MANILA GAS PIPELINES AND LNG RECEIVING FACILITIES IN BATAAN. IN DOING SO, PNOC MUST MAXIMIZE PRIVATE SECTOR PARTICIPATION IN THESE PROJECTS.

FUTURE POWER REQUIREMENTS IN LUZON SHALL BE MET BY ADDITIONAL GAS-FIRED PLANTS, WIND POWER ON NORTHERN LUZON, AND GEOTHERMAL FROM BICOL AND LEYTE.

MY ADMINISTRATION'S THRUST IS TO PROMOTE CLEANER FUEL AND RENEWABLE ENERGY FOR THE COUNTRY.

THE DOE AND THE ERC ARE EXPECTED TO ESTABLISH A POLICY AND REGULATORY FRAMEWORK TO CREATE A MARKET BIAS FOR RENEWABLE ENERGY. THIS WILL HELP US BECOME THE WORLD'S NUMBER ONE PRODUCER OF GEOTHERMAL POWER BY DEVELOPING AN ADDITIONAL 800-MEGAWATT INSTALLED CAPACITY BY 2012. PART OF THIS CAPACITY WILL BE DELIVERED BY THE GEOTHERMAL PLANTS IN RANGAS TANAWON IN SORSOGON, MAMBUCAL AND PALINPINON IN NEGROS, AND SAN JUAN AND BURAUEN IN LEYTE.

HYDRO POWER COULD PROVIDE ANOTHER 1,200 MEGAWATTS, WHILE OTHER RENEWABLE ENERGY SOURCES LIKE WIND AND BIOMASS CAN DELIVER ANOTHER 224 MEGAWATTS.

WE HAVE THE GREATEST POTENTIAL FOR WIND POWER IN SOUTHEAST ASIA. I THEREFORE, URGE THE PROPONENTS TO COMPLETE BY 2004 THE 25-MEGAWATT NORTHWIND PROJECT FUNDED BY DANISH INVESTORS AND THE 40-MEGAWATT PNOC WIND PROJECT, WHICH ARE BOTH IN BURGOS, IN ILOCOS NORTE. THESE TWO PROJECTS WILL BE THE FIRST AMONG THE 415 MEGAWATTS AVAILABLE FOR WIND POWER DEVELOPMENT IN THE NEXT TEN YEARS.

STUDIES SHOW THAT WE WILL NEED AT LEAST 400 BILLIONS OF PESOS OF PRIVATE SECTOR INVESTMENTS OVER THE NEXT TEN YEARS TO FINANCE THE WHOLE GENERATION CAPACITY BUILD-UP AND OTHER POWER-RELATED INFRASTRUCTURE INVESTMENTS. HISTORICALLY, THE MAIN COMPANIES PROVIDING THESE POWER-RELATED ASSETS HAVE BEEN THE NATIONAL POWER CORPORATION OR NAPOCOR FOR POWER GENERATION, THE TRANSMISSION COMPANY WHICH IS TO BE PART OF NAPOCOR FOR POWER TRANSMISSION, AND MERALCO FOR POWER DISTRIBUTION.

BUT AS WE HAVE SEEN FROM THE NUMBERS BEING THROWN AROUND EARLIER, THE CAPITAL EXPENDITURE NEEDS OF MERALCO, NAPOCOR AND TRANSCO HAVE BALLOONED ALL THESE DECADES. AT 38 BILLION PESOS ANNUALLY, GOVERNMENT SUBSIDIES TO THE POWER SECTOR SHOULD INSTEAD BE USED FOR OTHER SERVICES. THIS AMOUNT COULD BUILD MORE THAN A 100,000 CLASSROOMS, IRRIGATE MORE THAN A 100,000 HECTARES OF FARMLANDS, PUT UP MORE THAN 75,000 LOW-COST HOUSES, OR CONSTRUCT MORE THAN 6,000 KILOMETERS OF ROAD

TAKE THE CASE OF NAPOCOR AS A CASE STUDY. IN THE PAST FIVE YEARS, NAPOCOR HAS INCURRED LOSSES OF 73 BILLION PESOS AND HAS SEEN ITS DEBTS RISING FROM 4.5 BILLION DOLLARS IN 1983 TO 6.6 BILLION DOLLARS IN 2002. ON TOP OF THESE LOSSES AND BORROWINGS, THE LEVEL OF SERVICE OF NAPOCOR HAS BEEN UNRELIABLE, AND IN THE COURSE OF ITS OPERATIONS, NAPOCOR HAS BEEN ACCUSED OF INEFFICIENCY AND CORRUPTION.

WE NEED TO PUT A STOP TO ALL THESE. WE NEED TO PUT A STOP TO THE CONTINUOUS OF GOVERNMENT FUNDS DUE TO THE FINANCIAL LOSSES OF NAPOCOR. THE ANSWER WITH A SOURCING THE HUGE CAPITAL OF OUR POWER SECTOR IS PRIVATIZATION.

PRIVATIZATION ENABLES THE GOVERNMENT TO STRETCH ITS SCARCE TO MEET OTHER BASIC NEEDS THAT OUR PEOPLE SHOULD HAVE IMMEDIATELY.

KAILANGAN ANG PRIVATIZATION PARA HINDI NA MAGHANAP ANG GOBYERNO NG DAGDAG NA BUDGET PARA MAIWASAN ANG BROWNOUT SA MGA DARATING NA PANAHON. KUNG WALANG PRIVATIZATION, PATULOY ANG PAGLOBO NG UTANG NG NAPOCOR AT TRANSCO.

THAT IS WHY WE NEED TO PRIVATIZE TRANSCO AS SOON AS POSSIBLE.

THIS IS A MATTER OF PARAMOUNT NATIONAL INTEREST, WHICH IS BEING IMPERILED BY UNDUE DELAY.

I THANK THE CONGRESSMEN, REPRESENTED HERE BY OUR TWO LEADERS OF THE POWER COMMISSION, FOR HAVING PASSED THE TRANSCO FRANCHISE BILL VERY EARLY IN THE GAME. NOW, I APPEAL TO THE SENATE TO PASS THE TRANSCO LAW WHICH WILL ENABLE US TO GET A GOOD PRICE FOR TRANSCO'S PRIVATIZATION.

I SHALL NOT INORDINATELY TOSS BLAME, BUT I WANT THE SENATORS NOW BLOCKING THE PASSAGE OF THE BILL FROM... I WANT TO SAVE THEM FROM HAVING TO EXPLAIN TO THE VISAYAS ESPECIALLY WHY THE VISAYAS WILL SOON FACE A SHORTAGE OF ELECTRICITY.

THE VISAYAS GRID IS THE MOST VULNERABLE AND THE MOST AFFECTED BY THE DELAY OF TRANSCO'S PRIVATIZATION.

IN THE MEANTIME, EVEN HERE, THE CONGESTION OF TRANSMISSION LINES IN BATANGAS IS COSTING US 1 BILLION PESOS A YEAR AND PREVENTING EFFICIENT DELIVERY OF POWER TO THE LUZON GRID. TRANSCO HAS PLANS TO UPGRADE THE FIRST PHASE OF THE BATANGAS TRANSMISSION LINE BY JANUARY 2004 TO MAXIMIZE UTILIZATION OF MALAMPAYA GAS.

THAT IS WHY WHETHER OR NOT WE GET THE TRANSCO BILL PASS IN THE SENATE, WE WILL COMMENCE PRIVATIZATION OF THE TRANSCO. WHAT WILL HAPPEN IS IF WE DON'T HAVE A TRANSCO FRANCHISE LAW, THE MARKET PRICE FOR TRANSCO WILL PROBABLY BE ONE-FOURTH OF WHAT IT WOULD HAVE BEEN IF IT HAD A FRANCHISE TO GO WITH IT.

I HOPE -- AND I HOPE IT WOULD BE WITH A FRANCHISE -- I HOPE THAT THE PRIVATIZATION OF TRANSCO WILL RESULT IN THE AWARD OF CONCESSION TO THE WINNING BIDDER BY MID-2003, SO THAT TRANSCO 'S PLANS CAN BE DONE BY THE PRIVATE SECTOR. MOREOVER, THE PRIVATIZATION OF TRANSCO WILL PAVE THE WAY FOR THE SALE OF NAPOCOR'S GENERATING ASSETS, 70 PERCENT OF WHICH MUST BE COMPLETED BY JUNE 2004.

BECAUSE OF THE STAGGERING NUMBERS INVOLVED, FOREIGN CAPITAL AND TECHNOLOGY ARE KEY TO PRIVATIZATION. AT THE CORE OF PRIVATIZATION IS THE FRAMEWORK FOR GREATER COMPETITION AND A LEVEL PLAYING FIELD FOR POWER GENERATORS.

THE FIRST KEY TO PRIVATIZATION IS TO CREATE AN INVESTMENT CLIMATE THAT IS ATTRACTIVE TO BOTH DOMESTIC AND FOREIGN INVESTORS.

THE SECOND KEY IS TO CREATE A PRIVATIZATION PROCESS THAT IS TRANSPARENT AND FREE OF CORRUPTION.

THE REGULATORY FRAMEWORK FOR POWER IS BEING OVERHAULED IN THE INTEREST OF PROVIDING TRANSPARENCY AND A GOOD INVESTMENT CLIMATE. LAST WEEK, THE ERC RELEASED ITS PROPOSED NEW FRAMEWORK FOR RATE-MAKING FOR TRANSCO. IT WILL NOW BE PERFORMANCE-BASED RATHER THAN RETURN ON RATE BASE.

AND I AM HOPEFUL THAT THE ERC WILL ADOPT A SIMILAR PERFORMANCE-BASED FRAMEWORK FOR DISTRIBUTION FACILITIES BEFORE DECEMBER 2003.

THE GROUNDWORK IS BEING LAID. I TRUST THAT MY SUCCESSORS WILL BE ABLE TO BUILD ON THIS FOUNDATION THAT WE ARE PUTTING TOGETHER FOR A MORE COMPETITIVE, MORE EFFICIENT POWER SECTOR INTO THE 21ST CENTURY.

MARAMING SALAMAT. CONGRATULATIONS!

AND I WILL NOW SWITCH-ON THE SAN LORENZO POWER PLANT.

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