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A wellness plan for ZAMCELCO

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(BY: ATTY. VICENTE R. SOLIS) The Power Sales Agreement (PSA) between our consumer-owned and managed Zamboanga City Electric Cooperative, Inc. (Zamcelco) and the San Ramon Power Corporation (SRPI) was approved by the Energy Regulatory Commission (ERC) on September 15, 2014.  Under the agreement, SRPI commits to deliver to Zamcelco 85 megawatts of electric power, to be sourced from its yet-to-be-built ZamboEcozone-sited 105-megawatt coal-fired power plant, which is slated to break grounds in mid 2015 and targeted for commissioning and commercial operation within 2018.

The power company pegs its project cost at US$291.2M and estimates its actual disbursements todate at US$5.7M in preliminary works and activities. According to veteran columnist Bob Jaldon, who is on a sabbatical in San Jose, California, this is the “biggest single investment” so far in our city.  And may I add, this huge capital infusion into the city’s economy by way of a power infrastructure soon looming at Talisayan could be the salvavida or lifesaver of the ZamboEcozone, a flagship project of the late Representative and Mayor Maria Clara L. Lobregat, by rescuing it from irrelevancy and becoming defunct. She must be smiling somewhere up there, thanking the power company for this unintended consequence.

Recently, however, I heard some voices of serious but solicitous concern emanating from this Alsons Power Holdings-owned power firm over the “operating efficiency” and “financial viability” of Zamcelco. One of Alsons’ top executives, Joseph Nocos, is quoted in media as saying that “the next challenge in the development of the 105-megawatt SRPI plant will be the project financing phase” where it is crucial “that the distribution utility - in this case, Zamcelco, be financially viable.”

I understand George Ledesma, Zamcelco’s general manager, has been devoting much of his time and talent towards making the Coop “financially viable”. Recurring adverse challenges and circumstances, however, have conspired against him from achieving this goal, as evidenced by existing public records which indicate, among other things, that as of March 31, 2014, Zamcelco’s system loss is 19.70%, as ranged against the NEA standard of 13%; collection efficiency of 91.31%, as ranged against NEA’s standard of 95%; and arrears in the payment of restructured loans payable to “GENCO” (presumably referring to NPC-PSALM). Favorable indicators for Zamcelco are its net worth which remains positive and cash general fund which meets the NEA criterion. Overall, however, Zamcelco is classified by NEA in the “Yellow 2 Category”, which is only one rung away from the “Red Category”, or the equivalent of an “ailing electric cooperative”.  Is this what’s bothering Alsons?  The possibility and unpleasant thought that Zamcelco may turn from yellow to red and become a candidate for a take-over by NEA in pursuance of the step-in right granted under RA 10531 (NEA Reform Act of 2013)?

Obviously and quite reasonably, SRPI wants to put up an iron shield around its huge financial exposure in the base load power plant at San Ramon where the bulk of its dependable generated capacity is firmly committed for delivery to Zamcelco under the power sales agreement. Ditto with the credit and finance companies (both foreign and domestic) that would provide the funding resources for the construction and completion of the plant, via loans, estimated to constitute at least 70% of the total project cost. Bottom line is that both SRPI and the lending institutions want an operational and financial environment in Zamcelco that is consistent with “operational efficiency” and “financial viability”, thereby making the Coop credit worthy and a safe haven for their multi-million long-term direct investment.  I don’t think I can argue against that proposition.

Towards this end, there is a proposal making the rounds that would allow the entry of a professional management team, preferably coming from a power distribution utility, to provide Zamcelco not only with experience and expertise in day to day operations, but also substantial funding (estimated at over half a billion pesos) to put Zamcelco’s power distribution system in good order. As consumers, we are all aware of the infirmities besetting the distribution cables and technical hardware of Zamcelco and its financial constraints to undertake their repair and pursue rehabilitation. Even Engr. Ben Conti, who is a Zamboangueño expert in the power industry, having had a long stint with the National Power Corporation, will swear that the aged and frail distribution network of Zamcelco could yield and buckle under continual stress and strain if nothing is done to rehabilitate and upgrade its critical components between now and 2018 when SRPI’s plant is off and running.

I am not aware of the nuts and bolts of the proposal. But, I understand it does not hew to  a concession arrangement but more towards an investment and management contract, and hence, the Board of Directors of Zamcelco remains in place and will continue to function as the policy-making body. Likewise, Zamcelco, as an incorporated membership corporation, will continue its ownership over all its existing properties and assets. Looks and sounds fair enough.

Once fleshed with details, let’s expose this subject to unfettered discussion and debate within gatherings and assemblies of the Coop, and thereby gain consensus, for or against, before it’s too late.  (PO Box 333, Zamboanga City, solislaw@outlook.ph)




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