Gov't Renegotiates Power Subsidy to Big Investors, Begs for Understanding

Manila Bulletin, August 30, 2011 | Go to article overview

Gov't Renegotiates Power Subsidy to Big Investors, Begs for Understanding


MANILA, Philippines - The Economic cluster of the Cabinet has approved in principle the planned renegotiation for the reduction in power subsidy to big foreign investors, which was granted by the previous administration in an effort to persuade these huge projects to locate in Clark and Subic freeport zones.

Board of Investments (BoI) managing head Cristino L. Panlilio has confirmed this move by the new administration saying the government is hoping for 'understanding' from the three investors Korean shipbuilder Hanjin Heavy Industries Corp., Texas Instruments and Phoenix Semiconductor of the Philippines.

TI has $1.5 billion expansion facility in Clark, Phoenix with $2 billion, and Hanjin with $1.6 billion in Subic. Under full commercial operation, Phoenix is expected to export $3.5 billion annually. Hanjin is employing more than 15,000 workers in Subic freeport and is exporting ocean-going vessels. TI is also expected to export between $3 to $4 billion worth of exports annually.

"We ask for their understanding," Panlilio said noting that the government is seeking to renegotiate the contract to make it 'mutually beneficial for government and investors who invested billions of pesos and created 30,000 jobs.'

The firms were reportedly agreeable to the government proposal to reduce the subsidy, but have not yet accepted it formally.

The proposal was to reduce the subsidized power rate from P2.15 per kilowatt hour to about P3 per kwh or from an estimated at P40 billion subsidy to P2 billion or P500 million per year for three to four years.

The subsidized power rate of P2.15 per kwh, which is about half the current cost to ordinary consumers, already includes generation, transmission and distribution charges. The subsidy, approved by the Arroyo administration, was supposed to be taken from the Competitiveness Fund.

Under the current contract, TI has six years more to go, Hanjin has 8 years and Phoenix has nine years.

The move to renegotiate the contracts with the country's three biggest investors was called after other companies, particularly electronics firms belonging to the Semiconductor and Electronics Industries of the Philippines Inc. …

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Gov't Renegotiates Power Subsidy to Big Investors, Begs for Understanding
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