THE disqualification of the bid by Consolidated Electric Power
Asia Ltd. to build the Philippines' first natural-gas-driven power
plant has generated concern among foreign investors as to the
stability of the country's investment rules.
In May, CEPA, a subsidiary of Hopewell Holding Ltd. of Hong
Kong, won the bid to build and operate the 1,200 megawatt plant.
The $1.5 billion bid edged out nine other prequalifiers. CEPA's
technical partner was Japan's Mitsubishi Heavy Industries Ltd.
Mitsubishi's technology is based on a gas turbine developed by
Westinghouse Electric Corp. of Pittsburgh.
The problem is that the state-owned National Power Corp. (NPC)
has banned Westinghouse products in the Philippines since 1992,
after the Philippine government lost a lawsuit in New Jersey over
allegations that the company bribed the late President Ferdinand
Marcos to build a nuclear plant in Bataan in the mid-1980s. The
case is under appeal.
CEPA denied a Westinghouse link, but the government rejected the
company's claim and has set a rebidding for Oct. 26 open to all 27
consortiums that originally participated. The winner will be
announced in January.
Despite pressure from American and Japanese governments not to
rebid, the NPC says it is firm in its decision not to use
Westinghouse technology. The prequalified bidders are threatening
Analysts say they consider the negative effect of reopening the
bidding short-term if the bidders don't carry out their threats to
"In the long run, the effect is minimum," says a power-industry
executive. "There is too much business around. The bidders will
charge it off to experience and get on with business, as long as
the NPC is not seen to make a habit of reversing itself too often."
A corporate, political mess
Still, the rebidding has all the ingredients of a corporate and
political mess. All parties are unhappy, as everyone seems to have
lost out. NPC also disqualified the second-highest bidder, AES
Transpower Pte Ltd./Nichimen, because it proposed using the
Westinghouse 501F turbine. It bid at $2 billion.
The United States and Japan have threatened to make this a trade
issue against the Philippines if a rebid occurs.
US Commerce Secretary Ron Brown, a group of six US senators, and
a group of 11 House representatives wrote separate letters to
President Fidel Ramos, Energy Secretary Francisco Viray, and NPC
President Guido Delgado warning of consequences if rebidding