SIXTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
Second Regular Session )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez and>
Representative Maximo B. Rodriquez, Jr. NGLITS

House BillNo. 4883
EXPLANATORY NOTE

The most conerete effect of the Electric Power Industry Reform Act of 2001 (EPIRA)
specific to Mindanao is the special treatment extended to the ‘Agus-Pulangul Hydropower
Complex. The EPIRA deferred the privatization of Agus-Pulangui for 10 years. Today, its
privatization is in limbo after the lapse of the 10-year period, and government has not come
tp with a definite policy whether or not to privatize these assets, The problem is that there
are investors who are holding back their investments in power generation because they are
waiting for the possible privatization of the Agus-Pulangui dams, which are the crown jewels
of NAPOCOR/PSALM assets. In foreign electricity markets, hydropower assets are prized
possessions because they usually eamn windfall profits; thus, investors are probably holding
back and saving their resources {o bid and win such lucrative assets. If government says It
will no longer be privatizing Agus-Pulangui, the speculation would stop and investors would
be more definite in their business decisions. Given the shortage in Mindanao, there is always
incentive for new players to come in.

‘This bill seeks to make definite the national policy for the Agus-Pulangui Hydropower
Complexes not to privatize the crown jewels of the Mindanao power industry, and to
formulate a viable way to operate and maintain these assets that provide majority of the
electricity in Mindanao.

Nor-privatization is the wise policy decision because government should not hand
over possible windfall profits to any private entity when these resources could be used to
alleviate the power situation in Mindanao. Remember that under the Electric Power Industry
Reform Act of 2001 (EPIRA) generation plants now are deregulated and government has
less control at how much a private power plant can charge. If privatized, the new owner may
be able to sell electricity at around PhP 14,00 per kw/hr compared to how much NAPOCOR
sells hydropower electricity at around PhP 3.00 per kw/hr. Give the insufficiency of power
Capacity In Mindanao, electric cooperatives, distribution utilities, and other consumers have
ho choice but to accept the prices imposed upon them. Why hand over clean windfall profits
to the private sector when the lucrativeness of hydropower plants can be used to directly
benefit Mindanao? If these assets are left with goverment, hydropower can blend power
rates and mitigate spikes in power prices.

This bill seeks to cure the problem with the present set-up of the Agus-Pulangul
Hydropower Complexes, which is not viable. Under the present EPIRA, the NAPOCOR is
Supposed fo tum over all its income to the Power Sector Assets and Liabilities Management
(PSALM) to service NAPOCOR debts. PSALM has the discretion how much it would return
for the operation and maintenance of the Agus-Pulangui complexes. Remember that PSALM
and NAPOCOR have responsibility over and have to worry about the entire Philippine
electric power industry, and the Agus-Pulangui is just one of a myriad of their concems.
Under, this set-up, NAPOCOR barely has any resources to operate and maintain, much less
improve these assets. There has to be a revision of the structure how Agus-Pulangul is


operated and treated overall. A power corporation specifically for Mindanao would be able to
focus and safeguard the power situation in the region

My proposal is to set-up a Mindanao Power Corporation (MinPow) that will operate
and maintain the Agus-Pulangui Hydroelectric Complexes. MinPow can acquire the Agus-
Pulangui dams from NAPOCOR/PSALM under similar terms and conditions as in a
privatization context, For example, NGCP paid for Transco's transmission system at around
25% down payment with amortizations for 25 years. Why not have the same terms and
conditions for the transfer between NAPOCOR/PSALM and MinPow? This way, the Agus-
Pulangui Complex remains part of the equation in paying the power industry's debts
pursuant to the policy of the EPIRA. Considering the lucrative nature of hydropower plants,
MinPow would easily be able to pay for the transfer price by simply imputing such transfer
price (along with other provisions for rehabilitating and improving the assets) in its power
Tates as approved by the ERC.

‘A Mindanao Power Fund is also established to address any impending power crises
instead of waiting for the National Government to act and dole out taxpayers’ money. This.
fund can be raised as part of the power rates that can be charged by MinPow. This Is also
more equitable because the fund is bore by ratepayers who benefit from the Mindanao
assets instead of being paid for by taxpayers nationwide. The rate of Php .30 per kw/hr is
exactly the same as the mandatory rate reduction under the EPIRA, and can be utilized by
the corporation to safeguard the power supply situation in Mindanao. The Mindanao Power
Fund can also be utlized to lower residential power rates.

Indeed, there are sectors who believe that the Agus-Pulangui complexes should be
privatized simply because government (particularly NAPOCOR), by experience, has been
inefficient and terrible at running the power industry. According to them, the private sector
should be allowed to operate the plants better and more efficiently. This is mainly due to the
distrust surrounding the NAPOCOR

First, as already mentioned, the Agus-Pulangui hydropower complexes are the crown
jewels of the NAPOCOR/PSALM assets. The main reason why it appears to be neglected is
because of the setup wherein NAPOCOR has to turn over all its income to PSALM to service
NAPOGOR's debts. Considering how lucrative hydropower plants are, the Agus-Pulangui
plants are likely subsidizing the rest of NAPOCOR operations nationwide and unfortunately,
without provisions for rehabilitating and improving the plants. | do not see any good reason
to hand such assets over to the private sector. | think it is better to tailor fit how the plants
should be treated to avoid sacrificing efficiency and economy,

Secondly, an argument for privatization is that continued government ownership of
the hydroelectricity would discourage private investors because they will not be able to
compete with its low prices. This can be addressed by rationing the hydropower to electric
cooperatives and distribution utilities pro rata. This way, all these electric cooperatives and
distribution utilities have the benefit of blending their rates with cheap hydropower. Rationing
the cheap hydropower would also avoid allegations of favoritism and ensure that cheap
power benefits individual ratepayers rather than large consumers. On the other hand,
competition among power generators is not sacrificed because there is not sacrificed
because there is still the same number of customers with sufficient demand to whom they
can sell their electricity. Actually, a stronger argument against privatization is that in a
privatization context, the feared lack of competition is stil present but instead of government,
a private industry player is holding market power with high incentive to earn profits at the
expense of the rest of the population.

Thirdly, there are allegations that Mindanao electric cooperatives and consumers are
spoiled and refuse to share the burden in the costs of power. My proposal addresses this


concem by having a Mindanao Power Company with regulated rates that enable it to raise
(a) sufficient funds for buying Agus-Pulangui from NAPOCORI/PSALM; (b) sufficient funds
for operating and maintaining such assets efficiently, and even; (c) sufficient funds for
improving such assets. It also provides for the Mindanao Power Fund, which ensures
lessening subsidy by the National Government in any power crisis situation

This bill should also be supported by non-Mindanaoans because the creation- of the
Mindanao Power Corporation rationalizes costs and promotes economic efficiency because
any future Mindanao Power Situation shall be borne by Mindanao ratepayers, Instead of

being bore by taxpayers nationwide. Let Mindanaoans be responsible and bear costs for
the upkeep of the Agus-Pulangui complexes, and their power situation

RUFUS B: ROI

MAXIMO B. RODRIGUEZ, JR.



SIXTEENTH CONGRESS
REPUBLIC OF THE PHILIPPINES
Second Regular Session

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez and
Representative Maximo B. Rodriguez, Jr.

House Bill No. 488 3

AN ACT
CREATING THE MINDANAO POWER CORPORATION, APPROPRIATING FUNDS
THEREFOR AND FOR OTHER PURPOSES

Be enacted by the Senate and the House of Representatives of the Philippines in Congress
assembled,

Section 1. This Act shall be known as the "Charter of the Mindanao Power Corporation
(MinPOW)".

Sec 2. Declaration of Policy for the Mindanao Power Situation - Congress hereby adopts the
policy of non-privatization of the Agus-Pulangui Hydropower Complexes because these are
essential to the public welfare of the communities of Mindanao and would be better left
under government control considering their inherently profitable nature, and therefore, the
operation, maintenance, expansion, and/or improvement of such Hydropower complexes
could be done with minimal government subsidy, while sustaining the required level of power
supply in Mindanao.
Sec 3. Mindanao Power Corporation (MinPOW) ~ MinPOW (hereinafter Corporation) is
hereby created and shall exist for fifty years from the effectivity of this Act. The authorized
capital stock of the Corporation shall be One Billion pesos divided into Ten Million shares
having a par value of one hundred pesos each, which shares are not to be transferred,
negotiated, pledged, mortgaged, or otherwise given as security for the payment of any
obligation, unless approved by the ratepayers of Mindanao in a plebiscite conducted with the
help of Mindanao Electric Cooperatives.

The Corporation shall acquire the Agus-Pulangui Hydropower Complexes from the
Power Sector Assets and Liabilities Management (PSALM) on terms that is not more
onerous than Twenty-Five (25%) initial down payment with Seventy-Five (75%) to be
amortized for Twenty-Five (25) years

The Corporation is mandated to extend the benefits of its hydropower complexes to
the greatest number of the population as possible, and the Corporation shall undertake and
implement faithfully such projects as will promote the total electrification of all provinces,
cities, municipalities and barangays existing in the various regions of Mindanao.

Sec 4. Powers and General Functions - The powers, functions, rights and activities of the
Corporation shall be the following
(a) to have continuous succession under its corporate name until otherwise provided by
law;
(b) To prescribe its by-laws not inconsistent with this Act;
(c) To adopt and use a seal and alter it at its pleasure;
(d) To sue and be sued in any court;
(e) To conduct investigations and surveys for the development of water power in the
Mindanao region;
(f) To take water from any public stream, river, creek, lake, spring or waterfall in the
Philippines, for the purposes specified in this Act; to intercept and divert the flow of


waters from lands of riparian owners and from persons owning or interested in waters
which are or may be necessary for said purposes, upon payment of just
compensation therefor; to alter, straighten, obstruct or increase the flow of water in
‘streams or water channels intersecting or connecting therewith or contiguous to its
works or any part thereof: Provided, That just compensation shall be paid to any
person or persons whose property is, directly or indirectly, adversely affected or
damaged thereby;

(g) To operate, maintain, repair, rehabilitate, expand and/or improve the Agus-Pulangui
Hydropower Complexes acquired from the Power Sector Assets and Liabilities
Management Corporation (PSALM) under terms and conditions provided in this act
with authority to sell electric power in bulk to electric cooperatives, distribution
utilities, and other entities in accordance with this act;

(h) To adopt measures necessary and desirable to ensure sufficiency of power it
committed to electric cooperatives and distribution utilities, and to supply power in
Mindanao in general including the expansion of existing power plants, establishment
of new plants, and contracting of ancillary or support services with other power
generators;

(i) To acquire’ whether by negotiation or by eminent domain, promote, hold, transfer,
sell, lease, rent, mortgage, encumber and otherwise dispose of property incident to,
or necessary, convenient or proper to carry out the purposes for which the
Corporation was created;

() Subject to Constitutional requirements and with mandate from the President,
MinPOW shall have authority to operate idle power plants whether temporarily or
permanently to prevent, control, avoid or curb any Imminent and actual power
shortages;

(k) To construct works on, across, along or otherwise any stream, watercourse, canal,
ditch, flume, street, avenue, highway or railway of private and public ownership, as
the location of said works may require: Provided, That sald works be constructed in
such a manner as not to endanger life or property: And provided, further, That the
stream, watercourse, canal ditch, flume, street, avenue, highway, so crossed or
intersected be restored as near as possible to their former state, or in a manner not
to impair unnecessarily their usefulness. Every person or entity whose right-of-way or
property is lawfully crossed or intersected by said works shall not obstruct any such
crossings or intersection and shall grant the Board or its representative, the proper
authority for the execution of such work. The Corporation is hereby given the rightof-
way to locate, construct and maintain such works over and throughout the lands
owned by the Republic of the Philippines or any of its branches and political
subdivisions. The Corporation or its representatives may also enter upon private
property in lawful performance or prosecution of its business and purposes, including
the construction of necessary lines thereon subject to just compensation as provided
by law: Provided, That the owner of such private property shall be indemnified for any
actual damage caused thereby: Provided, further, That said action for damages Is
filed within five years after the rights of way, transmission lines, substations, plants or
other facilities shall have been established: Provided, finally, That after the said
period, no suit shall be brought to question the said rights of way, transmission lines,
substations, plants or other facilities;

() To exercise the right of eminent domain for the purpose of this Act in the same
manner provided by law for condemnation proceedings instituted by the national,
provincial and municipal governments:

(m)When essential to the proper administration of its corporate affairs or necessary for
the proper transaction of its business or to carry out the purposes for which it was
organized, to contract indebtedness and issue bonds subject to approval of the
President upon recommendation of the Secretary of Finance,

(n) To exercise such powers and functions of the corporation as provided in the
Corporation Code and do such things as may be reasonably necessary to carry out


the business and purposes for which it was organized, or which, from time to time;
may be declared by the Board to be necessary, useful, incidental or auxiliary to
accomplish the said purpose;

(0) To cooperate with, and to coordinate its operations with those of the National
Electrification Administration and public service entities;

(p) To exercise complete jurisdiction and control over watersheds surrounding the
reservoirs of Agus-Pulangui Hydro complexes and other plants and/or projects
constructed or proposed to be constructed by the Corporation. The National Power
Corporation (NAPOCOR) and the PSALM shall upon written advice by the
Corporation, forthwith surrender jurisdiction to the Corporation of all areas embraced
within the watersheds the NAPOCOR currently holds in Mindanao, subject to existing
private rights, the needs of waterworks systems, and the requirements of domestic
water supply, For new projects and upon determination by the Corporation of the
areas required for watersheds for specific projects in Mindanao, the relevant
government agencies, institutions, and/or entities shall, upon written advice,
Surrender jurisdiction to the Corporation of all areas embraced within the said
watersheds, subject to existing private rights, the needs of waterworks systems, arid
the requirements of domestic water supply;

(q) In the prosecution and maintenance of its projects, the Corporation shall adopt
measures to prevent environmental pollution and promote the conservation,
development and maximum utilization of natural resources; and

(r) Generally, to exercise all the powers of a corporation under the Corporation Law
insofar as they are not inconsistent with the provisions of this act.

Sec 5. Disposition of Hydroelectric Power ~ The Corporation shall have authority to sell the
hydroelectricity pursuant to the following parameters:

(a) The existing capacity of the Agus-Pulangui Hydropower Complexes shall be
allocated pro rata primarily to electric cooperatives and distribution utlities the
majority of whose customers are residential rate payers in Mindanao;

(b) Consumers other than electric cooperatives and distribution utilities may contract for
direct supply of electricity that has been unsold or uncommitted to Mindanao electric
cooperatives and distribution utilities;

(c) if and when possible, the Corporation is allowed to participate in the Wholesale
Electric Spot Market (WESM) provided that any and all its income shall be utilized
solely for operating, maintaining, expanding and improving the hydropower
complexes and/or its other assets, and as part of the Mindanao Power Fund.

Existing power supply agreements involving the Agus-Pulangui Hydropower
Complexes shall, within a period of one year from the effectivity of this Act, be reviewed and
renegotiated to comply with the foregoing parameters. Non-committed power generated by
the Agus-Pulangui Hydro complexes shall immediately be allocated to electric cooperatives
and distribution utlities that cater mainly to residential ratepayers.

Sec 6. Rate-fixing — The rates charged by the Corporation shall be subject to approval by
the Energy Regulatory Commission as follows:
a, Rates shall allow the recovery of just and reasonable costs and a reasonable retum on
the rate base (RORB) or other internationally accepted methodology to enable the
Corporation to operate viably, In case the rate setting methodology used is RORB, it shall be
Subject to the following guidelines:
(i) For purposes of determining the rate base, the Corporation may be allowed to
revalue its eligible assets not more than once every three (3) years'-by an
independent appraisal company: Provided, however, That ERC may give an
‘exemption in case of unusual devaluation: Provided, further, That the ERC shall exert
efforts to minimize price shocks in order to protect the consumers;


(li) Interest expenses are not allowable deductions from permissible retum on rate
base;
(iin determining eligible cost of services that will be passed on to the end-users, the
ERC shall establish minimum efficiency performance standards for the Corporation
including systems losses, interruption frequency rates, and collection efficiency;
(iv)Further, in determining rate base, the Corporation shall not be allowed to include
management inefficiencies like cost of project delays not excused by force majeure,
penalties and related interest during construction applicable to these unexcused
delays; and
(v) Any significant operating costs or project investments of the Corporation which
shall become part of the rate base shall be subject to verification by the ERC to
ensure that the contracting and procurement of the equipment, assets and services
have been subjected to transparent and accepted industry procurement and
purchasing practices to protect the public interest.
b. The Fate shall ensure that the Corporation would be able to service the acquisition cost of
the Agus-Pulangui Hydropower Complexes;
c. The rate is sufficient for operating and maintenance expenses, as well as capital
expenditures projected to be necessary within the next 10 years pursuant to a development
plan; provided that interest on loans, bonds and other debts shall not be included as
expenses;
d. the rate allows for systems losses subject to the caps determined by the ERC based on
the load density, sales mix, cost of service, delivery voltage and other technical
considerations it may promulgate;
@. The rate shall include Thirty Centavos (PhP.30) per kWh allocated to the Mindanao Power
Fund as created by this Act and administered by the Corporation to improve the Mindanao
power situation and to help avert any possible power shortage-by:
‘A. Preventing idleness of power plants through:

i. Contracting electricity from readily available power plants in Mindanao;
provided, the price shall be the best available price reasonably comparable to
prices offered by similar plants in Luzon and the Visayas;

il. Operating idle power plants, whether owned by the private sector or by
government, but subject to constitutional and legal requirements;

B. Contracting power plants that can generate electricity within 30 days: provided, the
price shall be the best available price reasonably comparable to prices offered by
similar plants in Luzon and the Visayas.

The Mindanao Power Fund shall be utilized to lower residential rates in such manner
as may be determined by the Corporation as approved by the ERC; provided it does not
sacrifice energy security in the region

Sec 7. The MinPOW Board; Composition; Compensation of Members; Qualifications;
Powers and Duties — The corporate powers of the Corporation shall be vested in and
exercised by the Board composed of seven members consisting of a chairman, vice-
chairman and five directors who, with the exception of the vice-chairman, shall be appointed
by the President of the Philippines, two of whom shall represent Electric Cooperatives, one
shall represent private Distribution Utilities, one shall represent the Mindanao
consumers/ratepayers, one shall represent labor, and one shall represent the business
sector. The General Manager shall be chosen by majority vote of the Board of Directors and
shall be the ex-officio Vice-Chairman of the Board. The members of the Board shall each
serve a term of three years, except that any person appointed to fill a vacancy shall serve
only for the unexpired term of the member whom he succeeds.

Every member of the Board shall possess any one or a combination of the following
qualifications: A duly licensed professional of recognized competence in engineering, in
business management and finance, or in law, particularly in the field of corporate practice,
with at least ten years actual and distinguished experience in their respective fields of


expertise, or a recognized labor leader with sufficient training, particularly in labor-
management relations, and of good moral character. All appointees by the President of the
Philippines shall be residents of Mindanao.

The members of said Board shall receive a per diem and allowances for actual
meetings attended or actual work done in such amounts as generally practiced by other
government-owned and controlled corporations.

‘A majority of the members of the Board shall constitute a quorum for the transaction
of the business of the Board

Sec 8. Powers and Functions of the Board - The Board shall have the following specific
powers and duties:

(a) To formulate and adopt policies and measures for the management and operation of
the Corporation; provided that policies and measures, including the compensation
structure of the Corporation, that has any rate impact or otherwise affects the prices
of electricity sold to residential consumers shall be subject to approval by the ERC;

(b) To adopt an annual and supplemental budget of receipts and expenditures of the
Corporation according to its requirements, which may include financial assistance to
municipalities which are the site of or contiguous to watersheds, lakes or natural
sources of hydroelectric power being utilized by the Corporation, subject to the
approval of the ERC: Provided, That copies of the budgets of receipts and
expenditures herein referred to shall be disclosed to and shall be subject to audit and
verification by the ERC during rate fixing;

(c) Subject to the provisions of existing laws and regulations and upon the
recommendation of the General Manager, to organize, reorganize and determine the
Corporation's staffing pattern and the number of personnel, to fix their salaries and to
define their powers and duties;

(d) To appoint and fix the compensation of the General Manager, subject to the approval
of the President of the Philippines, and to appoint and fix the compensation of the
Assistant General Manager, regional managers, and department chiefs;

(e) For cause, to suspend, or remove, by a majority vote of all members of the Board,
the General Manager, the Assistant General Manager, regional managers and
department chiefs, with the approval of the Office of Economic Coordination; and

(f) To adopt and set down guidelines for the employment of personnel on the basis of
merit, technical competence and moral character.

Sec 9, The General Manager; His Powers and Duties; Regional Managers and Other
Officers and Employees of the Corporation — The management of the Corporation shall he
Vested in the General Manager, assisted by an Assistant General Manager, a department
chief for finance, a department chief for engineering and construction, a department chief for
administration, and such additional officers and employees as the said Board may provide
and choose. For this purpose, the General Manager shall have the following powers and
duties:

(a) To execute and administer the policies and measures approved by the Board, and
have the responsibility for the efficient discharge of management functions;

(b) To submit for the consideration of the Board such other policies and measures which
he deems necessary to carry out the purposes and provisions of this Act;

(c) To direct and supervise the operation and internal administration of the Corporation
and, for this purpose, may delegate some or any of his administrative responsibilities
and duties to other officers of the Corporation;

(d) Subject to the guidelines and policies set up by the Board, to appoint and fix the
umber and compensation of subordinate officials and employees of the Corporation;
and, for cause, to remove, suspend or otherwise discipline, any subordinate
employee with the approval of the Board;

(e) To prepare an annual report on the activities of the Corporation at the close of each
fiscal year and submit a copy thereof to the Board for transmittal to the President of


the Philippines, President of the Senate, and Speaker of the House of
Representatives, the Joint Congressional Power Commission, and to the chairman of
the committee concerned in the Senate and in the House of Representatives:
Provided, That the Corporation shall similarly submit to the respective chairman of
the said committees of Congress a report of its operations and financial statements
within fifteen (15) days from the end of every quarter: And provide, further, That said
committees, either motu proprio or upon the request of any of their members, or of
any Member of Congress, as the case may be, shall have the authority to look into all
the matters relative to the financial and business operations and expenditures of the
Corporation:

(f) To exercise such other powers and duties as may be vested in him by the Board
from time to time. In the case of absence or disability of the General Manager, the
Assistant General Manager shall act in his place.

Under the supervision and control of the General Manager, relevant officers of the
corporation shall take charge of the operations of the Corporation as well as prepare its
power development program.

Sec 10. Authority to Incur Indebtedness and Issue Bonds; Their Conditions, Privileges and
Exemptions; Sinking Funds; Guarantee —

(a) Domestic Indebtedness. - Whenever the Board deems it necessary for the
Corporation to incur indebtedness or to issue bonds to carry out the purpose for which the
Corporation has been organized, it shall, by resolution, so declare and state the purpose for
which the proposed debt is to be incurred and the conditions of the bonds. In order that such
resolution be valid, it shall he passed by the affirmative vote of at least four members of the
Board and approved by the President of the Philippines upon recommendation of the
Secretary of Finance.

The bonds shall be issued under the following conditions: (|) they shall be in
registered form and transferable at the Office of the Treasurer of the Philippines; (2) they
shall not be sold at less than par; (3) they shall be payable ten years or more from date of
issue as may be determined by the Secretary of Finance before their issuance but may be
redeemable, at the pleasure of the Board, after five years from such date of issue; (4) they
shall bear interest at an annual rate to be determined before their issuance by the Secretary
of Finance; (5) the interest may be payable quarterly, semi-annually or annually as may be
determined by the Secretary of Finance before the issuance of the bonds; and (6) both
principal and interest shall be payable in legal tender of the Philippines.

The bonds issued under the authority of this subsection shall be exempt from the
payment of all taxes by the Republic of the Philippines, or by any authority, branch, division
or political subdivision thereof which facts shall be stated upon the face of said bonds, Said
bonds shall he receivable as security in any transaction with the Government in which such
security is required

A sinking fund shall be created, the total thereof at each annual due date of the
bonds shall be equal to an amount of annuity earning an annual interest of nine-tenths of the
rate of interest of the bonds as fixed by the Secretary of Finance. The sinking fund shall be
under the custody of the Treasurer of the Philippines, who shall invest the same subject to
the approval of the- Board and the Secretary of Finance.

The Republic of the Philippines or any of its agencies, instrumentalities organized for
the purpose of issuing guarantees shall guarantee the payment by the Corporation of both
the principal and the interest of the bonds issued by said Corporation by virtue of this Act,
and shall pay such principal and interest in case the Corporation fails to do so, Such
government guaranties shall be covered by the sums necessary to make the payments
guaranteed by this Act duly appropriated, out of the general funds in the National Treasury
not otherwise appropriated: Provided, That the sums so paid by the Republic of the
Philippines shall be refunded by the Corporation: Provided, further, That the Corporation
shall set aside ten per centum of its annual net operating revenues before interests as a


reserve or sinking fund to answer for amounts advanced to it by the National Government for
any loan, credit and indebtedness contracted by the former for which the latter shall be held
answerable as primary obligor or guarantor under the provisions of this Act: Provided,
furthermore, That the setting aside of the amounts mentioned herein shall be automatically
cease the moment the accumulated sinking fund or reserve exceeds the amounts advanced
to the Corporation by the National Government under this Act: And, provided, finally, That
the Corporation may periodically make partial payments to the National Government out of
the said reserves.

The total principal indebtedness of the Corporation under this subsection, exclusive
of interest, shall not at any time exceed Ten Billion pesos.

(b) Foreign Loans. - The Corporation is hereby authorized to contract loans, credits, any
convertible foreign currency or capital goods, and indebtedness from time to time from
foreign governments, or any international financial institutions or fund sources the total
outstanding amount of which, exclusive of interests, shall not exceed One Billion United
States dollars or the equivalent thereof in other currencies, on such terms and conditions as
it shall deem appropriate for the accomplishment of its purposes and to enter into and
‘execute agreements and other documents specifying such terms and conditions.

The President of the Philippines, by himself, or through the Secretary of Finance or
the Governor of the Central Bank, is hereby authorized to negotiate and contract with foreign
governments or any international financial institutions, in the name and on behalf of the
Corporation, one or several loans, for the purpose of assisting in the reconstruction, or
promoting the development, of the economy of the country,

The President of the Philippines, by himself, or through the Secretary of Finance or
the Governor of the Central Bank, is hereby further authorized to guarantee, absolutely and
unconditionally, as primary obligor and not as surety merely, in the name and on behalf of
the Republic of the Philippines, the payment of the loan or loans herein authorized as well as.
the performance of all or any of the obligations undertaken by the Corporation in the territory
of the Republic of the Philippines pursuant to loan agreements entered into with foreign
governments or any international financial institutions.

Negotiation and contracting of any loan, credit or indebtedness under this subsection
shall he subject to applicable laws.

The loans, credits and indebtedness contracted under this subsection and the
payment of the principal, interest and other charges thereon, as well as the importation of
machinery, equipment, materials and supplies by the Corporation, paid from the proceeds of
any loan, credit or indebtedness incurred under this Act, shall also be exempt from all taxes,
fees, imposts, other charges and restrictions, including import restrictions, by the Republic of
the Philippines, or any of its agencies and political subdivisions.

Sec 11, Rehabilitation, Expansion, or Construction of the Agus-Pulangui Hydropower Plant
and other Power Projects Recommended by the General Manager — Upon determination by
the General Manager, on his own initiative or on the recommendation of any interested
party, that the construction of any project by the Corporation is advisable, a report to the
Board, on the engineering and economic feasibility of the project together with preliminary
plans and estimates of the cost of the proposed development and the estimated income to
be derived therefrom shall be submitted by the General Manager.

The Board may thereupon, at its discretion, designate a consulting board composed
of two competent and impartial engineers and one competent economist to pass upon the
different aspects of the project and comment in view, decide whether or not the project shall
be constructed, and what changes, if any, shall be made in the scheme proposed by the
General Manager.

Sec 12. Construction or Repair Work Awarded upon Public Bidding; Exceptions — All work of
construction or repair of the Corporation involving an estimated cost of One Million Pesos or
more shall be awarded by the General Manager, with the approval of the Board, to the


responsible bidder who made the lowest or most advantageous bid. Notice to bidders shall
be published as provided by law. In case no satisfactory bid is received, the General
Manager may proceed to advertise anew, or with the approval of the Board, do the work by
administration. Before award of contract is made, the General Manager shall require the
contractor to give an adequate bond to secure the proper accomplishment of the work under
contract and to satisfy all obligations for materials used and labor employed upon the same
Provided, That any repair, reconstruction or other work of an emergency nature may be
authorized by the Board to be undertaken by administration or by contract: And, provided,
further, That any single work of construction or repair involving an estimated total cost of less
than One Million Pesos may, at the option of the General Manager, be authorized by him to
be undertaken by administration or by other advantageous means after a canvass of the
market to determine the lowest or most advantageous price.

Sec 13. Penalty for Destroying, Injuring or Interfering with any project of the Corporation, or
maliciously Interfering with any Person in the Discharge of his Duties Connected therewith —
Any person or persons who shall maliciously destroy, injure, or interfere with any canal,
raceway, ditch, lock, pier, inlet, crib, bulkhead, dam, gate, sluice, reservoir, aqueduct,
conduit, pipes, culvert, post, abutment, conductor, cable-wire, insulator, weir, benchmark,
monument, or other works, appliance, machinery, building or property of the Corporation, or
who shall maliciously do any act which shall injuriously affect the quantity or quality of the
water or electrical energy of the Corporation or the supply, transmission, measurement, or
regulation thereof, or who shall maliciously interfere with any person engaged in the
discharge of duties connected therewith, or who shall maliciously prevent, obstruct and
interfere with the survey, works and the construction of access road and transmission lines
or any related works of the Corporation, shall be guilty of felony and punished with a fine
ranging from one to five thousand pesos or with imprisonment ranging from one to five
years, or both such fine and imprisonment, at the discretion of the Court, and any injured
party shall have the right to recover all damages suffered and cost of suit in a separate civil
action in any court of competent jurisdiction.

Sec 14, Appropriation of Public Waters ~ Subject to existing rights, all unappropriated public
waters which may be used and developed for hydraulic power purposes shall be granted to
the Corporation: Provided, That in case of conflict with the needs for domestic water supply,
the latter shall prevail

Sec 15. Non-profit Character of the Corporation - The Corporation shall be non-profit and
shall devote all its retums from its capital investment, as well as excess revenues from its
operation, for operating, maintaining, expanding and improving the hydropower complexes
and/or its other assets, and as part of the Mindanao Power Fund. It shall be subject to audit
by the Commission on Audit.

SEC 16. Separability Clause — If any provision of this Act is held invalid or unconstitutional,
‘the same shall not affect the validity and effectivity of the other provisions hereof.

SEC 17. Repealing Clause — All laws, decrees, executive orders, rules and regulations and
other issuances or part thereof, which are inconsistent with this Act, are hereby repealed,
amended, or modified accordingly.

SEC 18. Effectivity - This Act shall take fifteen (15) days after its publication in two (2)
newspapers of general circulation

Approved,