Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

‘SIXTEENTH CONGRESS
Regular Session

676
House Bill No.

Introduced by: EDGARDO RAMA MASONGSONG.

AN ACT CREATING THE MINDANAO POWER CORPORATION,
DEFINING ITS POWERS AND FUNCTIONS,
PROVIDING FUNDS THEREFORE
AND
FOR OTHER RELATED PURPOSES.

EXPLANATORY NOTE

More than a decade ago, Congress passed the Electric Power Industry Reform
‘Act of 2001 (EPIRA) in the attempt of instituting genuine reforms in the industry to
ensure quality, reliability, security and affordability of the supply of electricity. One
of the reforms embodied in EPIRA is the privatization of the National Power
Corporation (NPC) aimed at encouraging greater competition and attracting more
private-sector investments in the power industry, premised on the expectation that a
more competitive power industry will in turn result in lower power rates and a more
efficient delivery of electricity supply to end-users.

Initially, NPC's Agus and Pulangui hydroelectric power complexes, both located
in Mindanao, has been excluded from the privatization program and was given a
reprieve for ten (10) years after the passage of EPIRA in 2001.

In the wake of the recent power crisis that struck Mindanao, power industry
stakeholders push for the government to maintain the Agus and Pulangi plants to
subsidize prices in Mindanao. The Agus-Pulangui hydro complex is the source of
cheaper electricity in Mindanao. Admittedly, power rates in Mindanao are lower
compared with Luzon and the Visayas because of Agus-Pulangi.

It has been foreseen that the takeover by private sector groups or independent
Power Producers (IPPs) will definitely increase the price of power in Mindanao
because private investors are profit oriented and are definitely propelled by business
interests and profits hence increase in price of power is inevitable if they should
acquire the power plants and take over its management and operations. Keeping the
hydro plants in government will certainly moderate any price adjustments of power as

the Pulangi and Agus plants will give a mix to the price of power that will keep it
lower.


The policy of the State to promote the economic development of the country,
particularly in the Mindanao region and the availability of electricity at reasonable
cost as a catalyst for economic growth and progress must be recognized.

It is imperative for the National Government to promote development in
Mindanao by the establishment of the dependable and reliable supply of electric
Power through the acquisition of generation assets of PSALM located in Agus and
Pulangui Hydropower Complexes by the direct stakeholders from the Mindanao region
to assure that the electricity rates are reflective of the true cost of power.

To attain these ends, it becomes necessary for an organized corporate entity in
Mindanao to be created. And this is what this bill seeks to achieve. The proposed
Mindanao Power Corporation, which is a standalone government-owned and-
controlled corporation, shall be empowered to acquire the Agus-Pulangi hydro
complexes for its rehabilitation, operation, management and maintenance.

Acquisition by the Mindanao Power Corporation of the Agus-Pulangui Hydro
Complexes would give beneficial resolution to the Mindanao stakeholders as it would
potentially gain all the benefits derived from privatization, that is, effective and
efficient administration of the power industry in the region; and, security against the
skyrocketing of electric power rates.

Furthermore, the creation of Mindanao Power Corporation as an organized
corporate entity in Mindanao is necessary to assure the full development and
maximized utilisation of the power resources of the region, ensure transparent and
reasonable prices of electricity in a regime of free and fair competition, protect the
public interest, and provide full public accountability to achieve greater operational
and economic efficiency in Mindanao

wh

Vv

EDGARDO RAMA MASONGSONG


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
Regular Session

House Bill No.__ 67 5

Introduced by: EDGARDO RAMA MASONGSONG

AN ACT CREATING THE MINDANAO POWER CORPORATION, DEFINING ITS
POWERS AND FUNCTIONS, PROVIDING FUNDS THEREFORE AND FOR
OTHER RELATED PURPOSES.

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

SECTION 1.Short Title.
This Act shall be known as the “Charter of the Mindanao Power Corporation.”
SECTION 2.Declaration of National Policy.

It is hereby declared to be the policy of the State to promote the economic
development of the country, particularly in the Mindanao region, through effective
and efficient management of the power industry and the availability of electricity at
reasonable cost as a catalyst for economic growth and progress of the region.

Towards this end, the National Government must promote development in Mindanao
by the establishment of the dependable and reliable supply of electric power through
the acquisition of generation assets of PSALM located in Agus and
PulanguiHyrdropower Complexes by the direct stakeholders from the Mindanao region
to assure that the electricity rates are reflective of the true cost of power.

Accordingly, the creation of an organized corporate entity in Mindanao is necessary to
attain these ends.

SECTION3.Creation, Name, Domicile and Term.

To carry out the above policy, there is hereby created a body corporate to be known
as the Mindanao Power Corporation, hereinafter referred to as the “Corporation”.

The principal office of the Corporation shall be determined by its Board of Directors.
It may also establish such offices, branches, agencies or correspondents or other units
in Mindanao or in other parts of the Philippines as its business operations may require.

The Corporation shalt have a term of fifty years from its creation hereof, which shall
be deemed renewed for an equal period unless sooner dissolved by law.


SECTION4. Corporate purpose and powers.

The Mindanao Power Corporation, upon its organization, shall be a body corporate and
shall have the following purposes and power

a. To 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 downpayment with seventy-five (75%) to be
amortized for Twenty-five (25) years.

b. To extend the benefits of the Agus-Pulangui Hydropower Complexes to the
greatest number of the population as possible, with preferential right to
benefit accorded to energy consumers and host communities where such
energy or water resources originate.

¢. To undertake and implement faithfully such projects and operations as will
promote the total electrification of all provinces, cities, municipalities and
barangays existing in the various regions of Mindanao.

d. To exercise complete jurisdiction and control over watersheds surrounding the
reservoirs of the Agus-PulanguiHydrocomplexes 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 watershed, subject to
existing private rights, the needs of waterworks systems, and the requirements
of domestic power supply;

e. To invest in the power industry, as well as, in any activity related to energy
resources development, and to set up or form business subsidiaries under the
Batas PambansaBlg. 68, or through the acquisition of the controlling interests
of existing corporations which may be necessary or contributory to the
economic development of the Mindanao region, or important in the public
interest, or deemed convenient or incidental to the carrying on of any of the
purposes of the Corporation, or which will promote the well-being of the
Corporation;

f. To provide and maintain an adequate or increased supply at all times of energy
resources at competitive cost for electric consumers, especially in Mindanao;

g. To foster conditions of power industry development conducive to a balanced
and sustainable growth of the economy;

Subject to government policy, the Corporation shall also have the following purposes,
powers, functions, rights and activities:

a. To have continuous succession under its corporate name until otherwise
provided by law;

b. To adopt a code of by-laws to complement this Act;

¢. To adopt and use a corporate seal and alter the same, which shall be judicially
noticed;

d. To sue and to be sued in its corporate name;

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, EPOH
payment of just compensation therefor; to alter, straighten, obstruct or
Pa yrece the flow of water in streams or water channels intersecting, 6f
ceecting therewith or contiguous to its works or any part thereof: Provided,
Frat just compensation shall be paid to any person or persons whose property
is, directly or indirectly, adversely affected or damaged thereby:

__ To operate, maintain, repair, rehabilitate, expand and/or improve the Agus-
Pulangui Hydropower Complexes acquired from the Power Sector Assets and
Tiabitities Management Corporation (PSALM) under terms and conditions
provided in this Act with authority to sell electric power 1”) bulk to electric
Cooperatives, distribution utilities, and other entities in accordance with this
Act;

To adopt measures necessary and desirable to ensure sufficiency of power it

TSminitted to electric cooperatives and distribution utilities, and te supply
power in Mindanao in general including the expansion of existing powerplants,
pomsblishment of new plants, and contracting of ancillary or support services
with other power generators;
To acquire by way of negotiation or in the exercise of the right of eminent
Gomain for the purpose of this Act in the manner provided by law for instituting
comjernation proceedings by the national, provincial, city and municipal
governments;

. To promote, hold, transfer, sell, lease, rent, motgage, encumber and
Te ice 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,
the Corporation shall have authority to operate idle powerplants whether
temporarily or permanently to prevent, control, avoid or curb any imminent
and actual power shortages;
ane construct. works across, or otherwise, any stream, watercoursts canal,
Uitch, flume, street, avenue, highway or railway of private and public
Gwnership, as the location of said works may require: Provided, That said
cae be constructed in such a manner as not to endanger le oF property:
And provided, further, That the stream, watercourse, canal ditch, flume,
seek. avenue, highway or railway so crossed or intersected be restored as
street eMMossible to their former state, or in a manner net te impair
restcessarily their usefulness. Every person or entity whose right of way or
property is lawfully crossed or intersected by said ‘works shall not obstruct any
ich 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 right of way to locate, construct and mainte “such works over and
Phroughout the lands owned by the Republic of the Philippines or any of its
branches and political subdivisions. The Corporation or Its representative may
algo enter upon private property in the lawful performané® oF prosecution. of
a sasiness and purposes, including the construction of the transmission lines
hereon: Provided, That the owner of such private property shall be
indemnified for any actual damage caused thereby: Provided, further, That
TAG netion for damages Is filed within five years after the rights of way,
transmission lines, substations, plants or other facilites shall have been
Uaablished: Provided, finally, That after the said period. ro suit shall be
brought to question the said rights of way, transmission lines, substations,
plants or other facilities;

When essential to the proper administration of its corporate affairs oF
hecessary for the proper transaction of its business or to col" ‘out the purposes
fac which it was organized, to contract indebtedness and issue bonds subject to
approval of the President upon recommendation of the Secretary of Finance;

@


To exercise such powers 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;

n. To cooperate with, and to coordinate its operations with those of the National
Electrification Administration and public service entities;

0. 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,

p. 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.

SECTION 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 utilities,
the majority of whose customers are residential ratepayers in Mindanao.
However, Electric Cooperatives where the Agus and Pulangui Hydropower
Complexes are located or sourced shall have the right of first or priority
dispatch of up to 25% of the generated capacities.

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.

¢. 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, created under this Act.

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-PulanguiHydrocomplexes shall immediately be allocated to
electric cooperatives and distribution utilities that cater mainly to residential
ratepayers.

SECTION 6.Mindanao Power Fund.

A Mindanao Power Fund is hereby constituted which shall be taken from the rate fixed
by the Corporation and from royalties paid by electric power industry players for
energy resources in Mindanao.

The Mindanao Power Fund shall be administered by the Corporation to improve the
Mindanao power situation and to help avert any possible power shortage:

a. By 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;

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


b. By contracting power plants that can generate electricity within thirty (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 and as approved by the ERC; provided it
does not sacrifice energy security in the region.

SECTION 7: 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
return 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;

(ii) Interest expenses are not allowable deductions from permissible
return on rate base;

(ili) In 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 rate shall ensure that the Corporation would be able to service the
acquisition cost of the Agus-Pulangui Hydropower Complexes;

¢. The rate is sufficient for operating and maintenance expenses, as well as
capital expenditures projected to be necessary within the next ten (10)
years pursuant to a development plan; provided that interest on loans 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.

e. 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.

SECTION 8.Capital Stock of the Corporation.


The authorized capital stock of the Corporation shall be Two Billion Pesos divided into
Twenty Million shares having a par value of 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 in Mindanao in a
plebiscite conducted for the purpose, with the help of the Mindanao Electric
Cooperatives.

SECTION 9.The Mindanao Power Board; Its 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 (7) members consisting of a chairman, vice-chairman and
five directors who shall be appointed by the President of the Philippines. At any time,
there must be one (1) lawyer, one (1) Certified Public Accountant, and one (1)
Electrical Engineer in the Board of the Corporation.

The Directors of the Corporation shall be composed of the following representatives:
Three (3) shall represent the Electric Cooperatives
One (1) shall represent private Distribution Utilities
One (1) shall represent the Mindanao consumer/ratepayers
One (1) shall represent labor, and,
One (1) 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, and of good moral character. In the case of the labor
representative: 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 the 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.

SECTION 10.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 for the management and

operation 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
Provinces, Cities/ municipalities, and/or Barangays 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 Energy Regulatory Commission (ERC):
Provided, that copies of the budgets or receipts and expenditures herein referred to
shall be disclosed to and shall be subject of audit and verification by the ERC during
ratefixing;

(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, the General
Manager, with the approval of the President of the Philippines, and the Assistant
General Manager, regional managers and department chiefs; and,

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

SECTION 11.The General Manager; His Powers and Duties; Regional Managers and
Other Officers and Employees of the Corporation.

The management of the Corporation shall be vested in the General Manager, assisted
by the 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. 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;

() 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
number 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 Corporation (JCPC), 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
provided, further, That said committees, either motuproprio 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 its power
development program.

SECTION 11. 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, 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 be 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: (1) 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 be 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, and there are hereby appropriated, out of the general funds in the National
Treasury not otherwise appropriated, the sums necessary to make the payments
guaranteed by this Act: 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 (10) 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 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 (10) 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.

The negotiation and contracting of any loan, credit or indebtedness under this
subsection shall be 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.

SECTION 12.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
onrecommendation by 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 on the report of the General
Manager. The Board shall, with the said report 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.

SECTION 13. Construction or Repair Work Awarded upon Public Biddin:
Exceptions.

All work of construction or repair of the Corporation involving an estimated cost of
One Million Pesos or more shall be let 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 tess 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.

SECTION 14. 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 maticiously 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 maticiously 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.

SECTION 15. 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.

SECTION 16. Non-profit Character of the Corporation; Exemption from all Taxes,
Duties, Fees, Imposts and other Charges by Government and Governmental
Instrumentalities.

The Corporation shall be non-profit and shall devote all its returns 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.

To enable the Corporation to pay its indebtedness and obligations and in furtherance
and effective implementation of the policy enunciated in Section one of this Act, the
Corporation is hereby declared exempt:

(a) From the payment of all taxes, duties, fees, imposts, charges, costs and service
fees in any court or administrative proceedings in which it may be a party,
restrictions and duties to the Republic of the Philippines, its provinces, cities,
municipalities and other government agencies and instrumentalities;

(b) From all income taxes, franchise taxes and realty taxes to be paid to the National

Government, its provinces, cities, municipalities and other government agencies and
instrumentalities;

(c) From all import duties, compensating taxes and advanced sales tax, and wharfage
fees on import of foreign goods required for its operations and projects; and

(d) From all taxes, duties, fees, imposts, and all other charges imposed by the
Republic of the Philippines, its provinces, cities, municipalities and other government
agencies and instrumentalities, on all petroleum products used by the Corporation in
the generation, transmission, utilization, and sale of electric power.

SECTION 17. Separability Clause.

The provisions of this Act are hereby declared to be separable, and in the event any
‘one or more of such provisions are held unconstitutional, they shall not affect the
validity of other provisions.

SECTION 18. Repealing Clause.

All laws, executive and administrative orders, or parts thereof, inconsistent with any
provision of this Act are hereby repealed or modified accordingly.”

SECTION 19.Effective Date.

This Act shall take effect fifteen (15) days after its publication in a newspaper of
general circulation.

APPROVED,