Republic of the Philippines
HOUSE OF REPRESENTATIVES.
Quezon City, Metro Manila

EIGHTEENTH CONGRESS
First Regular Session

House Bill Number si)

Introduced by:
REP. PRESLEY C. DE JESUS (PHILRECA PARTYLIST), REP. SERGIO C. DAGOOC.
(APEC PARTY-LIST ), REP. GODOFREDO N. GUYA (RECOBODA PARTYLIST), AND
REP. ADRIANO A. EBCAS (AKO PADAYON PARTY-LIST)

eee

AN ACT CREATING THE MINDANAO POWER CORPORATION
AND PROVIDING FUNDS THEREFOR

EXPLANATORY NOTE

Republic Act No. 9136 or the Electric Power Reform Act (EPIRA) of 2001 which
liberalized and privatized the power industry was aimed to secure the power supply and
reduce the cost of electricity through greater competition and efficiency. It was intended
to free the government from subsidizing capital-intensive power projects and allow
instead the private sector to put up the same. Thus, the law directed the government to
privatize or sell its power generation assets and the capacities it contracted with
Independent Power Producers (IPPs)

In Mindanao, National Power Corporation's (NPC) Agus and Pulangui
hydroelectric power complexes, located in Lanao Del Sur and Bukidnon provinces,
respectively, has been exempted from privatization and were given ten (10)-year reprieve
from the passage of EPIRA; they continue to bring low power rates in Mindanao.


The EPIRA provided that the ownership of the Agus and Pulangui power
complexes was to be transferred to the Power Sector Assets and Liabilities Management
Corp. (PSALM), the state agency which handles the privatization of National Power
Corporation’s (NPC) assets. They will continue to be, however, operated by the NPC.
After the lapse of ten (10) years, the privatization of the Agus and Pulangui complexes is.
left to the discretion of PSALM, in consultation with Congress.

It has been foreseen that the takeover by private sector groups or Independent
Power Producers (IPP) of the Agus and Pulangui power complexes will increase the price
of power in Mindanao as private investors are profit oriented and are propelled by
business interests and profits, hence, an increase in the 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 Pulangui and Angus 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 the Mindanao region, and the availability of electricity at reasonable cost as a
catalyst for economic growth and progress must be recognized.

Itis, therefore, 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 Angus-Pulangui 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


utilization 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.

ep. PRESLEY C. DE JESUS
PHILRECA Party-List

Rep. SERGIO C. DAGOOC
APEC Party,List

Rep. GODOFREDO N. GUYA
‘COBODA Party-List

vigiai

Rep. ADRIANO A. EBCAS
AKO PADAYON Party-List


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

EIGHTEENTH CONGRESS
First Regular Session

House Bill Number 470

Introduced by:

REP. PRESLEY C. DE JESUS (PHILRECA PARTYLIST), REP. SERGIO C.
DAGOOC (APEC PARTY-LIST ), REP. GODOFREDO N. GUYA (RECOBODA
PARTYLIST), AND REP. ADRIANO A. EBCAS (AKO PADAYON PARTY-LIST)

AN ACT CREATING THE MINDANAO POWER CORPORATION

AND PROVIDING FUNDS THEREFOR

&e 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 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.

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


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

SECTION 4. Corporate purpose and powers. ~ The Mindanao Power
Corporation, upon its organization, shall be a body corporate and shalt 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;

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;

To provide and maintain an adequate or increased supply at all times’ of

energy resources at competitive cost for electric consumers, especially in

Mindanao;

9. 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:

2

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

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;

To sue and to be sued in its corporate name;

. To conduct investigations and surveys for the development of water power
in the Mindanao region;

. 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;

. To operate, maintain, repair, rehabilitate, expand and/or improve the
AgusPulangui 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;

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
powerplants, establishment of new plants, and contracting of ancillary or
support services with other power generators;

i, To acquire by way of negotiation or in the exercise of the right of eminent
domain for the purpose of this Act in the manner provided by law for
instituting condemnation proceedings by the national, provincial, city
and municipal governments;

j. To promote, hold, transfer, sell, lease, rent, motgage, encumber and
otherwise dispose of property incident to, or necessary, convenient or
proper to carry out the purposes for which the Corporation was created;

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

|, To construct works across, 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 said
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 or railway 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

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work. The Corporation is hereby given the right of 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 representative may also enter upon private
property in the lawful performance or prosecution. of its business and
Purposes, including the construction of the transmission lines thereon:
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;

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;

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;

o. 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.

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, 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;

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:

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(iv)

(v)

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 order to protect the consumers;

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

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;

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

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.

. 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.

. 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.

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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.

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;

(©) 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;

(v) 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;

(4) 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 maybe 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, shalt 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
Bidding; 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 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.

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 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.

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 alll 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,