ROUSE. OF REPRESENTATIVES
RECEIVED

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

SEVENTEENTH CONGRESS
First Regular Session

122

HOUSE BILL NO.

Introduced by: REPRESENTATIVE CELSO L. LOBREGAT

AN ACT
CREATING THE MINDANAO POWER CORPORATION
AND PROVIDING FUNDS THEREFOR

EXPLANATORY NOTE

This is a re-filed bill, which adopts the substitute bill approved on May 19, 2015
during the Joint Committee Meeting of the Committees on Government Enterprises and
Privatization, Energy and Mindanao Affairs, which consolidated House Bill Nos. 676,
4883, and 2621, originally filed during the 16" Congress, by Representatives Edgardo
Masongsong, Rufus and Maximo Rodriguez and the undersigned, respectively. Said
substitute bill was also approved by the Committee on Ways and Means on September
22, 2015.

Republic Act No. 9136 or the Electric Power Industry Reform Act (EPIRA) of 2001
which liberalized and privatized the power industry, was aimed at securing the
country’s power supply and reducing 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 these crucial
projects. Thus, the law directed the government to privatize or sell its power generation
assets and the capacities it contracted with the independent power producers (IPPs)
However, more than a decade after the law's enactment, power outages, particularly in
Mindanao, continue to be experienced by consumers.

The most concrete effect of the EPIRA specific to Mindanao is the treatment
extended to Agus-Pulangui Hydropower Complexes. The Agus-Pulangui Hydropower
Complexes continue to bring low power rates in Mindanao. For the first 10 years of
EPIRA’s enforcement, Mindanao’s Agus and Pulangui hydropower complexes, located in
Lanao del Sur and Bukidnon provinces, respectively, were exempted from privatization.
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 that was created to handle the privatization of National
Power Corporation's (NPC's) assets, and that both would continue to be operated by
NPC. After 10 years, the privatization of the Agus and Pulangi complexes was to be left
to the discretion of PSALM in consultation with Congress, as the law provided.



This bill seeks for the non-privatization of Agus-Pulangui hydropower complexes,
which are considered as 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. There were calls to stop the sale of the Agus and Pulangui
complexes since these are sources of cheap power in Mindanao that should not fall into
the hands of profit-driven private interest. Policy should be adopted on the 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 no government subsidy, while sustaining the required
level of power supply in Mindanao.

There are two issues related to the matter. First argument is that non-
privatization of the Agus-Pulangui hydropower complexes would discourage entry of
private investors because they will not be able to compete with low power rates of the
hydroelectric complex. The demand for power in Mindanao has continuously risen
through the years with rapid urbanization and increased industrialization and citing
2015 data from the Department of Energy (DOE), of the total 2,067 megawatts
committed capacity and 1,939.33 indicative capacity of Mindanao, 131.80 megawatts
of committed capacity and 387.84 indicative capacity come from hydropower plants,
such as the Agus and Pulangui.

Second, there is an allegation that Mindanao electric cooperatives and
consumers refuse to share the burden in the costs of power. This bill addresses this
concern by having a Mindanao Power Corporation (MINPOCOR) with regulated rates
that enable it to raise (a) sufficient funds for buying Agus-Pulangui from NPC/PSALM;
(b) sufficient funds for operating and maintaining such assets efficiently; and (c)
sufficient funds for improving such assets.

The creation of the MINPOCOR was first proposed by the Mindanao
Development Authority (MinDA) during the 2012 Mindanao Power Summit. The
Philippine Chamber of Commerce and Industry (PCI) immediately expressed its
support considering that the Agus-Pulangui hydropower plants are Mindanao’
patrimony and should be in government hands.

It is the government's duty and responsibility 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.

In view of the foregoing, approval of the bill is earnestly sought.

BA4, ee
‘CELSO L, LOBRE(
Representative
Zamboanga City, 1* District



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

SEVENTEENTH CONGRESS
First Regular Session

HOUSE BILL NO.

Introduced by: REPRESENTATIVE CELSO L. LOBREGAT

AN ACT
CREATING THE MINDANAO POWER CORPORATION
AND PROVIDING FUNDS THEREFOR

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 (MINPOCOR)”.

SEC. 2. Declaration of State Policy.-It is the policy of the State not to privatize
the Agus and Pulangui hydropower complexes in Mindanao because these are essential
to public welfare. The public would be better served and benefited if the government
retains ownership and control over these inherently profitable hydropower plants
There would be no need for government subsidy for the operation, maintenance,
expansion, and improvement of these hydropower complexes, even as the required
level of power supply in Mindanao is sustained.

It is the government’s duty and responsibility to promote the economic
development of the country, particularly the Mindanao region, and the availability of
electricity at reasonable cost is a catalyst for economic growth,

Towards this end, the National Government shall ensure the dependable and
reliable supply of electric power through the acquisition by the appropriate government
agency of the generation assets of the Power Sector Assets and Liabilities Management
(PSALM) located in Agus and Pulangui, hereinafter referred to as the Agus-Pulangui
Hydropower Complexes (APHC), an assurance that the electricity rates shall, at all
times, reflect the true cost of power.

The creation of an organized government-owned corporate entity in Mindanao
is necessary to attain these ends.



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SEC. 3.Definition of Terms.- The following terms are herein defined as follows:

(a) Distribution of electricity refers to the conveyance of electric power by a
distribution utility through its distribution system.

(b) Distribution Utility refers to any electric cooperative, private corporation,
government-owned utility or existing local government unit which has an exclusive
franchise to operate an electric power distribution system in a specified area

(c) Electric cooperative refers to an electric power distribution utility
organized pursuant to Presidential Decree No. 269, otherwise known as the National
Electrification Administration Decree, as amended

(d) End-user refers to any person or entity requiring the supply and delivery of
electricity for its own use.

(e) NPC-Mindanao Generation refers to the Mindanao office of the National
Power Corporation.

(f) Return-On-Rate-Base or RORB refers to the rate setting methodology that
allow public utilities to recover just and reasonable costs and earn a reasonable return
so as to enable such entities to operate viably.

(a) Retail Rate refers to the total price paid by end-users consisting of the
charges for generation, transmission and related ancillary services, distribution, supply
and other related charges for electric service.

SEC. 4.Creation, Name, Domicile, and Term.-There is hereby created a
government-owned and -controlled corporation to be known as the Mindanao Power
Corporation(MINPOCOR), hereinafter referred to as the "Corporation", under the Office
of the President of the Philippines and attached to the Department of Energy for policy
supervision

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



The Corporation shall have a term of fifty (50) years from its creation hereof and
shall be deemed renewed for an equal period unless sooner dissolved by law. The
Corporation shall be covered by the provisions of Republic Act No. 10149, otherwise
known as the “GOCC Governance Act of 2011”, and be subject to the regulatory
jurisdiction of the Governance Commission for GOCCs (GCG).

SEC.S. Powers and General Functions.-The powers, functions, rights and
activities of the Corporation shallbe the following:

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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.  Toadopt and use a seal and alter it at its pleasure;
d. To sue and be sued in any court of law;

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 Mindanao, 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, or improve the APHC
acquired from the PSALM under the 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 hydropower plants, and contracting of
ancillary or support services with other power generators, subject to the
market share limitation as provided in Republic Act No. 9136, otherwise
known as the"Electric Power Industry Reform Act of 2001”;



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To acquire whether by way of 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 of the Philippines, to exercise the authority to operate idie
power plants in Mindanao, whether temporarily or permanently,to curb
any imminent and actual Mindanao power shortages that would impact on
the national interest;

To construct work 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 shall be constructed in such a manner as not to endanger life or
property: Provided, further, That the stream, watercourse, canal, ditch,
flume, street, avenue, highway, or railway so crossed or intersected shall
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
Corporation 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 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 (5) years after the rights-of-way 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
manner provided by law for instituting condemnation proceedings by the
national, provincial, and municipal governments;

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



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bonds subject to the approval of the President of the Philippines upon

recommendation of the Secretary of Finance;

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 provisions of Batas PambansaBlg. 68, otherwise known as the
Corporation Code of the Philippines, or through the acquisition of the
controlling interests of existing corporations which may be necessary or
will contribute 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 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;

To exercise complete jurisdiction and control over the watersheds
surrounding the reservoirs of the APHC and other plants or projects
constructed or proposed to be constructed by the Corporation. For this
purpose, the National Power Corporation (NAPOCOR) and the PSALM shall,
upon written advice by the Corporation, forthwith surrender jurisdiction to
the Corporation all areas embraced within the watersheds that 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
Department of Environment and Natural Resources and any attached
agency thereof as well as other relevant government agencies, institutions,
or entities shall, upon written advice, surrender jurisdiction to the
Corporation all areas embraced within the said watersheds, subject to
existing private rights, the needs of waterworks systems, and the
requirements of domestic water supply. A proportionate share of the
watershed management fees being collected by these concerned agencies
likewise shall be automatically transferred to the Corporation to be used
for the management of the watersheds of the APHC and those surrounding
other power plants or projects of the Corporation;

To extend the benefits of the APHC to the greatest number of the
population as possible, with preferential right to benefit accorded to



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energy consumers and host communities where such energy or water
resources originate;

r. To cooperate with and to coordinate its operations with those of the
National Electrification Administration and public service entities, as may
be appropriate;

s. 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,

t. Generally, to exercise all the powers of a corporation under the
Corporation Code of the Philippines insofar as they are not inconsistent
with the provisions of this Act.

SEC. 6. Acquisition of APHC Facilities, Intangible Assets, and Liabilities.—The
Corporation shall acquire by purchase all existing APHC facilities, plants, lands, buildings
and other properties, movable and immovable, and all assets, powers, rights, interests
and privileges relating to hydroelectric power plant operations, including all equipment
which are necessary for their operations from the PSALM pursuant to Republic Act No.
9136, otherwise known as the Electric Power Industry Reform Act of 2001.The value of
these assets shall be determined by the Commission on Audit.

The acquisition cost of the APHC including their existing liabilities, which shall
also be transferred to the Corporation, shall be amortized for twenty-five (25) years.

SEC.7.Disposition of Hydroelectric Power.-The Corporation shall have authority
to sell hydroelectricity pursuant to the following parameters or as may be determined
by the Board

a. The existing capacity of the APHC shall be allocated pro-rata primarily to
electric cooperatives and distribution utilities, the majority of whose
customers are residential ratepayers 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. To devise ways and means of giving direct benefits to the province, city, or
municipality, especially the communities and people affected, and equitable
and preferential benefit to the region that hosts the energy resource or the
energy-generating facility: Provided, however, That the other provinces,
cities, municipalities, or regions shall not be deprived of their energy
requirements. For this purpose, the relevant provisions under sections 289



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to 294, Chapter 2, Title Ill, Book II, of Republic Act No. 7160 or the Local
Government Code of the Philippines, shall continue to apply;

d. If and when possible, the Corporation may participate in the Wholesale
Electric Spot Market (WESM) provided that any and all its income shall be
1g, expanding, and improving the

utilized solely for operating, maintai
hydropower complexes and its other assets.

Existing power supply agreements involving the APHC 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 APHC shall
immediately be allocated to electric cooperatives and distribution utilities that cater
mainly to residential ratepayers.

SEC.8.Rate-fixing.-The rates charged by the Corporation shall be subject to
approval by the Energy Regulatory Commission (ERC) and the following guidelines, as
follows:

a. Rates shall allow the recovery of just and reasonable costs and a reasonable
return on 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
beallowed to revalue its eligible assets not more than once every three
(3) years by an independent appraisal company: Provided, however,
That 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;

(iii) 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 the 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
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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 APHC;

c.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.

SEC.9.Authorized Capital. - The Corporation shall have an authorized capital
stock equal to:

(a) The value of APHC fixed assets, including dams, facilities, and equipment,
and such other properties pertaining to the APHC, movable and immovable, as valued
on the date of the acquisition thereof pursuant to Section 6 hereof; and

{b) The value of such real estate owned or administered by the NPC-MinGen
in connection with its operation of the APHC.

The National Government shall make additional equity investment into the
Authority out of funds appropriated in the annual General Appropriations Act.

SEC.10.Board of Directors; Composition; Qualifications; Compensation of
Members; Powers and Duties.-The powers of the Corporation shall be vested in and
exercised by the Board composed of eleven (11) directors consisting of the Chairperson
of the Mindanao Development Authority and the Secretary of the Department of
Energy (DOE) as co-chairpersons; the General Manager of the Corporation as the vice-
chairperson; the Secretary of the Department of Finance (DOF), the Secretary of the
Department of Environment and Natural Resources, a representative of the Governor of
the ARMM or its successor entity, as ex-officio members; and the following other
members to be appointed by the President of the Philippines from a shortlist prepared
by the GCG in accordance with the provisions of Republic ActNo. 10149: One (1)
representative from Mindanao electric cooperatives; One (1) representative from
Mindanao private distribution utilities; One (1) representative from the education or
academic community in Mindanao; One (1) representative from Mindanao consumers
or rate-payers; and One (1) representative of the business or private sector.

The chairpersons and the Secretaries of the DOF, DOE, DENR, the General
Manager, and the representative of the ARMM Governor or its successor entity shall sit

in an ex-officio capacity. The other members of the board shall each serve a term of one

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(1) year, subject to reappointment, pursuant to Republic Act No. 10149, except that any
person appointed to fill a vacancy shall serve only for the unexpired term of the
member being succeeded. The General Manager shall be appointed annually by the
members of the Board from among their ranks.

Except for the directors who sit in an ex officio capacity, every member of the
Board shall possess any one or a combination of the following qualifications: a duly
licensed professional or with recognized competence in engineering or any other
energy-related discipline, environmental science, business management and finance,
or law, and of good moral character. Every member of the Board must also be qualified
by the “Fit and Proper Rule” as determined by the GCG in accordance with the
provisions of Republic Act No. 10149. All appointive members of the Board, including
the General Manager, shall be residents of Mindanao for at least five (5) years prior to
their appointment.

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

The General Counsel of the Corporation shall be the ex-officio Secretary of the
Board

The members of the Board and the Board Secretary shall receive a per diem and
allowances for actual meetings attended or actual work done in such amounts as
generally practiced in the industry.

SEC.11.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 impact on the rates 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 municipalitieswhich are the site of or are 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 rate fixing;

{c) Subject to the provisions of existing laws and regulations and upon the
recommendation of the General Manager, to organize, reorganize and

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determine the Corporation's staffing pattern and the number of personnel;
to fix their salaries; and to define their powers and duties: Provided, That
the Corporation shall be covered by the Compensation and Position
Classification System (CPCS) for GOCCs under Republic Act No. 10149 as
approved by the President of the Philippines: Provided, further, That prior
approval from the GCG shall be obtained therefor;

(d) To appoint and fix the compensation of the General Manager, Assistant
General Manager, Regional Managers, and Department Heads;

(e) For cause, to suspend or remove, by majority vote of all members of the
Board, the Assistant General Manager, Regional Managers, and Department
Heads; and

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

SEC. 12. The General Manager; Powers and Duties; Regional Managers, and
Other Officers and Employees of the Corporatio}
shall be vested in the General Manager, assisted by an Assistant General Manager,
Department Head for Finance, a Department Head for Engineering and Construction, a
Department Head for Administration, and such additional officers and employees as the
Board may provide and choose.For this purpose, the General Manager shall have the
following powers and duties:

-The management of the Corporation

(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 deemed 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 prescribed by the Board, to appoint
and fix the number and compensation of other officials and employees of
the Corporation not herein provided; 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

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the President of the Philippines, President of the Senate, Speaker of the
House of Representatives, the Joint Congressional Power Corporation
(CPC), 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 chairperson of the said committees of
Congress a report of its operations and financial statements within fifteen
(15) days from the end of every quarter: Provided, 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 by the Board
from time to time. In the 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.

SEC. 13. Authority to Incur Indebtedness and Issue Bonds; Conditions,
Privileges and Exemptions, Sinking Funds; and Guarantee thereof.

(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 be passed by affirmative vote of at least
four (4) 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 for ten (10) 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 (5) 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) 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,

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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
(9/10) of the rate of interest of the bonds as fixed by 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 guarantees 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, 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 per centum (10%) 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: 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
(P10,000,000,000.00)

(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 doliars (US$1,000,000,000.00) 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 BangkoSentral ng Pilipinas, is hereby authorized to negotiate
and contract with foreign governments or any international financial institutions, in the

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name and on behalf of the Corporation, one or several loans, for the use of the
Corporation.

The President of the Philippines, by himself, or through the Secretary of Finance
or the Governor of the Bangko Sentral ng Pilipinas, 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 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.

SEC. 14. Rehabilitation, Expansion, Construction of the Agus-Pulangui
Hydropower Complexes 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.

SEC. 15. 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 (P1,000,000.00) 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

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contract:Provided, further, That any single work of construction or repair involving an
estimated total cost of less than One Million Pesos (P1,000,000.00) 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. 16. 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
fone thousand pesos (P1,000.00) to Five thousand pesos (P5,000.00) or with
imprisonment ranging from one (1) to five (5) 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. 17. 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. 18.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 its other assets
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 1 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

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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.

SEC. 19. Appropriations.-The amount necessary for the initial operations of the
Corporation shall be sourced from its earnings. Subsequent funding requirements, if
necessary, shall be included in the annual General Appropriations Act.

SEC. 20. Transitory Provision.- The ownership, possession, authority and
control of NPC-MinGen over the APHC and all other properties, assets, and facilities in
Mindanao, including its budgetary appropriations, finances, records, equipment, rights
as well as liabilities are hereby transferred to the Corporation.

The Board may reorganize the existing APHC personnel structure and the
current personnel placement of NPC-MinGen. Any incumbent employee of NPC-
MinGen who may be separated as a result of the said restructuring or who elects to
leave the service or retire shall be entitled to claim separation or retirement benefits as
may be provided under existing laws or issuances or be entitled to a separation plan
which shall be one and one-half month salary for every year of service in the
government excluding those already considered or paid in a prior separation plan,
whichever may be beneficial to the employee concerned: Provided, however, That
those who avail of such privilege shall start their government service anew if absorbed
by any government agency, branch, unit, or any GOCC.

SEC.21.Separability Clause.-Should any provision of this Act is held to be invalid
or unconstitutional, the same shall not affect the validity and effectivity of the other
provisions hereof.

SEC.22. Repealing Clause.-Section 47(f) of Republic Act No. 9136, as well as 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.

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1 SEC.23. Effectivity.-This Act shall take effect fifteen (15) days after its
2. publication in the Official Gazette or in a national newspaper of general circulation.

3 Approved,

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