11 June 2012

IN SUBIC, BAGUIO, CLARK; P5B power subsidy for mega projects

The Department of Trade and Industry (DTI) plans to continue a power subsidy plan for mega projects or those worth over $1 billion in Subic, Baguio and Clark.

Trade Undersecretary Cristino Panlilio said that P5 billion is being budgeted to replenish an old fund-industry competitive fund- started during the term of President Gloria Arroyo.

The subsidy can last for seven years. Panlilio said the electric power support scheme is now awaiting approval of Malacanang after it has gotten the endorsement of the economic cluster for appropriation in the budget.

He declined to identify the companies that would benefit from the plan nor the power rates they would be enjoying but previous reports had tagged Texas Instruments in Clark and Baguio, Hanjin Heavy Industries Philippines in Subic, Samsung through unit Phoenix Semiconductors in Clark, Intel Corp. and Mindanao Electronics Inc. as the initial beneficiaries of the reduced power scheme.

Despite this incentive, Intel chose to shift operations to Vietnam and closed its Cavite plant.

The subsidized power rate was P2.15 per kwh, which is about half the current cost to ordinary consumers and includes generation, transmission and distribution charges.

Generation charge was 20 to 30 percent cheaper.

Panlilio clarified that the new scheme being worked out is for just projects worth over a billion dollars and is separate from the one earlier forged by the Philippine Economic Zone Authority (PEZA) for reduced power rates for about 279 ecozone locators.

“It would be an adequate support for them to be competitive,” said Panlilio of the electric power support scheme.

The ICF was part of a commitment granted by the Arroyo government to the mega investors in Clark, Subic and Baguio ecozones. The support was contained in Executive Orders 701, 856 and 666 and expired in March 2011.

The scheme reportedly cost government P500 million annually because the locators were few and operations were small..

Korean firm Hanjin invested $2 billion for shipbuilding in Subic; Texas Instruments also invested $2 billion for its expansion project; Phoenix Semiconductor invested $500 million in Clark.

The ICF was used to support and incentivize qualified power intensive industries which contribute significantly to the economy.

The ICF was used to recover any financial impact that PSALM had to incur for the subsidy. (Irma Isip, Malaya)