Decision, ERC Case No. 2013-050 RC
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\ IN THE MATTER OF THE APPLICATION FOR APPROVAL OF AUTHORITY TO SECURE LOAN FROM THE NATIONAL ELECTRIFICATION ADMINISTRATION (NEA) TO FINANCE APPROVED ·CAPITAL EXPENDITURE (CAPEX) PROJECTS WITH PRAYER FOR PROVISIONAL AUTHORITY ERC CASE NO. 2013-050 MC OCCIDENTAL MINDORO ELECTRIC COOPERATIVE, INC. (OMECO), · Applicant. )(- -----------------------)( DECISION · . Before the Commission for resolution is the application filed on April 17, 2013 by Occidental Mindoro Electric Cooperative, Inc. (OMECO) for the approval of its authority to secure loan from the National Electrification Administration (NEA) to finance its approved capital expenditure (CAPEX) projects, with prayer for provisional authority. · , In the said application, OMECO alleged, among others, that: 1. It is an electric cooperative (EC) duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal offices at San Jose Occidental Mindoro; 2. It is the holder of an exclusive franchise, issued by the National Electrification Commission (NEC), to operate an electric light and power distribution system in the Municipalities of Abra de llog, Calantaan, Magsaysay, Maburao, Paluan, Rizal, Sablayan, San Jose, and Santa Cruz Mindoro, all in the Province of Occidental Mindoro. The '. ERC CASE NO. 2013-050 MC DECISION/December 1, 2014 Page 2 of 10 distribution service in the Municipality of Paluan 1s being provided by its Municipal Government; 3. On June 25, 2009, it filed an application for the approval of its capital expenditure (CAPEX) projects docketed as ERC Case No. 2009-058 MC entitled, "In the Matter of the Application for Approval of Capital Projects - Re: Acquisition, Installation and Construction of 5 MVA Substation in Mompong, Sablayan, Reconductoring!Upgrading and Conversion of Primary Lines and Meter Clustering, with Prayer for Provisional Authority; 4. On December 12, 2011, the Commission issued a Decision approving its proposed CAPEX projects with modifications amounting to One Hundred Seventy-Three Million Nine Hundred Ten Thousand Four Hundred and Fifty-Five Pesos (PhP173,91 0,455.00), broken down, as follows: PROJECT COST (PhP) PROJECT TITLE 2011 2012 2013 2014 2015 Construction of Mompong 5 MVA Substation for 18,000,000.00 Sablayan & Calintaan - - - - Upgrading of Lines - MAPSAArea 1 222,286.00 447,033.00 479,128.00 284,362.00 325,487.00 Upgrading of Lines - Sablayan Area 1 - 1,728,116.00 1,031,613.00 1,237,183.00 1,581,116.00 Upgrading lines - San Jose Area 1 614,947.00 - - 7,414,331.00 - Upgrading and conversion of Lines - OMECO Areas - 3,463,049.00 617,684.00 2,774,947.00 980,984.00 Upgrading of Lines - MAPSAArea 2 - 41,298.00 298,442.00 919,969.00 2,806,241.00 Upgrading of Lines - Sablayan Area 2 3,703,036.00 - 295,958.00 - 7,817,706.00 Upgrading of Lines - Rizai/Calintaan/ - 1 ,260,611.00 4,382,791.00 1,467,774.00 2,125,094.00 Maqsavsay Upgrading of Lines -San Jose Area 2 and Construction of tie-line from San Jose Switchyard 7,337,686.00 - - - - to Magbay NPC 20 MVA Substation Rehab/Upgrading of Facilities 8,721,070.00 8,847,140.00 10,044,715.00 10,884,915.00 11,711,937.00 Logistics 7,135,821.00 9,234,603.00 2,758,603.00 4,306,341.00 334,372.00 Add-ons 4,000,134.00 3,980,999.00 4,321,068.00 - 5,103,138.00 General Account 1,700,000.00 - - - - Others 7,167,000.00 - - - - TOTAL COST (PhP) 58,601,980.00 29,002,576.00 24,230,002.00 29,289,822.00 32,786,075.00 5. Based on the Decision of the Commission, it applied for a loan accommodation to NEA to finance its CAPEX projects. NEA, on the other hand, granted the loan in the amount of One Hundred Seventy-Three Million Nine Hundred Ten Thousand Four Hundred Fifty-Six Pesos and Forty-Four Centavos (PhP173,91 0,456.44 ); ERC CASE NO. 2013-050 MC DECISION/December 1, 2014 Page 3 of 10 6. In view of the foregoing, it now seeks authority from the Commission to secure loan in the amount applied for or granted by NEA in order to finance its approved CAPEX projects; 7. In support of the instant application, the following documents were attached and were made as an integral part thereof; a. Audited Financial Statement (AFS) for years 2009-2012; b. Letter of Approval of NEA; c. Summary of Projects and/or Equipment Cost Estimate; d. Details of Specifications of Project and/or Equipments; e. Bases/Reasonableness of the estimate cost per project/equipment; f. Loan Amortization Schedules; g. Commission's Decision dated December 12, 2011 1n ERC Case No. 2009-58 MC; h. Annual Reinvestment Fund Utilization; 1. Computation of Impact to Rates; J. Computation of Financial Ratios; k. Cost Benefit Analysis (Justification, study, computation and benefits resulting from securing the loans); and I. Loan Profile with NEA (2009- 2012); 8. It prays that, upon filing and initial evaluation of the instant application and pending trial on the merits, a provisional authority be issued, allowing it to secure loans from NEA and upon due notice and hearing, that the same be approved accordingly. Having found said application sufficient in form and in substance, with the required fees having been paid, an Order and a Notice of Public Hearing, both dated May 27, 2013, were issued setting the case for initial hearing on June 20, 2013. ERC CASE NO. 2013-050 M'c DECISION/December 1, 2014 Page 4 of 10 In the same Order, OMECO was directed to cause the publication of the Notice of Public Hearing, at its own expense, once (1x) in a newspaper of general circulation in the Philippines, with the date of the publication to be made not later than ten (1 0) days before the scheduled date of the initial hearing. It was also directed to inform the consumers within its franchise area, by any other means available and appropriate, of the filing of the instant application, its reasons therefor and of the scheduled hearing thereon. The Office of the Solicitor General (OSG), the Commission on Audit (COA) and the Committees on Energy of both Houses of Congress were furnished with copies of the Order and the Notice of Public Hearing and were requested to have their respective duly authorized representatives present at the initial hearing. Likewise, the Offices of the Provincial Governor of Occidental Mindoro and Mayors of the Municipalities within OMECO's franchise area were furnished with copies of the Order and the Notice of Public Hearing for the appropriate posting thereof on their respective bulletin boards. On June 13, 2013, OMECO filed its "Pre-Trial Brief." During the June 20, 2013 hearing, only OMECO appeared. No intervenor/oppositor appeared nor was there any intervention/opposition registered. At the said hearing, OMECO presented its proofs of compliance with the Commission's posting and publication of notice requirements which were duly marked as Exhibits "A" to "D-1", inclusive. Thereafter, it conducted an expository presentation of its application. At the termination of the expository presentation, OMECO presented Engr. Celso D. Garcia, its Corporate Plan[ling Section's Officer-in-Charge (OIC), who testified in support of the instant application. In the course of his direct examination, additional documents were identified and marked as exhibits. The direct examination having been terminated, the Commission propounded clarificatory · questions on the said witness. ERC CASE NO. 2013-050 MC DECISION/December 1, 2014 Page 5 of 10 Thereafter, OMECO made an oral formal offer of evidence. On November 24, 2014, the Commission issued an Order admitting OMECO's formal offer of evidence and declaring the case submitted for resolution. DISCUSSION The Commission's Decision in ERC Case No. 2009-058 MC, dated December 12, 2011, approved OMECO's 2011 to 2015 CAPEX projects requiring a total capital investment of One Hundred Seventy Three Million Nine Hundred Ten Thousand Four Hundred Fifty-Five Pesos (PhP173,91 0,455.00). The said amount will be financed through loans from NEA, subject to the following conditions: a) submission of a progress report with an indication of any variance in the implementation of the projects and time schedule; b) conduct of a competitive bidding for the purchase of major materials in the implementation of the proposed projects, and c) filing an application for the approval of its authority to secure loans and exert efforts in negotiating terms and condition affording longer loan amortization. The details of OMECO's aforementioned Approved Capital Expenditure (CAPEX) projects for the period 2011 to 2015 are as follows: Approved Project Cost Source of Project Description (PhP) Financing a) Construction of Mom pong 5 MVA Substation for Sablayan & Calintaan 18,000,000.00 NEA b) Upgrading of Lines-MAP SA Area 1 1,758,296.00 NEA c) Upgrading of Lines-Sablayan Area 1 5,578,028.00 NEA d) Upgrading of Lines-San Jose Area 1 8,029,278.00 NEA e) Upgrading and Conversion of Lines-OMECO Areas 7,836,664.00 NEA f) Upgrading of Lines-MAP SA Area 2 4,065,950.00 NEA g) Upgrading of Lines-Sablayan Area 2 11,816,700.00 NEA h) Upgrading of Lines-Rizai/Calintaan/Magsaysay 9,236,270.00 NEA i) Upgrading of Lines-San Jose Area 2 and Construction of tie-line from San Jose switch yard to Magbay NPC 20 MVA Substation 7,337,686.00 NEA j) Rehab/Upgrading of Facilities 50,209,777.00 NEA k) Logistics 23,769,467.00 NEA I) Add-ons 17,405,339.00 NEA m) General Account 1,700,000.00 NEA n) Others 7,167,000.00 NEA TOTAL 173,910,455.00 ERC CASE NO.