Artech admits contract with Ileco-3 defective

By Francis Allan L. Angelo

NO less than the vice president of Applied Research Technologies Phils. (Artech) admitted that their power supply agreement (PSA) with Iloilo Electric Cooperative (Ileco 3) is flawed.

Atty. Ramil Naciongayo, counsel for complainants Gerardo P. Panes and Evelyn P. Peñaflor, said Artech vice president for administration and business development Domingo Beltran admitted the defects in the 25-year contract before the National Electrification Administration (NEA) investigation committee looking into the alleged bribery and onerous provisions of the Artech-Ileco 3 contract signed last April 21, 2009 in Iloilo City.

The story hugged the headlines after Ileco 3 board president Mateo Baldoza claimed that he received cash-laden envelope from Iloilo Gov. Niel D. Tupas Sr. during a meeting with Artech officials at the governor’s house last April 17.

The cash, Baldoza assumed, was meant to facilitate the negotiations and approval of the power supply agreement offered by Artech.

Naciongayo said Atty. Xerxes Adzuara, NEA probe committee chair, discovered the flaw when they went over Beltran’s affidavit.

Beltran claimed in his affidavit that the contract is beneficial to Ileco 3 because Artech will construct the transmission facility to link the cooperative to the power producer’s proposed diesel and biomass plants.

Beltran said Artech will shoulder the construction so that Ileco 3 will not charge transmission fees on its consumers. The cooperative will only maintain the transmission facility.

But Section 9.2 of the PSA provides that Ileco 3 will construct and maintain the transmission facility.

Beltran told the panel that they are willing to amend the contract in keeping with Artech’s commitment to put up the facility.

He added that Artech prepared the contract which the Ileco 3 board later approved and signed through Baldoza.

Naciongayo said the defect only shows that the Ileco 3 directors did not study the contract which Artech prepared and offered to them.

“The board did not study the contract before approving it because they missed the discrepancy between what was agreed verbally during the negotiation and what is written in the contract. Had they taken time to read the provisions, they could have found it beforehand. And Beltran admitted that there was a flaw in the contract,” Naciongayo said.


Naciongayo also pointed out the conflicting interpretation of Beltran and the contract on when the agreement will take effect.

Section 3.3 of the PSA provides that the contract shall become effective upon its execution and when the plant is ready to deliver electricity.

But Beltran told the NEA panel that commercial operations will only start once the Energy Regulatory Commission (ERC) approves the PSA.

Beltran said they have yet to submit the PSA to the ERC because it is Ileco 3’s job.

Naciongayo said Beltran’s interpretation of the contract’s effectivity is disadvantageous to the cooperative as it will be at the mercy of Artech.

“What if Artech does not do anything? Ileco 3 will be left hanging and that will endanger the power needs of its consumers,” the lawyer said.

Naciongayo also cited Artech’s contract with Capiz Electric Cooperative (Capelco) which took seven years to commence.

He said the Artech-Capelco contract was signed in 2001 but it was only approved in 2008.

Artech later formed another corporation, Enervantage, by partnering with a prominent family in Capiz in order to fulfill its contract with Capelco.

“Right now, Artech has no contract with Capelco, its Enervantage. This is a question of Artech’s capability to deliver its commitment,” Naciongayo said.


Naciongayo also hit Beltran’s justification before the NEA panel why Artech did not include the prompt payment discount in the 25-year PSA.

“Mr. Beltran said the discount is just a decoration in supply contracts as they have not encountered any cooperative that pays their bill within the 3-day period. In this case, Artech is assuming that Ileco 3 cannot pay its bills on time. Artech actually does not trust the cooperative to fulfill its part of the contract. So why is Artech doing business with Ileco 3 if there is no trust and confidence between them,” he said.

The discount, which is usually pegged at 3%, is an incentive to cooperatives that pay their suppliers within three days upon receipt of the monthly billing. The discount is a feature of power supply contracts to encourage power distributors to pay their suppliers promptly.


Last Tuesday Ileco 3 board President Baldoza admitted before the NEA panel that Gov. Tupas gave him money in exchange for his approval of Artech’s offer.

Naciongayo said he suggested to the National Bureau of Investigation (NBI) to secure copies of the transcript of Baldoza’s admission.

He said the transcript could be a basis for the filing of criminal cases against personalities involved in the Artech-Ileco 3 bribery scandal.

“The NBI said they will request the NEA administration committee to provide the transcript of Baldoza’s admission. The NBI has been investigating this case as regards the bribery angle,” Naciongayo said.

Naciongayo said there is also a chance that the 25-year PSA might be rescinded or annulled because of the onerous provisions.