P2.5-B joint venture wins Zamcelco management deal

Financially troubled Zamboanga City Electric Cooperative Inc. (Zamcelco) has finally awarded the investor – management contract of the Zamboanga City Electric Distribution’s 25-year management to the joint venture of Crowninvestments Holdings Inc. and Desco Inc.

The joint venture will pump P2.5 billion into the debt-ridden electric cooperative, after Zamcelco held its fourth bidding of the contract.

The first and second bids were declared failures because no party showed interest in the floor price of P800 million. The third bidder withdrew last December, leaving Meralco-Comstech to enter into a negotiated agreement with Zamcelco.

At a negotiated amount of P550 million to be pumped into Zamcelco, the Meralco-Comstech joint venture also withdrew from the concession.

The joint venture said this is the appropriate amount to pay all existing obligations, provide capital infusion to upgrade the facilities and improve the services of Zamcelco.

While there were delays, the process has been completed as the board stepped in to ensure that the agreement will be free from any influence.

The joint venture’s commitment to the bid is proved by a contract, duly approved by the National Electrification Administration (NEA).

The returns on the contract is based on performance based targets. It will be to the joint venture’s loss if it fails to meet the targets, according to NEA systems loss and collection efficiency ratings.

Four other bidders submitted their qualification documents, Davao Light and Industry, Nikolas Management Services, Filinvest Development Utilities and Comstech Services. But they did not submit any financial bid, reportedly backing off from the bid by the joint venture of Crowninvestments and Desco.

Zamcelco has been saddled with over P1.5 billion of debt and payables to its power suppliers, PSALM, San Miguel, Alsons and others.

Systems losses have also stood at 23 percent, which has caused more than P50 million a month in cash flow negativity for the ailing cooperative.

The P2.5 billion, which is 500 times more than the previous bid of P550 million, would solve the power problems of Zamboang City, pay off Zamcelco’s debts and spur businesses in the penninsula.

Reports said the joint venture is prepared to deposit the amount and proceed to manage the cooperative.

The residents of the city are reportedly looking forward to being free from rotational brownouts of up to four hours in the last several years.

They said Zamboanga deserves this infusion to be the primary distribution utility in Mindanao.