FREQUENTLY ASKED QUESTIONS. (8) Q. What is the significance of September 14, 2013 to Aleco? A. On that day, Aleco voted on how to rehabilitate itself. Q. Was that a referendum? A. No. it was only a consultative vote. The members were merely asked to pick out between two ideas, on how to cure Aleco. Q. What ideas were presented? A. Whether to seek asistance from another electric cooperative, or from an entity other than an electric cooperative. Q. Which prevailed? A. The winning idea was to seek assistance from entities other than electric cooperatives. Q. At whose instance was the vote taken? A. At the instance of NEA’s Project Supervisor Veronica Briones and the NEA-designated interim board headed by clergyman Baylon and lawyer Fernandez. Q. What happened on October 29, 2013? A. Baylon, Fernandez and Petilla signed a document in behalf of Aleco, in favor of “SMC Global Power Holdings Corporation”. Q. What document? A. Concession agreement Q. What is that concession agreement about? A. The document gives to “SMC Global Power Holdings Corporation” the right to operate Aleco’s electricity-distribution franchise in the province of Albay, and to use existing Aleco assets and facilities for electricity-distribution business. Q. Are they authorized to do that? A. No. Petilla represents his office, Department of Energy. Baylon and Fernandez represent NEA, their appointing authority. Q. Could NEA lawfully designate anyone like Baylon and Fernandez to enter into contract representing Aleco? A. No. Such authority to enter into contract is to be given by the Aleco members, not by NEA. In fact, according to Aleco insiders, Baylon and Fernandez are not registered members of Aleco. Q. How do Aleco members authorize someone to enter into contract? A. They hold an assembly meeting where they elect their directors. The elected directors elect their president. Whenever it is necessary for Aleco to enter into a contract, the directors meet as Board of Directors and they adopt a resolution authorizing their President to enter into a contract, with agreed terms of reference so that the president shall not exceed his authority. Q. Why should Aleco elect its own directors? A. Because Aleco is a private corporation under government supervision, and it has its own bylaws. Q. What does government supervision mean? A. The government sees to it that Aleco observes its own bylaws, and it complies with government policies in the exercise of its corporate powers. Q. What is Petilla’s role in Aleco? A. None. His office supervises NEA. In turn, NEA supervises electric cooperatives. He has no direct supervisory functions over Aleco. Q. What is the role of NEA in Aleco? A. It has the right to be represented in the Board of Directors of Aleco, with one board seat. It could also discipline Aleco directors, upon observance of due process of law. Q. Are there directors in Aleco at present? A. None. Gov. Salceda made his directors resign two years ago. Q. Were elections held to replace the resigned directors? A. No. Q. Instead of conducting elections, what did NEA do? A. NEA designated an interim board, consisting of representatives or nominees of NEA, Albay congressmen and the Catholic Church. Q. Who headed the interim board? A. Baylon and Fernandez. Q. By what authority did Salceda ask the elected directors to resign? A. He does not have the authority to interfere with Aleco. As governor, his powers are limited to what is allowed under the Local Government Code. Q. Why did Joey Sarte Salceda cause his directors to resign? A. His directors could no longer manage Aleco’s operating deficits amounting to more than three billion pesos. Q. What mistakes were committed by Salceda’s directors? A. When it was necessary to increase Aleco’s rate structure in order to recover operating deficits, they did not petition ERC for rate increase. Instead, they increased the rate by collecting SPA, without ERC approval, which is against the law. Then they asked NPC to manage Aleco, just to get rid of annoying notices of disconnection. They did not make arrangements requiring NPC to do something with Aleco’s 24% system loss problem, and with the NPC takeover Aleco lost 576 million pesos more in the next two years. Q. Without directors being elected to replace the resigned directors, what happened to the corporate acts of Aleco? A. They are all void. Q. What corporate acts are void? A. The process that led to the designation of the interim board; the contacts with power suppliers; the bidding procedures undertaken by the interim board; the September 14, 2013 consultative vote; the October 29, 2013 concession agreement; the takeover of Aleco franchise operations and Aleco assets and facilities by APEC, with the acquiescence of the interim board; and all disbursements made by the interim board. Q. Will the involvement of DOE and NEA not legalize these void corporate acts of the interim board? A. No, because both NEA and Aleco are governed by the same charter, that is, Presidential Decree No. 269. This law does not say that if all Aleco directors resign NEA may create an interim board. The mandate is for Aleco to hold elections for the purpose of electing new directors replacing the resigned directors. Q. There are legal remedies provided by law and by NEA itself for the bailout of Aleco, how come that DOE, NEA, the Interim Board, Governor Salceda and Mayor Rosal are one in allowing APEC to takeover the franchise operations of Aleco, as well as Aleco assets and facilities? A. This is the 4-billion peso question actually, because on the part of Salceda and Rosal the very local government units they run are consumers of Aleco. Their LGU’s have contributed to the 5-billion peso capital expenditures contribute by all Aleco consumers since 1973. With the financial exposure of Albay and Legazpi City in the capital expenditures of Aleco, Salceda and Rosal should be the first ones to oppose the entry of “SMC Global Power Holdings Corporation” or APEC. On the part of DOE, NEA and the Interim Board, they do not represent the Aleco consumers as a specific constitutency. Q. If there are remedies, then what are the problems to be cured? A. Aside from the institutional problems Aleco is facing, its main problem is undercapitalization equivalent to its system loss monthly deficit, as well as its matured obligations said to be amounting to P4 billion pesos then, but which could have reached P5 billion pesos by this time. Q. What is the remedy for Aleco’s persistent system loss? At 24%, and with annual sales of P2.4 bilion pesos, this could be in the amount of P48 million pesos per month. The legal remedy is the extensive use of the BAPA (Barangay Power Association) system, throughout the coverage area of Aleco. If there are 720 barangays in Albay, not less than 720 mother meters are to be installed in strategic points. NEA has authorized the use of BAPA as a legal institution in addressing system loss problems. Instead of collecting only 76% of the value of its power purchases from suppliers, Aleco shall be able to collect 100%, with the cost of system loss being prorated among the consumers who are connected to the mother meter. The system gain should now be plowed back for the renovation of defective circuits. BAPA shall be deactivated upon the renovation of each circuit that is served by its mother meter. The system loss problem shall be solved within one year on phase-in/phase-out basis. Q. What is the solution to Aleco’s accumulated undercapitalization? A. Simply obtain interest-free capital from the capital market, by availing of Republic Act No. 10531. Q. How come the capital buildup is interest free? A. The capital inflow originates from the investors, who buy shares of stock in Aleco. Their investment is not loan. That is why the capital buildup is interest-free. Q. Why will investors put in money in Aleco? A. The most lucrative business in the world today is energy business. Oil was the reason the US had to look for Sadam Hussein ahead of Bin Ladin. For the same reason, “SMC Global Power Holdings Corporation” is diversifying from retailing beer to retailing electricity, on the basis of the concession agreement in question. Q. Who shall be the intermediary in this capital buildup? A. The stock brokers and investment bankers. They will organize themselves and they will pay to the Aleco management the full amount of the value of issued shares, in exchange for the same shares that they shall hold in trust for identified investors who whom the shares shall be endorsed or assigned. Q. For how much shall these intermediaries assign the shares of stock to identified investors? A. A fixed amount of service charge shall be billed to the investors. This will explain why Aleco shall receive the full amount of stock issues interest-free. It is the investors who shall bear the service fees. Q. How about the suppliers and other creditors of Aleco whose credits have matured already? A. Aleco should obtain a stay order from the rehabilitation court, by filing a petition for corporate rehabilitation. Q. What is the purpose of a stay order? A. To prevent these creditors from proceeding against Aleco unilaterally, or from initiating bankruptcy proceedings. The suppliers cannot disconnect the power supply, or else their executives shall be punished for contempt of court. Q. What else is the function of the rehabilitation court? A. It will appoint a rehabilitation receiver who shall submit for court approval the corresponding rehabilitation plan. The plan shall be based on the interest-free capital buildup, within the framework of Republic Act No. 10531 (NEA Reform Act). Q. How do we control the details of stock issuance? A. Before executing the articles of incorporation to be filed with SEC, the newly elected Board of Directors of Aleco shall formulate and approve a pre-incorporation agreement to serve as terms of reference, where all the safeguards shall be provided. It shall include: (a) issuance of stock to existing Aleco consumers only; (b) every consumer shall acquire at least one share; (c) one shareholder or related interest shall acquire not more than 10% of the authorized capital stock; and (d) a committee shall oversee the implementation of the capital buildup. Q. If there are legal remedies affecting Aleco’s financial problems, what explains the October 29, 2013 concession agreement, as well as the belated entry of APEC? A. The creation of APEC is preconceived, because the three signatories of “SMC Global Power Holdings Corporation” to the concession agreement are also three of the incorporators in APEC. This means that APEC could be an instrument of corporate layering, to mislead the member-consumers of Aleco, with vested interests becoming shareholders in APEC. Q. What is the remedy now against APEC? A. Albay Electric Cooperative, Inc. shall be filing a petition for quo warranto against APEC assailing the latter’s unlawful exercise of the corporate powers of Aleco, with member-consumers filing the same petition as alternative petitioners, by way of a derivative suit. I discussed this legal remedy with Atty. Bart Rayco at my office last June 25, 2013, and he gladly agreed to coordinate with Aleco Forum affecting this crusade. Atty. Rayco promised to get the signatures of those who wish to join in the filing of the petition. Q. Could any renegade or maverick group attempt to pre-empt these plans? A. Not without disastrous effects, because only Aleco as the corporation has the legal personality to obtain a stay order from the courts, otherwise the suppliers shall disconnect Alecos service connection.
Posted on: Fri, 27 Jun 2014 01:53:13 +0000
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