2 2017 First Semester

PSALM at 16: Making a LEAP

Emelina S. Blanco Managing Editor

Madelyn Esperanza N. Solito Editor-in-Chief

Recelo G. Celades Writer

Frances Grace P. DamazoWriter

Hacer B. Balisbis Web Master

Sean August P. Perez IIILayout and Graphics Editor

is published by thePower Sector Assets

and Liabilities Management Corporation

3rd Floor TransCo Bldg., Power Center, Quezon Avenue,

cor. BIR Road, Diliman, 1101 Quezon City

For comments and further information, contact:

Corporate Communications Division

Tel: 902-9067Fax: 817-0037

Email: infos@psalm.gov.phWebsite: www.psalm.gov.ph

Recently, we conducted two significant corporate events -- the 2017 PSALM’s Strategic Planning and the Corporate Strengthening Week that coincided with the 16th

Anniversary of PSALM, signalling that we have entered the first year of the last decade of PSALM’s corporate life.

These events remind us all over again to contemplate on the strategies we employ as we complete the last but more challenging stages of the corporation’s privatization program that the PSALM Board orders us to accomplish within a three-year timeframe.

I find the theme for both events, “PSALM at 16: Making a LEAP - Leverage through Expedited Asset Privatization,” timely and relevant because it is in sync with the tall order of the PSALM Board -- suggestive of us to take a LEAP of faith to comply with the directive and weather whatever formidable challenges that would interfere in the process given the tight timeline.

The theme encourages us to further cultivate willpower and initiate actions to continue or even transcend the immense headway we made in the past years. It suggests that we take the path of higher learning to squarely resolve concerns and unite pluralistic views on the privatization of remaining plants, particularly the assets in Mindanao.

The privatization scenario compels us to create new privatization strategies, innovate schemes and think outside of the box. And of course, prudence, past experiences and business instincts will surely help us bring results.

Making a LEAP is what the times need. Challenging but at the same time, it enlivens our veins to show the sector what more we’ve got. So, relax we can do it!

LOURDES S. ALZONAOFFICER-IN-CHARGE

P R E S I D E N T ’ S C O R N E R

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ISO Surveillance and Enterprise Risk Management:Sustaining the Momentum in PSALM’s Quality Management

Memoirs of a Pinoy scholar in South Korea

PSALM’s 2017 Bags-to-SchoolOutreach Program:A symbol of hope for a bright future

PSALM’s Next Step: Towardsreal estate asset privatization

PSALM Sells Last Decommissioned Plant

Administering Universal Charge for a Mission

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2017 CSPW: Preparing for the big LEAP

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TA B L E O F C O N T E N T S

4 2017 First Semester

As PSALM starts the privatization of its real estate assets, it painstakingly lays down the groundwork to ensure that systems and

resources that the job requires are all set, apt and running.

PSALM’s real estate assets consist of 6,160 lots with aggregate area of 100 million sqm (10,000 hectares) – taking up a substantial size in the asset universe of the Corporation. Around 75% of these lands can be up for privatization. As of December 2013, the total book value of PSALM’s real estate assets is PhP3.64 billion.

As part of its mandate, PSALM aims to privatize its real estate assets to generate high financial returns for the liquidation of its financial obligations. This will eventually lead to the reduction of the stranded or residual debts of the Corporation and the minimization of additional power charges or taxes.

By privatization, PSALM also aims to contribute to energy security and to facilitate local and national development by packaging these assets as location of new power plants and new economic activities. Most of the real estate assets of the Corporation are adjacent to existing power plants and are also seen as fit to become areas for new power plants. Some of the assets are also barren lands. The aim of privatization is to free up

these lands to encourage economically viable activities in these properties.

Real estate asset privatization preparation In October 2015, PSALM came up with a strategic plan that serves as framework for real estate privatization target setting. This portfolio contains the profile of alienable and disposable lands, and outlines various approaches to maximize their potentials. It also identifies feasible modes of privatization for these real estate assets.

In terms of prioritization, PSALM considers various parameters to determine indicative timelines on privatization of its real estate assets that include marketability, titling status, and asset specific issues.

PSALM acknowledges the fact that in terms of target market, real estate is entirely different from power asset privatization. The latter is limited to power generation companies while in real estate, the target market is varied. It could be power generating companies because some of PSALM’s real estate assets are potential sites for new power plants. Others are conducive for commercial infrastructure, industrial use or agricultural.

The real estate asset framework was then delegated to

PSALM’s next step:Towards real estate asset privatization

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the three departments of PSALM’s Asset Management Group tasked to execute the necessary groundwork in completing the Land Lease Agreement process, the profiling of activities, and the formulation and implementation of asset disposal plans.

Working on it systematically, even some PSALM personnel who are scholars of the Development Academy of the Philippines took the initiative to document the project and firmed up the standard procedures that must be followed for the privatization of said assets.

PSALM is awaiting the receipt of complete turnover of the real estate assets possessory rights documents from the National Power Corporation that will signal the transfer of all identified real estates to the ownership of PSALM.

Challenges and StrategiesPSALM will explore new strategies to smoothly gain ground in the privatization of real estate assets. The previous concept was to title the asset under PSALM’s name. Deemed as more feasible, PSALM shifts to selling the assets on an as-is-where-is basis. It will test the waters this year. When this key concept becomes successful, it will provide a clearer direction on how PSALM could resume the sale of succeeding real estate assets.

Land titling is an enormous

concern that could get in the way. To address this concern, PSALM will implement the “as-is-where-is” strategy, at the same time foster partnerships with the Land

Registration Authority, the Registry of Deeds, and the Department of Justice to help in expediting the titling process, as well as resolution of issues.

Aside from titling process, one of the primary challenges in privatization is the non-availability of complete records and maps, an indication of poor appreciation of the real estate properties. PSALM will need to come up with an asset profiling to formulate a more market responsive strategy on selling them, Tolentino concluded.

To get better value for these real estate assets, PSALM also devises marketing strategies and market sounding activities. It is also in talks with the Philippine Economic Zone Authority for the inclusion of

PSALM’s real estate properties in its mapping activities as potential site for ecozones.

Way ForwardFor 2017, PSALM will commence bidding of the first batch of properties for disposal to include the Puerto Azul Villas, a two-unit townhouse structure located in Cavite. Two other assets are also expected to be bid out by the end of the year, namely: the real estate properties of Manila Thermal Power Plant and Bauang Thermal Power Plant.

As it rolls out its privatization scheme for its real estate assets, PSALM hopes to gain enough revenue from the sale of these assets to help augment the Corporation’s financial resources, at the same time open economic opportunities to host communities.

6 2017 First Semester

2017 CSPW:2017 CSPW:2017 is the year PSALM Corporation takes a

LEAP to meet the challenge of fast-tracking the fulfilment of its mandates.

On 24 May 2017, the PSALM Officer-in-Charge, Vice Presidents, Department, and Division Managers convened at the University Hotel, University of the Philippines Diliman, Quezon City to start the three-day conduct of the 2017 Corporate Strategic Planning Workshop (CSPW).

With the timely theme “PSALM making a LEAP – Leverage through Expedited Assets Privatization”, the yearly conduct of this workshop is crucial for the management as the Corporation enters the last decade

of its corporate life. The need to assess the effectiveness of PSALM’s strategic plans to key issues such as the rescheduling of power assets privatization, corporate restructuring, employee compensation and benefits, among others, has become more urgent.

“Mid-way in PSALM’s corporate life, we are faced with the challenge to fast-track completion of our mandates pursuant to directions set by the PSALM Board led by the DoF and DoE. Our response to these challenges is critical as it impacts our leverage in the Philippine power sector. That is why it is imperative to become forward-thinking in all our decisions, and inculcate strategic planning and risk management in all our actions,” said PSALM Officer-in-Charge Lourdes S. Alzona.

Power Sector Roadmap Director Irma Exconde of the Electric Power Industry Management Bureau of the Department of Energy presented before PSALM officials the government’s Power Sector Roadmap which puts heavy emphasis on PSALM’s power assets privatization schedule. It is noted that high maintenance costs, especially diesel-fueled plants, mainly contribute to PSALM’s losses. In the coming months in 2017, it is expected that a definitive policy direction from the DoE and DoF will clarify PSALM’s position on the privatization of Malaya Thermal Power Plant, Unified Leyte (Bulk of Energy), Caliraya-Botocan-Kalayaan (CBK) and Agus-Pulangi Hydroelectric Power Plants.

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Preparing for the Big LEAP2017 is the year PSALM Corporation takes a L.E.A.P., that is, Leverage through Expedited Asset Privatization to meet the challenge of fast-tracking the fulfillment of its mandates.

Reorientation to Enterprise Risk Management System Added to the repertoire of organizational priorities tackled in the three-day activity is the integrated management systems review in preparation for the Surveillance Audit for ISO9001:2015. Post-ISO9001:2015 certification stage, surveillance audits became priority of the management to retain the quality of PSALM’s business processes and frontline services in check. Mr. Jose Paolo Mungcal of Systems Network International, Inc. reoriented CSPW participants on Enterprise Risk Management (ERM) System. ERM aids the Corporation in meeting its targets on time while efficiently allocating resources for the treatment of risks inherent in its business operations.

Notable 2016 AccomplishmentsThe previous year’s accomplishments deserved to be feted by PSALM officials and employees. The Corporation obtained 100% scores for the amount of net reduction in financial obligations, collection efficiency (CE) for current power sales, percentage share of overhead expenses to total income, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) margin of remaining power assets, average satisfaction rating on frontline services and UC remittance efficiency of CEs. These ratings are based on the Board-approved re-assessed 2016 corporate performance scorecard. Considering the other corporate targets with lower ratings, overall, PSALM netted 94.33%.

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It’s the last decommissioned plant under the sale portfolio, but certainly, not the least sweet victory for PSALM Corporation.

provider to ascertain the degree of contamination as reference for proper disposal of hazardous wastes.

After the crucial PCB testing, various coordination meetings and receipt of policy guidance from the Department of Environment and Natural Resources (DENR) on the dismantling and clean- up obligation guidelines to be imposed on the buyer, the PSALM Board gave its go-signal to proceed with the next round of bidding.

DENR, which was on board in the decision-making phase, is expected to provide the buyer with the same support and guidance it needs when it executes its responsibilities under its disposal contract with PSALM —dismantle, clean and remediate the Sucat plant site. Remediation means the present site should return to ground zero (road level)-- free and clear of wastes, toxic substances, debris and structures.

The site remediation will pave the way for a new beginning or perhaps, for a new government development project looming on the horizon.

Sold smoothly last 31 May 2017 to Riverbend Consolidated Mining Corporation, the successful sale of the structures, equipment, auxiliaries and accessories of the decommissioned 850-megawatt Sucat power plant in Muntinlupa City is a product of years of bidding experiences, good business sense and perseverance.

Publishing the bidding procedures online and providing ample time for the receipt of letters of interest were simple but effective interventions that PSALM employed to ensure that more bidders will participate in the auction. Indeed, PSALM drew eight interested bidders, six of which submitted documentary deliverables. Of the six, three bidders were qualified to participate in the final bidding but in the end, only Riverbend passed the reserve price set by the PSALM Board for the Sucat plant. Riverbend was declared the highest-ranking bidder on the spot.

Sucat plant was earlier sold twice in a row but both attempts failed due to concerns that needed to

be threshed-out before it took-off smoothly in the third round, finally culminating to a successful bid with the offer of Riverbend amounting to PhP305.2 million. Subsequently, Riverbend passed the post-qualification phase and was ascended to its status as the winning bidder through the issuance of a Notice of Award last 30 June 2017. Riverbend completed its document deliverables and paid PSALM the complete amount prior to the turnover ceremony for the plant on 02 August 2017.

Inherent in old power plants, several equipment and materials in the Sucat site are contaminated with PCB (polychlorinated biphenyls).

Before the third-round of bidding started, PSALM had to resolve the plant’s environmental compliance, particularly so, when the extent of suspected contamination escalated from its previous state as shown in the last inventory conducted in coordination with the National Power Corporation. To move forward, PSALM engaged a third-party service

PSALM sells last decommissioned plant

10 2017 First Semester

An important revenue driver, PSALM strives to achieve 100% efficiency rate in collecting UC from 153 companies nationwide composed mainly of electric cooperatives and private distribution utilities.

A part of the monthly electricity bills of consumers, the UC is used in various development endeavors. At present, there are four components in which the UC is being utilized and each has its own Special Trust Fund in accordance with the Energy Regulatory Commission (ERC) guidelines. Every peso collected

through the UC is disbursed to intended beneficiaries following ERC approvals and prescribed timelines. The UC-Stranded Debt (SD) will soon form part of the Universal Charge, upon approval of PSALM’s application it filed with the ERC. On top of the list is the UC for missionary electrification (UC-Missionary Electrification), a revenue source for NPC to finance power and its associated power delivery systems in the off-grid, remote or unviable or missionary areas. Through the UC

Concomitant to the fulfilment of its twin mandates of privatizing government’s power assets and managing financial obligations of NPC, PSALM also gives utmost attention to its equally

significant functions including the efficient administration of the Universal Charge (UC).

that consumers pay, remote and isolated islands in the country are energized.

PSALM also uses a portion of the UC as a cash incentive disbursed to renewable energy developers (UC-Renewable Energy Developer Cash Incentive) to encourage more private investors to construct and develop renewable sources of energy in the missionary areas.

A portion also goes to environmental charge (UC-Environmental Charge) which is being used by NPC in protecting and preserving 11 watershed areas nationwide to enhance the provision of power and water. To date, various development programs have been created paving the way for employment

Administering Universal Charge for a Mission

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opportunities to the residents living near or within the watershed.

Considered by PSALM as a necessary social contribution from electricity end users, a portion of the UC also goes to paying off stranded costs incurred for the continuous operations of eligible IPP power plants (UC-Stranded Contract Cost) that have been approved by the ERC as of December 2000 for energy security.

An administrative role, PSALM uses simple but effective ways to increase its UC collection efficiency ranging from information workshops to encouraging correspondences, reminding collecting entities of their responsibilities to promptly comply with timelines to avoid penalties. Through information workshops, collecting entities are also updated of the new power rates as approved by the ERC.

With PSALM’s efforts, more and more collecting entities strive to remit on time, fully aware of the positive impact of their prompt response.

Universal Charge Remittances, Interests and DisbursementsAs of 30 June 2017 (In PhP Billion)

Particulars Remittances Interests Disbursements Balance

Special Trust Funds: Missionary Electrification (ME) - NPC SPUG

67.671 0.044 67.683 0.032

ME - Renewable Energy Developer Cash Incentive (REDCI)

0.383 0.001 0.203 0.181

Environmental Charge (EC)

1.922 0.098 1.491 0.529

Stranded Contract Cost (SCC)

53.055 0.008 53.033 0.030

Total 123.031 0.151 122.410 0.772

12 2017 First Semester

This position provided the impetus to establish an Enterprise Risk Management (ERM) system that will assist the Corporation in fulfilling all its mandates in an environment of uncertainty, boost the likelihood of achieving its targets year on year and efficiently allocate resources to temper the impact of risks inherent in its operations.

The ERM process identifies, analyses, evaluates, treats, monitors and reviews risk using standards provided by the Risk Management Principles and Guidelines or ISO 31000:2009. The Enterprise Risk Management Manual guides PSALM to pinpoint risks which pose significant consequences on its financial and operational performance and corporate integrity and assess how it fares in its societal objectives.

Ongoing IMS surveillance and current issuesAfter PSALM passed on 16 November 2016 the International Organization for Standardization’s latest ISO9001:2015 standards and garnered gleaming commendations from its third-party audit team, TÜV Rheinland Group, for a slew of best practices in the Corporation’s business processes, the management decided to conduct surveillance audits to pulse certain conditions, with the end goal of keeping the momentum in quality management. Surveillance

audits will be running until 2018 in PSALM, two years after it obtained ISO9001:2015. Added to this, a SWOT (strengths, weaknesses, opportunities, threats) was conducted to assess PSALM’s current business environment to be used as basis for the formulation of the risk treatment plan.

The ISO9001:2015 CertificationAt present, PSALM joins the ranks of the few government agencies, such as the Department of Trade and Industry and the Bureau of Internal Revenue, which can proudly wear the badge of being passers in ISO’s changing quality management system standards through the years.

According to PSALM Information Systems and Technology Department Manager, Helen San Pedro, standards are reviewed or revised every five years to make compliance easy for users. She said that revisions lend emphasis to certain requirements of managing an organization.

TÜV Rheinland announced that the aggregate findings from the auditing of departments warrant PSALM an ISO9001:2015 Certification. PSALM, in general, has an established and adequate implementation and maintenance in improving the quality management system, thus it meets the requirements

Being at the forefront in the country’s power generation assets privatization and strategic liabilities management since the early 2000 means that PSALM must keep improving on its services and operations, conduct business processes without having to cut corners and adhere to regulatory

requirements for good governance.

ISO Surveillance and Enterprise Risk Management:Sustaining the Momentum in PSALM’s Quality Management

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of ISO9001:2015. TÜV Rheinland, therefore, recommended the issuance of a new certificate.

These notable practices include PSALM’s efforts for maintaining its status as the top traded corporate bond for 2015 and in the past years, its initiative to formulate a risk-based approach to conform with quality management systems, its continuous exemplary services given to contractors, the upmost attention it gives to further improve its accounting system, and the application of a helpdesk as central part in communicating improvement plans and recommendations.

ISO9001:2015 is ISO’s latest edition in its line of regulatory requirements for quality management system (QMS) and information security management system (ISMS). Passing the requirements of this edition affirms an organization’s commitment to continual improvement of its services

and operations in adherence to regulatory requirements for good governance.

Back in October 2014, PSALM obtained the ISO 9001:2008 certification which requires an organization to prove its

consistency in providing a product that meets customers’ expectations along with statutory and regulatory requirements.

There is an underlying wisdom on PSALM’s constant upgrading to ISO standards. According to San Pedro,

the two ISO platforms mainly differ in structure. ISO 9001:2015 follows the basic management approach of Plan, Do, Check, Act in the management of an organization or any type of project. Another major difference is the focus on risk-based decision-making. This

simply means that there must be a conscious and rational knowledge of the repercussion(s) of every decision made.

San Pedro concluded that upgrading to ISO9001:2015 promises to bring several benefits to PSALM as it goes on fulfilling its corporate mandates. The new version brings increased requirements for top management commitment and involvement. It also provides a clearer understanding of the context of organization.

A better understanding of PSALM as an organization is instrumental in effectively addressing organizational risks and opportunities in a structured manner instead of resorting to preventive action.

At present, PSALM joins the ranks of the few government agencies, such as the Department of Trade and Industry and the Bureau of Internal Revenue, which can proudly wear the badge of being passers in ISO’s changing quality management system standards through the years.

14 2017 First Semester

PSALM’s Rey Evince R. Valencia of the Liability Management Department

took the brilliant opportunity to earn a diploma in Global Master in Public Administration (GMPA) from Seoul National University in South Korea. With the help of PSALM’s endorsement, Rey became the lone Filipino scholar in a multi-national batch of carefully-selected graduate students sponsored by the Korean Electric Power Corporation (KEPCO) to complete the graduate program. Aimed at advancing the careers of young public officials and enhancing economic and social development in their home countries, Rey’s classmates were usually officers of finance, safety and security, cultural promotion and health agencies.

memoirsof a Pinoy scholar in South Korea

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In the 16 months he spent at the premier university, Rey and his classmates delved into public policy formulation and other governmental subject matters. He was able to apply the concepts he learned from his policy formulation subjects in crafting PSALM’s Liability Management Policy which would guide the Corporation in adapting transparent practices and implementing liability management programs and transactions.

The GMPA program instilled in Rey a fresh, positive outlook towards working in government. Asked on how the program enriched him professionally, “The GMPA program has taught me how to value time and other people’s opinions. It is inherent in a democratic nation to voice out concerns and opinions. The primary challenge is how to find a common ground for different opinions in order to find an inclusive solution to the problem,” Rey explained.

The GMPA program was a holistic experience for Rey. Apart from the academic rigors, he coordinated with the Filipino community of scholars and volunteered in the Department of Tourism’s (DOT) satellite office in Seoul.

Rey got in touch with the Filipino community of scholars through the Pinoy Iskolar sa Korea (PIKO), Inc. (PIKO). The organization is committed in assisting Filipino students settle into their new life in South Korea through the sharing of personal experiences, passing on helpful “survival” tips in the various stages of their stay and engaging in social and intellectual exchange, fellowship and community between and among Filipino students in the country.

Rey’s stint as volunteer in the Department of Tourism –Seoul Office gave him the chance to perform roles similar to that of a Cultural Ambassador such as promoting positive Filipino identity, culture

and tourism to the international community. In this volunteer activity, Rey often heard Koreans giving thanks to the Philippines for extending help during the Korean War in the 1950s.

Interesting snippets about Korean culture

Playing his favorite sport volleyball with the locals led him to visit counties in South Korea. In the process, he got to know Korean culture up close. What he discovered was quite far from the romanticized depictions in TV dramas starred by Lee Min Ho or Song Hye Gyo that Pinoys go crazy about.

Rey observed the Koreans’ way of life which makes them unique from other Asians. From their natural tendency to keep moving and their efficient transport system to how they value their physical appearance, it can’t be denied that Koreans are one of the most meticulous people in the world.

Koreans always rush to finish errands and just about everything. This is the “pali-pali” culture. Literally meaning “hurry up” in Korean, the culture also explains why the people use their infra projects like roads and bridges before full completion and only improve them after learning some technical faults encountered midway. The population ride in synchronized transport systems and purchase goods via mobile applications. When a train arrives, the other departs at exactly the same time. Locals and tourists have no choice but to run their fastest to catch the next connecting train.

With the phenomenal success of South Korea’s entertainment industry came the boom of the cosmetic surgery industry. In a country where music and telenovelas are major cultural exports, it can’t be denied that physical beauty is everything. Fixing a wide nose is as easy and accessible as buying goodies from a nearby grocery store. While going under the knife is still frowned upon by Filipinos, it’s the exact opposite in South Korea. It symbolizes an elevated social status and attaining the ideal standards of beauty could get one that precious ticket to the local showbiz industry. Never ever tell a Korean he/she’s ugly

(well, no one should to anybody). Koreans are especially sensitive to comments about their physical appearance. In fact, body image issues are one of the main causes of depression in the country.

Koreans are stickler for social conventions. Formal is, and always will be, formal. Age

and social status dictate interpersonal relations. In a Korean work setting, most professional relationships do not develop into personal relationships over time. Officemates do not get intimate with each other nor end up as kumare / kumpare in weddings and baptisms. Foreign professionals planning to work in the country should be forewarned of this aspect of Korean work ethic.

Many lessons can be learned from Rey’s sojourn in South Korea. His international education proved that understanding at different social levels remains achievable even with language and cultural barriers. The common aspiration of a progressive and equitable society binds Koreans and Filipinos and perhaps, many other nationalities. This common aspiration can become a reality if we find inclusive solutions to our social problems despite our opposing ideologies.

16 2017 First Semester

On 13 - 14 July 2017, PSALM employees, including some newly-hired staff, together with the Corporate Social Responsibility

(CSR) Group busied themselves with filling over a hundred school bags with school supplies and adding McDonald’s meal boxes for distribution to the schoolchildren of Bangkal Resettlement Elementary School in Bagac, Bataan. Several boxfuls of textbooks on basic education subjects were also donated to the school. The school’s sizeable Aeta population were overjoyed upon receiving the bags with the meals as their bonus treat. “It is fulfilling to see how delighted they were in receiving the bags and meals,” said Yaneth Joyce Guillermo of Power Accounts and Management Division. For these children, the bags symbolize hope for a bright future through education. Later, schoolchildren rendered an Aeta tribal dance to the appreciation of the PSALM volunteers. This year’s Bags-to-School Outreach Project integrated new PSALM staff into the Corporation’s CSR activities that commit to serving marginalized and underserved communities in the country. “As a first-time volunteer, I realized how blessed I am. I also became friends with employees from other departments. We have the same goal of helping those in need,” said first-time volunteer Jojie Mae Ventura. For future conduct of the Bags-to-School activity, finance specialist Melody Santos recommends, “We could do something, such as a group performance on the part of volunteers, that would connect to children. It is not necessary that we explain the technical side of what PSALM does but it is important that beneficiaries are able to appreciate the message we want to convey.” Now in its fifth-year run, the Bags-to-School Outreach Project’s first beneficiaries were the children of Barangay Hulo in Angat, Bulacan back in July 2012.

PSALM’s 2017 Bags-to-School Outreach Program:A symbol of hope for a bright future

C O M M U N I T Y I N V O LV E M E N T