Bases Conversion Development Authority (BCDA) and its subsidiary John Hay Management Corporation (JHMC) has contracted out the rehabilitation, reconstruction and operation of the old hydro power plant inside Camp John Hay.
In a historic event, BCDA and JHMC signed the Lease Contract for the rehabilitation, reconstruction and operation of the Mini Hydro Power Plant (MHPP) located along Kennon Road, with representatives of the Riverflow Ventures and Power Energy Corp., a consortium of Isabela Power Corporation and Vendeka Bilgi Teknolojileri Ticaret Limited Sirketi, created for this purpose.
BCDA President and CEO Atty. Arnel Paciano Cassanova, said that "The BCDA is one of the government owned corporations that advocate and push for renewable sources of power, championing the cause through the help of partner private corporations. We are looking forward to a productive partnership in the John Hay Economic Zone (JHEZ) through the mini hydro power plant project".
JHMC president and CEO Dr. Jamie Eloise M. Agbayani said the agreement will bring in some P440 million investments on the first year of the pre-development stage of the project.
"The contract will not just provide revenue in terms of lease rentals but revenue from taxes and the after effect of the project which will provide investment and jobs to the local community, Agbayani said
The contract also provides that in case the consortium declares a bankruptcy, subjects itself to insolvency proceedings, rehabilitation which would lead to a delay in the payment of rentals or failure to comply with its obligation, will regard the party to be in default, giving the government the right to recover the property after notice, and vice-versa.
A performance bond of 10 percent of the P440 million will also be paid to the government within seven days from the notice to proceed. This amount can be forfeited if lessee-developer fails to start within the period.
In the event the lessee-developer raises revenue from other activities within the leased premises, an additional lease rental shall also be paid to the government by the lessee-developer power consortium, which is five percent of the gross revenue.
The contract covers an area of 38 hectares from the 625 hectares of the Camp John Hay Reservation Area (CJHRA), now owned by the BCDA as identified under Republic Act 7227, the law that created BCDA, and under the implementation of the JHMC.
The mini hydro was developed and utilized by the US government in the early 1900s.The area, covering parts in Baguio City and parts in Tuba town in Benguet will be used to accommodate the diversion dam or the weir, headrace, penstock, power huse and the tailrace.
For 25 years, the Riverflow Ventures and Power Energy Corp. will develop the area and commercially produce clean-energy while securing the necessary government permits.
The consortium shall "apply for Renewable Energy Service Operating Contract (RESOC) under the Department of Energy (DOE) as well as secure the DOE certificate of recognition."
JHMC on the other hand will be responsible for providing a certification and come up with the documents to be submitted to the DOE.
Upon issuance of the RESOC, the JHMC will assign part or all of its rights and obligations under the RESOC.
The contract provides that on the first year following the signing of the contract, the developer will conduct the feasibility studies needed for the pursuance of the project and will only start the development stage on the second year.
On the fifth year of the mini hydro plant’s operation, the government will receive not less than five percent lease rental based on the gross revenue derived from the operation.
The lease is good for 25 years, renewable with the mutual consent of both parties not earlier than three years and not less than one year before its expiration.
However, the contract can be vacated with the government taking over the area in case the lessee-developer fails to make good its obligation, and vice versa, after written notices.
The developer declaring bankruptcy, insolvency, subjects itself to rehabilitation which leads to the suspension of payment of rentals under the contract are considered default in obligation which can make the non defaulting party either rescind or claim damages.