Key Union Issues in Napocor Privatization (September 2009)

1. Key Union Issues in Napocor Privatization (September 2009)

2. Massive job losses - due to retrenchment, reorganization, EPIRA • 1994: 17,000 employees • 1997: 13,500 employees • 2003: 8,850 employees (3,800 - NPC; 3,400 – TRANSCO)

3. Non-recognition of NPC unions • Unions’ right to representation and collective bargaining undermined • No full recognition of NPC unions to date • Existing CNA since 2002 • Non-remittance of union dues since 2005 • Delay in govt agency resolution on status of unions • Lack of transparency & no consultation with unions • NPC reorganization plans; Drafting of EPIRA/IRR, ‘employees issues’, OMMSA, etc

4. 2003 Termination due to EPIRA • 2001 EPIRA law ‘unbundled’ NPC, created PSALM to sell NPC assets manage NPC liabilities & provided for termination of all NPC employees • After Feb 2003: • Rehired at lower working conditions: • NPC = 3,800 • Transco = 3,400 • PSALM = 200 • Not re-hired = 1,200

5. Lowering of working conditions & pay • When NPC employees were rehired immediately after their termination in Feb 2003, they were forced to accept employment contracts • at position grade levels lower than what they previously enjoyed • at 25-30% reduction of salaries & benefits • Increase in contractualization and service agreements • Majority of contractuals are former NPC employees; no security of tenure

6. SC decision: NPC employees illegally terminated in Feb 03 • Sep 06: Supreme Court ruled that NPC Board Resolutions terminating NPC employees were ‘void and without legal effect’ (because they lacked votes for adoption) -- the ‘DAMA’ case • Sep 08: Supreme Court ruled with finality: • Immediate reinstatement of NPC employees • Payment of P34.7B++ in backwages and wage adjustments to NPC employees • Still awaiting enforcement of judgement; Motions filed still pending in SC • Aug 09: Recognition by Asian Development Bank (ADB) that backwages and financial claims of NPC workers as recognized by Philippine Supreme Court form part of legitimate costs of restructuring of Philippine power sector

7. Sale of NPC plants (1) • Hydropower & geothermal plants (cheaply-produced power & part of national patrimony) are being sold first • Non-profitable power plants remain with NPC • Undervalued assets, “Buy 1, take 1” • Nasipit Power Barge (1) is sold at the cost of only the spare parts;Nasipit Power Barge (2) payable thru operational income • 2004 sale of Agus & Talomo hydro plants & other hydro/geothermal plants illegal, still within 10-year prohibitive period under EPIRA • NPC still subsidizing privatized plants • NPC will supply fuel at subsidized rate to SPC Island Power Corp (SIPC), for operation of Panay Power Diesel Plants 1 & 2 starting March 26, 2009 • Allegations from union leaders that Salcon Power Corp (SPC) received excess payments from NPC amounting to P738M, and that SPC earned “silent profits” in billions of pesos for purchases of coal and other fuel products at expense of government; such profits enabled SPC to buy NPC diesel plants in Bohol and Panay in Nov 08 for $5.9M (SPC filed libel charges in Aug 09 vs union leaders)

8. Sale of NPC plants (2) • PSALM does not obligate buyers to retain existing workforce (contrary to promises of EPIRA) • Unions presented PSALM with Manual of Employees Benefits (MEB) to be part of bidding documents, which PSALM ignored • No recognition by PSALM of bargaining power of unions • PSALM says MEB (benefits, security, etc) entails huge costs (but labor costs is only 3-5% of total costs) • No consultation with unions before sale of plants in violation of EPIRA • Impacts: • Bargaining power of unions weakened • Clear violation of CLS • No workers’ protection • No overtime, beyond 8 hrs (violation of Philippine labor laws)

9. Proposed NPC-PSALM management contract (OMMSA, 2007) threat to jobs • Union-busting provisions in Section on ‘Personnel services’: NPC or PSALM may remove ‘any incompetent, dishonest, reckless, dangerous or disruptive personnel or those deemed redundant or unnecessary for the accomplishment of the OMM Services’ • Threat to ‘dangerous’ whistleblowers, ‘disruptive’ trade unionists, ‘reckless’ OSH advocate, etc • OMSSA legally tenuous as PSALM is mandated to sell NPC, not run it; OMSSA allows PSALM to exercise powers of a de facto owner with overall managerial oversight & determine issues of hiring & firing, but is devoid of any employee-employer relationship with NPC employees

10. New OMA (Feb 09) • Operations & Maintenance Agreement between PSALM & NPC (signed 17 Feb 2009) • Article IX (p. 7) on ‘Employees’: “OWNER shall not be deemed to be the employer of OPERATOR’s employees rendering service to OPERATOR for purposes of this Agreement. Any and all claims arising from and as a consequence of the employment of such employees, including separation pay, monetary benefits and other claims for damages arising out of or as a consequence of employment with OPERATOR shall be the responsibility of and for the sole account of OPERATOR.” (OWNER – PSALM; OPERATOR – Napocor) • April 09: Unions challenged OMA at Supreme Court citing a provision that is in violation of EPIRA: • On ‘Property of PSALM’ as being “net profits” of NPC, rather than “gross profits” (in OMA)

11. TRANSCO Privatization • Dec 07: PSALM declared winner consortium of Monte Oro Grid Resources Corp, Calaca High Power Corp and State Grid Corp of China of 25-year concession of TransCo – later named named National Grid Corporation of Philippines (NGCP) -- with a bid of US$3.95B (but Transco franchise law is for 50 years) • Jan 2009: TransCo formally turned over to NGCP, after an upfront payment of 25% of purchase price • All workers were handed notices by new Transco operator (NGCP) • Job security of 6,000 TRANSCO employees under threat • NGCP starts operation Nov 3, 2008 • NGCP has no existing Table of Organization • Employees will start working under NGCP but their positions and salaries will stay as it were until end of 165 -day transition period • At start of 166th day, employees are considered NGCP personnel and will undergo 6-month provisionary period. Hiring plan is based on what NGCP needs

12. TRANSCO Privatization • First to be retrenched were 3 vice-presidents, 15 managers and 35 key personnel/supervisors when new owner (NGCP) took over in Jan 09 • Highly-trained personnel (e.g. trained abroad on nuclear power plants operation) not taken in • Training of personnel (PhP1M/person); new owners not looking at manpower/training investments • By July 2009: 1,000 Transco employees not taken in after 5 months of transition period, despite EPIRA assurances • Permanent employees were terminated; Contractual employees were retained • Employees with ~35 yrs experience “too young to be retired; too old to be rehired” • Budget for a ‘Residual Transco’ (created by EO 366 in 2004) is only for 200 employees, hence cannot absorb those terminated • Retrenched Transco employees plan to file case vs NGCP