Former Dominican ambassador in Washington, Roberto Saladin, told the Listin Diario that the Dominican government needs to hire the best lawyers available to take Cogentrix to court. Saladin spoke on an RNN news show and said that a high-caliber counsel could avoid the downgrading of the country?s credit risk rating.
Saladin explained that Cogentrix secured the approval of the PRD-majority Congress, which lent it the unconditional and irrevocable governmental guarantee for the payment of the loans. These loans were secured from European organizations such as Creditanstalt fur Wiederaufbau (KFW), ECGD and WestLB, which are now demanding the government meet the contractual obligation, after Cogentrix having defaulted on its debt.
Saladin explained that the credit insurance agencies and the creditors had recognized from the start that habitual solvency conditions were not being met in the Cogentrix deal and therefore agreed only to finance the plant if Congress would issue a government guarantee.
Listin Diario Sunday, 19 January issue says that closed-door contract negotiations (bedroom agreements) are to blame for the onerous clauses that have resulted in excessively generous deals for foreign companies with ties to influential Dominican politicians.
As a result, consumers in the Dominican Republic pay the highest power rates in Latin America. For instance, the cost in US dollars for power to residential sectors is 14.01 cents per kilowatt/hour, compared to 6.10 cents in Puerto Rico. Commercial clients pay 15.64 cents in the DR, compared to 7.67 cents in Puerto Rico. And industrial clients are billed 18.12 cents in the DR compared to 7.21 in Puerto Rico.
Listin reports that the government has renegotiated several of the contracts benefiting other independent power providers, and in the talks held from June to November 2002 agreed to pay US$184.5 million to generators and distributors. Minister of Finance Jose Lois Malkum says that of that amount, the government still owes US$150 million and is negotiating a World Bank loan for US$200 million to meet these commitments and put an end to the burdensome contracts.
As part of a Mejia government strategy to organize the power sector, the government has been renegotiating the old contracts, paying accumulated debts and compensations to the companies, removed the Corporacion Dominicana de Electricidad (CDE) as the intermediary between distributors and power generators, and passing on to consumers a subsidy to deflect the rising cost of power
