By Juzel L. Danganan
MANILA, Sept 11 (PNA) – The Power Sector Assets and Liabilities Management (PSALM) stressed the decision to terminate the Independent Power Producer Administrator (IPPA) contract of South Premiere Power Corp. (SPPC) for the 1,200-megawatt (MW) Ilijan, aims to protect government interest and consumers amidst SPPC’s Php 6.46-billion dues to PSALM.
“In the interest of government, PSALM issued the Notice of Termination to SPPC to stop government from incurring unnecessary losses as a result of the Ilijan IPPA’s nonpayment of its obligations amounting to PhP6.46 billion (PhP6,460,973,606.46),” PSALM president and chief executive officer Lourdes S. Alzona said in a statement.
The government-owned and controlled corporation (GOCC) noted the proceeds were supposed to be used for the National Power Corporation’s (NAPOCOR’s) obligation settlements. PSALM was created through the Electric Power Industry Reform Act (EPIRA) to privatize NAPOCOR’s assets, which had incurred huge debts.
PSALM explained SPPC’s failure to pay the outstanding generation payment — from Dec. 2012 to Apr. 25, 2015 — had compelled it to avail of relief granted under the administration agreement with SPPC.
SPPC is a wholly-owned subsidiary of SMC Global Power Holdings Corp., the power unit of San Miguel Corp (SMC).
Alzona further said that despite PSALM’s demands on SPPC to pay its outstanding generation payments, the power firm refused within the given period.
PSALM said it has grounds to terminate the deal and claim the USD 60-million performance bond of SPPC from New Zealand-bank ANZ through their administration agreement.
The government-owned and controlled corporation added its contract termination was also backed by the Commission on Audit (COA) based on its latest audit report of PSALM’s operations.
With the development, PSALM said it has also informed the electricity-market operator Philippine Electricity Market Corp. (PEMC) on Sept.4 to cease SPPC as the trading participant for the Ilijan power plant.
PSALM said it has also informed the market operator that all sums payable to SPPC as Ilijan’s market participant should be transferred to PSALM’s account.
The president, however, assures that the contract termination will not affect the operations of Ilijan, since Korean-firm KEPCO Ilijan Corp. is still operating the power plant.
Meanwhile, SMC Global Power stressed PSALM’s termination of the Ilijan IPPA is illegal, adding the claimed amount is based on erroneous calculations and is against the spirit of the EPIRA.
SMC Global Power also warned it sees that electricity prices will increase with PSALM trading Ilijan’s power at the Wholesale Electricity Spot Market (WESM).
”We believe that electricity prices will escalate with the termination as PSALM plans to trade Ilijan output on the WESM,” the company said.
On Wednesday, SMC disclosed that the Mandaluyong Regional Trial Court (RTC) has issued a 72-hour temporary restraining order (TRO) Tuesday for PSALM’s termination of the IPPA agreement.
San Miguel noted the TRO stops PSALM on exercising its IPPA rights to dispose the payment it had received from the performance bond with ANZ.
The conglomerate added the TRO also halts PSALM’s powers to “pursue collection of supposed unpaid generation payments, VAT on generation payments for Meralco nominations under the Meralco-NPC power supply contracts to service Sunpower and Ecozone requirements and any interest imposed by PSALM on such amounts.”
San Miguel further said the TRO also blocks any acts to forfeit the performance bond, terminate the Ilijan IPPA and issue a cessation notice.
The company noted SPPC initiated a dispute resolution process with PSALM through a letter on Aug. 12, 2015, adding PSALM had advised the IPPA termination on Sept.4 due to SMC’s non-payment.
PSALM also mentioned SMC won the auction for the Ilijan IPPA on April 16, 2010 through its USD 870-million offer, beating First Gen Luzon Power Corp., Therma Power Visayas Inc., and Trans Asia Oil and Energy Development Corp. SMC then created SPPC for the IPPA contract.
Shortly, the IPPA’s certificate of effectivity was issued on May 11, 2010 after all administrator conditions precedents were met by SPPC.
Ilijan, which is located in Batangas, is operated by KEPCO under a build-operate-transfer contract that will expire in 2022. (PNA)