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SMC threatens to sue PSALM for alleged contract breach

Posted on September 15, 2015

By Juzel L. Danganan

MANILA, Sept 15 (PNA) – Food and beverage conglomerate San Miguel Corp.(SMC) threatens to sue the state-owned Power Sector Assets and Liabilities Management Corp. (PSALM) for alleged breach of contract.

SMC president Ramon Ang said Tuesday that the company would file a case against PSALM Board of Directors for breaching their administration agreement on the 1,200 megawatt (MW) Ilijan power plant.

”We will sue PSALM management and Board of Directors. We will pursue them until we get the justice in their harassment,” Ang said in a press briefing Tuesday.

He claimed that PSALM failed to honor SMC’s win in the bidding process for the power plant’s capacity. SMC owns the capacity of the power plant, as the independent power producer administrator (IPPA), through its subsidiary South Premiere Power Corp. (SPPC).

Ang also said that SMC had already paid Php 180 billion for the power plant’s capacity, far more expensive than building a similar power plant worth USD 1 billion, but was still demanding more payment. He added that the company had only earned Php 3.8 billion since its takeover in 2010.

Ang sees that PSALM’s move has malicious intent, adding that it might disqualify them from other auctions to be held soon. SMC Global Power Holdings Corp. has also recently made a bid for the IPPA of 210-megawatt (MW) Mindanao coal.

”Because if they don’t follow the contract and we don’t file a case…, they might prevent us to join other bids,” he said.

San Miguel said that the Energy Regulatory Commission (ERC) had no jurisdiction on the case because it only covered the administration agreement and was not related to the rates for the consuming public.

SPPC stressed that “Under the administration agreement, the Administrator is entitled to a reduction in “Must Pay Volume” called the “Must Pay Relief”, when the Power Station is not able to generate at the “Must Pay Volume” attributable to IPP Kepco Ilijan.

However, the subsidiary said that PSALM had not granted the rate relief, but applied the Wholesale Electricity Spot Market (WESM) prices.

SPPC argues that PSALM should apply the rate relief since the power plant was on shutdown for the period.

The corporation further cited the administration agreement requires energy delivered — but it had not since Ilijan was on shutdown.

Meanwhile, the hearing for the injunction of the IPPA termination will be held on Sept. 23 at 1:00 p.m.

PSALM, however, said in a statement Tuesday that San Miguel’s claim that electricity prices would increase was false, after its takeover of the IPPA.

“The assumption on increase in the electricity price is just a play on public opinion and is very speculative, given that prices at the WESM are driven by market forces and competition,” PSALM president and chief executive officer Lourdes Alzona said.

She added there was still a price cap and a secondary price cap at WESM that would avoid unnecessary spikes and protect the consumers.

On Monday, SMC said the Mandaluyong Regional Trial Court (RTC) has extended the temporary restraining order (TRO) for PSALM’s termination of the IPPA agreement until Sept. 28.

The Mandaluyong RTC has initially issued a 72-hour TRO on Tuesday.

The TRO also stops PSALM from exercising its IPPA rights to dispose the payment it had received from the USD 60-million performance bond with ANZ, pursue collection of supposed unpaid generation payments, VAT on generation payments for Manila Electric Company (Meralco) nominations under the Meralco-NAPOCOR power supply contracts to Sunpower and Econzone requirements and any interest imposed by PSALM on such amounts. (PNA)

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