SMC power unit suing PSALM for ‘intentional breach of contract’

MANILA, Philippines - SMC Global Power Inc. of the San Miguel Group is taking further legal action against the management of the Power Sector Assets and Liabilities Management Corp. (PSALM) for not honoring a 2010 independent power producer administration (IPPA) agreement involving the 1,200-megawatt Ilijan combined cycle power plant, its top official said yesterday.

PSALM earlier terminated the IPPA agreement for the Ilijan plant with South Premiere Power Corp., a unit of SMC Global Power.

“We will sue PSALM management. We will pursue them until we get justice for their harassment,” SMC Global chairman Ramon Ang told reporters in a briefing yesterday.

He said there seems to be an “intentional breach of contract” as PSALM did not honor the 2010 contract with SPPC, which he said is a negative signal to future investors.

“The new management of PSALM does not know how to honor contract. There seems to be some malicious intent,” Ang said.

The SMC official, however, noted the dispute with PSALM would not discourage the group from participating in future government auctions.

“We will still participate in other public biddings,” Ang said.

In April 2010, PSALM bid out Ilijan IPPA where San Miguel emerged as the highest bidder with a $870 million offer.

SPPC was then issued the certificate of effectivity as the Ilijan plant’s IPPA after all conditions precedent had been met.

However, the state-run agency terminated the contract last Sept. 4 over SPPC’s failure to pay the outstanding generation payments from Dec. 26, 2012 to April 25, 2015 amounting to P6.46 billion.

However, SPPC has already paid P180 billion in obligations to PSALM for the Ilijan IPPA, broken down into P36 billion in capacity fee and P144 bilion in generation payments, as of this month, Ang said.

The SMC Group sought legal relief from the Mandaluyong Regional Trial Court, which granted a 72-day temporary restraining order (TRO) and was eventually extended 17 more days until Sept. 28.

The dispute went on with PSALM claiming the local court has no jurisdiction over the case and only the Supreme Court can issue a TRO because of a provision of Republic Act 9136 or the Electric Power Industry Reform Act (EPIRA).

The SPPC action in restraining the termination of the IPPA agreement is not to restrain provisions of EPIRA but to “compel PSALM to implement the provisions of the EPIRA by honoring the privatization of a Napocor asset, as required by EPIRA,” SMC Global had said.

Situated in the Southern Luzon province of Batangas, the Ilijan power plant is being operated Kepco under a build-operate-transfer contract that will expire in 2022.