SMC, PSALM wrangle over P200 B contract compensation

MANILA, Philippines — State-run Power Sector Assets and Liabilities Management Corp. (PSALM) must pay San Miguel Corp. (SMC) around P200 billion if it continues not to honor their contract, the conglomerate’s top official said yesterday.

In a statement, SMC said it already paid PSALM $5.28 billion – or P264.25 billion to cover various fees for the independent power producer administrator (IPPA) contract for the 1,200-MW Ilijan combined-cycle power plant as of end-June.

The total amount  is broken down into generation payments of P205.33 billion and fixed monthly total payments of P58.92 billion.

This has allowed PSALM to gain $631 million (P31.55 billion) from total payments of South Premier Power Corp. (SPPC), which is the IPPA for the Ilijan plant.

SPPC is a subsidiary of SMC Global Power Holdings Corp., the power unit of San Miguel Corp.

“We are religiously honoring our contractual obligations to PSALM. In fact, they are already making billions out of the agreement. We hope PSALM will refrain from releasing questionable data that put us in a bad light. We want the pending cases to be quickly resolved. In the meantime, we wait and let the courts decide,” SMC president and COO Ramon Ang said.

However, PSALM made claims in its financial statements that it has receivables of P22.39 billion from SPPC as the power plant’s IPPA.

SMC bagged the Ilijan IPPA in April 2010 after it outbid other parties with its  $870 million offer.

Under the Electric Power Industry Reform Act (EPIRA), the IPPA contract gives the administrator management and control of National Power Corp.’s contracted capacity, passing on the risks in the power sector to the private sector.

During that time, Ang said the output of the Ilijan plant is sold as a baseload capacity and not through WESM.

“PSALM should stick to the terms of reference and not change whenever it is convenient for them,” he said.

WESM prices fluctuate depending on supply and demand situations. PSALM previously argued that SPPC should have sold its generated power to WESM instead of selling to the Manila Electric Co. (Meralco), especially during the contested period (November-December 2013) which could have optimized revenues from the high prices.

The SMC official said they are willing to pay the P20 billion in outstanding balance to PSALM, as long as they re-compute all the paid amount and return to SMC the overcharges amounting to P200 billion based on the company’s estimates using WESM prices.

SPPC earlier filed a complaint against PSALM for willful breach of contract from a flawed interpretation of certain provisions of its IPPA agreement. The case also sought to stop PSALM from illegally terminating the Ilijan IPPA and treating SPPC as administrator in default.

The court has enjoined PSALM from proceeding with the termination of the Ilijan IPPA agreement with SPPC while the case is still pending.

Situated in Batangas, the Ilijan power plant is being operated by Korea Electric Power Corp. (Kepco), through Kepco Ilijan Corp., under a build-operate-transfer contract that will expire in 2022.