SMC continues talks to settle payments for Ilijan power plant

MANILA, Philippines — San Miguel Corp. (SMC) said it would continue to negotiate with the government even after getting rejected for imposing a new condition in its offer to fully settle in advance its monthly payments for the 1,200-megawatt (MW) Ilijan power plant.

In a statement yesterday, SMC said its offer to pay off capacity charges for the Ilijan power plant two years ahead of schedule was made as a “gesture of good faith” to help boost government resources needed to address the immediate social and economic impact of the COVID-19 pandemic.

Capacity charges represent capital payment by SMC to PSALM as administrator of the Ilijan plant, spread over the term of its contract.

With the settlement of its dues, SMC said the power plant should be turned over to the company.

“The resulting turnover of Ilijan power plant to SMC’s power arm South Premiere Power Corp. (SPPC) is a natural consequence of prepaying the remaining P20 billion capacity charges (now down to P14 billion as of Jan. 31, 2021),” it said.

However, the government, through the Power Sector Assets and Liabilities Management Corp. (PSALM), rejected the advance payment and the “preposterous condition” that the state-run firm should cede control and ownership of the plant to SPPC once the monthly payments are settled.

“Despite this, SMC is committed to continue discussions with the government to swiftly resolve the issue and help boost the country’s economic recovery in these trying times,” SMC said.

Based on government data, SPPC still owes PSALM P23.07 billion in generation payments as of end-2020.

The computation of generation payments due PSALM from SPPC is the subject of the pending court case.

Generation payments refer to the cost of energy based on the specific formula provided for in the IPPA agreement, while monthly payments refer to the fixed monthly amounts due to PSALM based on the IPPA’s financial bid for its right to own the power plant at the end of the IPPA agreement.

As of Jan. 31, SPPC had already paid approximately P83 billion in capacity charges and P260 billion in generation charges since the start of the IPPA.

“If all the capacity charges are paid then the selling price of the Ilijan power plant would have been deemed paid. In fact, SPPC would have overpaid, as P98 billion would have paid for a brand new, and not a 25-year-old, power plant,” SMC said.

SMC earlier said a brand-new power plant with the same capacity as Ilijan, would cost only about P40 billion.

Citing the latest directive of President Duterte, Finance Secretary Carlos Dominguez said no private company should benefit or secure a franchise until “they settle their full accounts with the government.”

The Ilijan power plant in Batangas City was constructed and owned by KEPCO Ilijan Corp. (KEILCO) under the energy conversion agreement (ECA) with the National Power Corp. (Napocor)/PSALM. SPPC was appointed the IPP administrator for the Ilijan power plant in 2010.