Court stops sale of Naga plant to SPC

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The Supreme Court has stopped the sale of the 153.1-megawatt (MW) Naga Power Plant to SPC Power Corp., ruling that the company does not have the right to top an offer by a rival firm.

The Power Sector Assets and Liabilities Management Corp. (PSALM), which allowed SPC to revise its bid and subsequently beat Therma Power Visayas Inc. (TPVI), on Sunday insisted that the deal was valid.

SPC and TPVI officials were not immediately available for comment.

In a decision, the high court’s Third Division said SPC—formerly known as Salcon Power Corp.—could not exercise first refusal rights under a land lease agreement (LLA) due to “lack of valued interest or right to the object over which the right of first refusal is to be exercised.”


The court pointed out that the property subject of the right of first refusal was outside of the leased premises covered by the LLA.

“The right of first refusal (right to top) granted to Salcon Power Corp. under the 2009 Naga land-based gas turbine land lease agreement (LBGT-LLA) is hereby declared null and void,” the high court said.

“Consequently, the asset purchase agreement and land lease agreement executed by the Power Sector Assets and Liabilities Management Corp. and SPC are annulled and set aside,” it added.

The court stressed that SPC’s contentions regarding right of way and operational requirements were “clearly not analogous to a lessee’s legitimate interest on the property being leased.”

It also said that SPC had never operated the Naga land based gas turbine.

“We hold that the grant of right to top to SPC under the LBGT-LLA is void as it is not founded on the said lesses’s legitimate interest over the leased premises,” it added.

The court also rejected SPC’s argument that the privatization of the Naga Power Plant Complex (NPPC) was even more advantageous to the government, because it resulted in a higher offer.

“Whatever initial gain from the initial price obtained for the NPPC compared to the original bid price of TPVI is negated by the fact that SPC’s right to top discouraged more potential buyers from submitting their bids, knowing that even their most reasonable bid can be defeated by SPC’s exercise to right to top,” the court said.

The Naga Power Plant was turned over by PSALM to SPC in October last year. A March auction had seen TPVI emerging as the highest bidder with a P1.09-billion offer, followed by SPC which had bid P859 million.

A sale condition, however, was that SPC would have the right to top the winning bidder based on the LLA its signed with PSALM in 2009. SPC subsequently adjusted its offer and paid PSALM P1.14 billion in May.

Senator Serio Osmena 3rd questioned the deal and asked the high court to enjoin the sale, calling the right to top condition as contrary to public policy.

Asked to comment on the court ruling, PSALM President Lourdes Alzona said on Sunday: “For the record, the Department of Justice (DOJ) affirmed the legality of the ‘right to top’ the adjoining property within the Naga Power Plant Complex accorded to the owner of the Naga Land-Based Gas Turbine Power Plant in connection with the privatization of NPPC.”

“The DOJ’s confirmation was made before the commencement of the NPPC sale process,” she added.

Alzona, who said PSALM had yet to receive a copy of the court decision, did not say if the government would appeal. She noted that the Office of the Government Corporate Counsel was representing them.

The Naga Power Plant consisted of the 52.5-MW Cebu 1 and 56.8-MW Cebu 2 coal-fired thermal power plants, already demolished, and the 43.8-MW Cebu Diesel Power Plant 1.

Last month, SPC said it would be creating Cebu Naga Power Corp. to oversee the construction of two new 2×150-MW facility at the Naga complex.

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1 Comment

  1. The Supreme Court is right to prevent the sale of assets of the country. Look at what is happening with the private power/energy business in the country – controlled by the Oligarchs who are in collusion to keep on increasing the cost of electricity. The power generators are supposed to be competitors to keep the cost of electricity true, but NO – they are even co-owners of some power generating power plants – Son-of Gun!

    The government or NAPOCOR should be given the right to build new generating facilities! Dissolve ERC and PSALM – they are nothing but vehicles for the Oligarchs to keep on filling their pockets with money from the poor!!!!!