Psalm defends Ilijan contract termination


THE Power Sector Assets and Liabilities Management Corp. (Psalm) defended its decision to terminate the contract appointing a unit of San Miguel Corp. (SMC) as independent power producer administrator for the 1,200-megawatt (MW) Ilijan combined cycle power plant.

Psalm President and Chief Executive Officer Lourdes Alzona said the move was intended to protect the interest of government and power consumers in the Batangas-based power facility.

On Tuesday, SMC said in a disclosure to the Philippine Stock Exchange (PSE) that the Mandaluyong RTC Branch 209 has issued a temporary restraining order (TRO) enjoining PSALM from terminating the IPPAA contract it entered into with South Premiere Power Corp. (SPPC), a unit of SMC.

The state-run Psalm said it was compelled to avail of the relief provided under the Independent Power Producer Administration Agreement (IPPAA) for Ilijan because of the failure of SPPC to pay the outstanding generation payments for the period December 26, 2012 to April 25, 2015.

“In the interest of government, Psalm issued the Notice of Termination to SPPC to stop government from incurring unnecessary losses as a result of the Ilijan IPPA’s nonpayment of its obligations,” said Alzona.

Alzona said the obligation amounts to P6.46 billion, which forms part of the privatization proceeds to be utilized to liquidate the financial obligations of National Power Corp. (NPC), pursuant to the Electric Power Industry Reform Act.

For power consumers, Alzona said the collection of the outstanding amount will translate into a reduction of NPC stranded debts that are to be recovered through the universal charge.

“While PSALM, on different occasions, has demanded immediate payment by SPPC of its outstanding generation payments, SPPC refused and consistently refuses to settle all its contractual obligations to Psalm for the relevant period,” Alzona added.

With the termination, and in accordance with the Ilijan IPPAA, PSALM has also called on the $60-million performance bond of SPPC on September 4.

The Philippine Electricity Market Corp. (PEMC) was also informed that SPPC would cease to be the trading participant in relation to the Ilijan power plant.

PEMC was also informed that, with immediate effect, all sums payable to SPPC as trading participant for the Ilijan power plant shall be paid into the account of Psalm.

Alzona assured the public that the termination will have no effect on the operations of the Ilijan plant.

The plant is being operated by Korea Electric Power Corp. (Kepco) through Kepco Ilijan Corp.

Alzona added that Psalm’s action on the Ilijan IPPAA was also echoed by the Commission on Audit (CoA) in its latest audit report on Psalm operations.

Psalm held the bidding for the Ilijan IPPA on April 16, 2010, where San Miguel Corp., SPPC’s parent company, was the highest bidder.

San Miguel offered $870 million for Ilijan’s contracted capacity to edge out three other groups — First Gen Luzon Power Corp., Therma Power Visayas Inc., and Trans Asia Oil and Energy Development Corp.

After all administrator conditions precedent had been met, SPPC was issued the Certificate of Effectivity as the Ilijan plant’s IPPA on May 11, 2010.

Located in Batangas, the Ilijan power plant is being operated by Kepco under a build-operate-transfer contract that will expire in 2022.


Please follow our commenting guidelines.

1 Comment

  1. The BIG QUESTIONS is — why did PSALM wait for more than 2-1/2 years to terminate contract for non-payment? What is the contract terms associated with late payment penalties and termination thereof?

    The money due is payment to money owed by the government (NAPOCOR), where did the PSALM get the money to pay the money owed by NAPOCOR on time???

    I smell stink to high heaven here of CORRUPTION by the largest corporation of the country who claims in pronouncements making billions every year!!!

    Contract termination is not good enough – there should be immediate INVESTIGATION by proper investigative body – like congress and etc.