The Power Sector Assets and Liabilities Management Corp. (PSALM) has rejected the new condition recently imposed by South Premiere Power Corporation (SPPC) for its offer to advance in full its Monthly Payments due under its Independent Power Producer Administrator (IPPA) Agreement with PSALM for the 1,200 megawatt Ilijan Power Plant.
During the business review of PSALM with the Department of Finance on January 19, 2021, Secretary Carlos G. Dominguez asked PSALM for an update on SPPC’s offer to fully settle in advance its Monthly Payments for the Ilijan Power Plant. PSALM president and CEO Irene Besido Garcia reported that SPPC’s offer now carries with it a new condition that “entirely differs from the tenor of SPPC’s original offer.”
SPPC publicly announced last year that it was willing to prepay these Monthly Payments to PSALM “without prejudice” to the pending case it has with the latter. SPPC also made this announcement during a March 2020 congressional inquiry of the House Committees on public accounts and on good government and public accountability into the unpaid P23.94 billion Generation Payments that PSALM is seeking to collect from SPPC.
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.
Garcia explained that in the March 6, 2020 offer of SPPC to PSALM, the only condition imposed by SPPC on the advance settlement of its Monthly Payments to PSALM was that it would be without prejudice to SPPC’s legal position with respect to the ongoing dispute with PSALM on the Generation Payments due under the IPPA Agreement.
Garcia reported that SPPC’s latest offer, which was outlined in a letter dated January 11, 2021 and sent by the firm’s General Manager, Elenita Go, unexpectedly contained the preposterous condition that PSALM should cede control and ownership of the Ilijan Power Plant to SPPC upon full settlement of the Monthly Payments, and ahead of the June 2022 date of turnover provided in the IPPA Agreement.
According to Garcia, this new condition of SPPC was neither indicated in SPPC’s original offer letter to PSALM dated March 6, 2020, nor mentioned during the July 2, 2020 meeting between representatives of SPPC and PSALM.
Secretary Carlos G. Dominguez reminded PSALM about the latest directive of President Rodrigo R. Duterte not to allow any private company to benefit or to secure a franchise until “they settle their full accounts with the government.”
Based on PSALM’s data, the Monthly Payments due from SPPC for the period of January 2021 until June 2022 is about P14 billion. When the offer was made by SPPC early last year, the Monthly Payments totaled about P22.68 billion.
Garcia informed DOF that PSALM already sent a response to SPPC dated January 18, 2021, pointing out that PSALM’s acceptance of the prepayment offer under the new condition that it will “cede control and ownership of the Ilijan Power Station to SPPC” will “pre-empt any ruling of the judicial court on the matter and will undoubtedly prejudice PSALM’s legal position.” In the same response, PSALM reminded SPPC that in PSALM’s letter of August 4, 2020, it was categorically stated therein that “PSALM is willing to accept SPPC’s offer, provided that such acceptance is without prejudice to PSALM’s legal position” in the pending case.
PSALM’s response to SPPC also stressed that the National Power Corporation (Napocor), and KEPCO Ilijan Corp. (KEILCO) — the independent power producer of the Ilijan Power Plant — had already agreed on the specific transfer date of the power plant. PSALM should not be obligated to fast-track or amend its current arrangements in the Energy Conversion Agreement (ECA) under another contract with a different party in order to accept SPPC’s offer.
Garcia recalls that when SPPC announced the offer to pre-pay in 2020, there was no demand to deliver the Ilijan Power Plant ahead of schedule since SPPC said the offer is meant to help PSALM. This new condition of SPPC clearly deviates from SPPC’s original offer as well as from the condition for PSALM’s acceptance of the offer as stated in PSALM’s letter dated August 4, 2020.
SPPC, a subsidiary of SMC Global Power Holdings Corp., still owes PSALM P23.07 billion in Generation Payments as of the end of December 2020 per PSALM’s books. The computation of Generation Payments due PSALM from SPPC is the subject of the pending court case.
The Ilijan Power Plant in Batangas City was constructed and owned by KEILCO under the ECA with Napocor/PSALM. SPPC was appointed the IPP Administrator for the Ilijan Power Plant in 2010.