San Miguel Corp. urged to settle outstanding financial obligations with PSALM over Ilijan asset

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The Department of Energy (DOE) urges San Miguel Corp. (SMC)  to pay its outstanding liabilities to the Power Sector Assets and Liabilities Management Corp. (PSALM) for the Ilijan contract it has signed with the government in 2010.

Energy Chief Alfonso Cusi said that SMC disregarded its contractual obligations in the Ilijan combined cycle power plant. The agency has now addressed the issue to the courts.

“That is the contract, they have to pay. If they want government to honor the contract, they also have to honor their contract,” Cusi said, referring to the SMC’s contract with the government for the independent power producer administration (IPPA) of the Ilijan asset under the Electric Power Industry Reform Act (EPIRA).

In April 2010, SMC acquired the Ilijan IPPA for a whopping $870 million offer, outbidding other interested investors.

The Ilijan power plant, a 1,200-MW dual-fuel power station in Ilijan, Batangas City, is under Korea Electric Power Corp.’s build-operate-transfer contract set to expire in 2022. It runs on natural gas and uses distillate oil as backup fuel source.

South Premiere Power Corp. (SPPC), a subsidiary of SMC’s Global Power Holdings Corp., was issued the contract for the Ilijan’s IPPA by PSALM.

As per EPIRA’s directive, IPPAs are provided to designated private firms for further administrator management and control of Napocor’s contracted capacity.

But in 2015, PSALM terminated SMC’s IPPA contract of SPPC on September 4 due to the power firm’s unsettled generation fees worth P6.46 billion from December 26, 2012 to April 25, 2015. This amount increased rapidly to over P12 billion, according to PSALM’s records in April 2016.

This caused SMC to submit complaints to various courts including the Regional Trial Court of Mandaluyong City and the Department of Justice, specifically PSALM OIC Lourdes Alzona, against PSALM on the enterprise’s financial obligations under the IPPA.

Photo courtesy of ABS-CBN News

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