No unpaid debts to the government as of January, says San Miguel


San Miguel Corp. (SMC) through its power unit South Premiere Power Corp. (SPPC) has paid a total of P314.6 billion to the Power Sector Assets and Liabilities Management Corp. (PSALM) as of January 2020 for its Administration Contract  on the 1200 MW Ilijan power plant in Batangas.

The company released a statement after reports of “unpaid debts” to the government were reportedly issued by PSALM and the Makabayan bloc.

Bayan Muna however denied their involvement.

“This puts into question the motives of the true source of the news release and the integrity of the material,” SMC was quoted in a statement.

The issue was also raised in a joint hearing in Congress.

“For some reason, while our case with PSALM is still in Court, this issue is being raised by parties that are devious enough to use and misrepresent the Makabayan bloc to advance their ulterior motives,” SMC President Ramon S. Ang said.

“It’s for this reason that we are releasing the latest figures of our continuous and up-to-date payments to PSALM,” he added.

SPPC began discussions with PSALM about the proper computation as a result of differing interpretations on the basis for generation payments. However, PSALM unilaterally terminated SPPC’s Administrator Contract over Ilijan despite ongoing talks.

Then PSALM chairman, Finance Secretary Cesar Purisima, argued that the contract termination was done without the authorization of the PSALM board.

The total payment of P314.6 billion consisted of P73.9 billion fixed in monthly payments and P240.7 billion in generation charges.

With this, the remaining balance payment to PSALM is at P77.6 billion, including P23.6 billion in fixed monthly payments and P54 billion in generation charges.

“PSALM gains from the deal as of January 2020 have thus reached P40 billion,” said SMC.

The issue stemmed from a misinterpretation of PSALM on the provisions of SMC’s original independent power producer administrator (IPPA) contract, resulting in wrong computation on “underpayments.”

According to Ang, PSALM was computing payments based on prices when the Wholesale Electricity Spot Market (WESM) had a temporary spike, particularly from November to December 2013.

Such spike in WESM prices were eventually declared null and void by the Energy Regulatory Commission (ERC).

SMC further explained that such manner of computation would have resulted in higher earnings for PSALM would have also required SPPC to sell the capacity produced of Ilijan power plant to the spot market.

“This is contrary to the nature of a baseload plant and the fact that the power plant has been and continues to be fully contracted to bilateral power customers, primarily Meralco,” San Miguel added.

Selling the produced supply of the Ilijan plant to the spot market would have been a violation of the provisions of SPCC’s contract approved by the ERC. 

“We cannot just change the provisions of the contract for those two months, when there was an extraordinary spike in prices, and then revert to the original agreement after that. If we did that, PSALM would actually lose a lot more. We have continued to pay them and they have earned so much from this agreement already. We’re just asking them to honor the contract,” Ang concluded.