PSALM: No turnover plan yet for Ilijan even with less than a year left in contract

Ilijan SMC

The 1,200-megawatt Ilijan gas-fired power plant’s build-operate-transfer (BOT) contract will expire in June next year, but the Power Sector Assets and Liabilities Management Corporation (PSALM) noted that there is no definitive plan yet regarding the turnover to either its independent power producer administrator (IPPA) or the buyer of its supply contract during its privatization.

In a Manila Bulletin report, PSALM President and CEO Irene Garcia said that there weren’t any meetings between the government-owned firm and South Premiere Power Corporation (SPPC) regarding the plant’s turnover. SPPC, a subsidiary of SMC Global Power Holdings, is Ilijan’s IPPA.

Located in Batangas City, Ilijan is one of the five plants feeding on fuel from the Malampaya gas field in Palawan.

Under the bidding terms in the privatization of the IPPs’ power supply contracts, power plants will have to be turned over to their respective IPPAs. In the case of Ilijan, owner National Power Corporation (NAPOCOR) will have to turn it over to SPPC. Established by virtue of Republic Act 9136 or the Electric Power Industry Reform Act (EPIRA), PSALM is tasked to oversee and facilitate the privatization of NAPOCOR’s assets.

Nevertheless, there is a pending dispute between PSALM and SPPC because of the differing calculations that the parties regarding capacity fee payments. The government-run firm particularly rejected San Miguel’s ownership proposal for the plan earlier this year.

Garcia said that recent meetings with SPPC focused on the need to order critical spare parts for the plant for next year, the scheduling of inventory and the scheduling of trainings to be conducted by KEPCO Ilijan Corporation.

Under the original BOT contract with NAPOCOR, the government engaged the Korea Electric Power Corporation (KEPCO) to develop and operate the plant until the contract expires on June 5, 2022.

Then in the privatization of the supply contract carried out by PSALM in 2010, it has been stipulated that Ilijan’s ownership will be yielded to SPPC at zero-value upon the contract’s expiration.

In the turnover of power plants’ ownership, it normally takes a year or two to flesh out all the details with government, including those regarding compliance of deliverables by the interested parties.

Based on its last audited financial statement, PSALM was still pursuing Php21.9 billion worth of receivables from SPPC because of the disputed capacity payments.

Ilijan’s continued operation would also be saddled with dilemmas on fuel that will be utilized for its electricity generation, as its gas sale and purchase agreement with Shell Philippines Exploration B.V., Malampaya’s operator, will end next year.

PSALM previously inked a memorandum of understanding with fellow state-owned firm Philippine National Oil Company for the use of its “banked gas” in Ilijan, though there is no certainty that such resource can still be extracted given Malampaya’s depleting resources.