By Lenie Lectura – September 21, 2017
from Business Mirror
It has, in fact, paid P238 billion as of August this year, according to Ang.
“It is not true that we are not paying. Please stop unnecessary publicity. It’s turning off investors,” Ang, SMC president, said. “We have paid our obligations. It is Psalm that should honor the contract.”
Ang was reacting to a recent statement of the Department of Energy (DOE) asking South Premiere Power Corp. (SPPC) to honor its contractual obligation to the government as the administrator of the 1,200-megawatt (MW) Ilijan power plant.
SPPC is a wholly owned subsidiary of SMC Global Power Corp., the power arm of SMC. Ang is the president of SPPC and SMC.
SPPC said it has already paid Psalm P238 billion in various fees as of August 2017.
The P238 billion paid to Psalm consists of P187 billion in energy fees and P51 billion in capacity fees. By the time the agreement expires in 2022, SPPC would have paid Psalm a total of P384 billion, representing P287 billion in energy fees and P97 billion in capacity fees.
The P97-billion payment for capacity fees, equivalent to about $2 billion, is effective payment for the 20-year-old power plant. A brand-new plant with the same capacity can be built for so much less.
“By the time we finish our payment, it would be like we bought the plant twice its value already,” Ang said. SPPC also reimburses Psalm regularly for fuel and variable operating and maintenance costs in the form of energy fees.
Ang said this clearly shows that SPPC is paying Psalm more than what it is paying the IPP counterparty for the Ilijan power plant. Thus, Psalm is net-cash positive from its administration agreement with SPPC.
SPPC allegedly owes the government P10 billion in unpaid power-generation fees. PSALM, according to Ang, said SPPC should have sold its power generation to the Wholesale Electricity Sport Market (WESM) instead of Manila Electric Company, as this allegedly would have optimized revenues from the high WESM prices during the period of November and December 2013.
“Not only is this a view in hindsight but is also very short sighted. Prices in November to December 2013 at P15.56 per kilowatt-hour [kwh] was a fluke and was, in fact, declared by the ERC [Energy Regulatory Commission] null and void in its order of March 2014,” SPPC said.
Moreover, WESM prices are volatile as it is dependent on the supply and demand situation.
“Today, where supply exceeds demand, prices hover at about P2 to P2.50 per kwh, which could have meant huge losses to Psalm and SPPC,” the company said. “It is not even enough to pay for fuel costs.”
SPPC earlier filed a complaint against Psalm due to willful breach of contract, arising from what the power company believes is a flawed interpretation of certain provisions related to its generation payments, under the agreement.
Psalm’s questionable interpretation resulted in the alleged shortfall in generation payments by SPPC, according to documents provided by the company.
The case also sought to stop PSALM from illegally terminating SPPC’s Ilijan power contract and treating the latter as an administrator-in-default.
On September 15, 2016, the court issued an order granting a preliminary injunction that enjoins Psalm from proceeding with the termination of the Ilijan power contract with SPPC while the main case is pending.