Ilijan contract lined up in Palace review of ‘onerous deals’

By Myrna M. Velasco – April 22, 2019, 10:00 PM
from Manila Bulletin

The Ilijan gas plant’s independent power producer administrator (IPPA) deal is among the government transactions set for submission to Malacañang on President Rodrigo Duterte’s call for review of ‘onerous contracts’ with the private sector.

The Ilijan power project is currently enmeshed in legal battles relating to the P22.396 billion receivables (as of end-2017) booked by state-run Power Sector Assets and Liabilities Management Corporation (PSALM) against its IPP administrator South Premiere Power Corporation (SPPC), a subsidiary of San Miguel Corporation.

According to a highly placed energy official, a formal correspondence has already been sent last week directing PSALM to prepare all the necessary documents relating to the plan to elevate the Ilijan IPPA contract for the Palace’s review.

Malacanang reportedly asked all government agencies to submit respective project contracts in their departments or units that they deem to be “onerous” or with troublesome provisions in form and in execution.

It was gathered that PSALM’s continuing billings to SPPC further swelled last year, but no resolution yet how the contested amounts would be resolved given the pending cases in the Courts and the Department of Justice. The Malacanang review is seen as a way to finally give this matter its much-needed resolution.

The source added that the submission of the Ilijan contract has already gotten the nod and will just need final confirmation from its board chaired by Finance Secretary Carlos G. Dominguez III.

The build-operate-transfer (BOT) contract of the Ilijan gas-fired power plant between Korea Electric Power Corporation (KEPCO) and the government (initially through National Power Corporation then transferred to PSALM post-privatization) will lapse in 2022, but there is no clear direction yet on the turnover plans of the asset because of the legal skirmish on the IPPA deal.

At the expiration of the BOT contract, the power plant should be due for turnover to the IPP Administrator at “zero value” — but the Ilijan contract is seen “disparately situated” because of the legal entanglements.

San Miguel Corporation President Ramon S. Ang challenged PSALM last year that if he will be compelled to pay the P22 billion being demanded from SPPC, he can bring the check to the state-run firm anytime but his company will pursue counter-billings to the government that could reach a scale of P200 billion – just to follow what he claimed as PSALM’s preferred billing scheme.

The SMC chief executive laments a particular demand for SPPC to pay the higher charges when prices were soaring at the Wholesale Electricity Spot Market (WESM) during the industry’s technical and market troubles in November-December 2013.

But PSALM is insisting that there’s a formula in the IPPA contract that shall guide the parties on how payments to the government shall be referenced on, thus, the billings on ‘underpayments’ continuously being forwarded to SPPC.

Aside from the Ilijan deal, it was noted that two more contracts in the energy sector are being studied for possible submission for the Palace’s targeted review of questionable contracts with the private sector.

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