Meralco eyes SMC’s Ilijan power contract

by Alena Mae S. Flores – July 13, 2016 at 11:35 pm

from Manila Standard Today

Manila Electric Co.  is in talks with San Miguel Corp. to acquire the independent power producer contract of the 1,200-megawatt Ilijan natural gas power plant in Batangas province.

Meralco president Oscar Reyes said “talks are very preliminary” on the Ilijan IPPA contract sale.  San Miguel president Ramon Ang did not confirm the negotiations.

Meralco chairman Manuel Pangilinan and Ang recently forged a first joint venture in power generation. Meralco Powergen Corp., a subsidiary of Meralco, acquired a 49-percent stake in Mariveles Power Generation Corp., a wholly-owned subsidiary of SMC Global Power Holdings Inc., the power arm of San Miguel Corp.

South Premiere, a wholly-owned subsidiary of SMC Global Power Holdings Corp., won the contract as the independent power producer administrator of the Ilijan plant during a bidding conducted by Power Sector Assets and Liabilities Management Corp. in 2010 with an offer of $870 million.

South Premiere has an ongoing dispute with PSALM over the Ilijan contract. The dispute arose from interpretations of certain provisions related to generation payments under the Ilijan IPPA agreement.

PSALM advised South Premiere on Sept. 4, 2015 that it was terminating the Ilijan IPPA agreement because of the latter’s alleged failure to settle the alleged outstanding generation payments. PSALM was demanding payment of unpaid obligations amounting to P6.6 billion from South Premiere.

The Mandaluyong City regional trial court issued last year a preliminary injunction in favor of South Premiere enjoining the government from further proceeding with the termination the IPPA contract for the  Ilijan natural gas power plant.

PSALM called on the performance bond in the form of a stand-by letter of credit of South Premiere with ANZ Bank in the amount of $50 million.

South Premiere filed a complaint before the court on Sept. 7, 2015 to nullify the termination notice of PSALM and the drawing of the standby letter of credit “for lack of factual and legal basis.”

The TRO previously issued in favor of South Premiere prevented PSALM “from disposing in any manner of the payment received from ANZ under the performance bond except as directed by the Court.”

The court also prohibited PSALM from treating South Premiere “as being an administrator in default and from performing any act to pursue the collection of supposed unpaid generation payments.”

It also prohibited the agency from collecting “VAT on generation payments for Meralco nominations under the Meralco-National Power Corp. power supply contracts to service Sunpower and Ecozone requirements.