PSALM continues to bleed from IPPA deals

by Myrna Velasco – August 14, 2016

from Manila Bulletin

The Power Sector Assets and Liabilities Management Corporation (PSALM) is still on financial losses from the privatized supply contracts that it had placed under the charge of Independent Power Producer Administrators (IPPAs), according to a top official of the company.


PSALM Officer-in-Charge Lourdes S. Alzona said financial outcome for the IPPAs had remained “negative,” explaining that higher turnovers are expected yet at the latter part of the privatization deals.

“The nature of the contracts for the IPPAs is that their payments are back-loaded, meaning, we will earn higher in the latter part of the contracts, so it is only then that we expect to have positive results. But as time goes by, the ‘negative financial turnover’ will also taper off,” she said.

Alzona indicated that it was only the IPPA deal for the 1,200-megawatt Ilijan gas-fired plant that has been registering positive financial yield – but that was prior to the dispute with its IPPA South Premiere Power Corporation of the San Miguel Group.

“We are still registering negative results for the Pagbilao, Sual and Bakun plants… but for Ilijan, we used to have positive results,” Alzona disclosed.

For the privatized contracted capacity of the San Roque hydropower plant, the PSALM executive reckoned that the “unfavorable yield” has already narrowed down.

Serious questions have been raised against the IPPA mode of privatization of the IPP-contracted capacities, with some parties pointing out that the assets may have been unloaded on a “fire sale” – with the government losing money while some private sector takers have been raking in huge profits.

The costs unrecoverable from the IPP contracts’ privatization are being passed on as universal charge (UC) for stranded contract costs (UC-SCC) component in the electric bills.

This is already reflected for a P0.1938 per kilowatt-hour (kWh) impact in the existing bills, but this may still go up with the R35 billion worth of pending UC-SCC applications of PSALM with the Energy Regulatory Commission.

It will be long and winding cost recoveries yet that the consumers will be shouldering in their electric bills.

PSALM has been batting for at least nine years of pass-on of its additional UC stranded contract cost recoveries – plainly, a burden that will torment consumers until the end of PSALM’s corporate life in 2026.

Beyond UC on stranded contract costs, PSALM has also applied for stranded debt recoveries for as mounting as P70 billion. This is also pending for regulatory approval.