Psalm sees P1.7-B borrowing costs yearly on bad accounts

By Butch Fernandez -February 24, 2020
from Business Mirror

THE Power Sector Assets and Liabilities Management Corp. (Psalm) warned it will incur an annual borrowing cost of about P1.7 billion a year should the P33.62 billion in delinquent accounts remain unpaid by the Independent Power Producer Administrators (IPPAs).

The Psalm said the government could have used this “substantial amount” to fund more priority programs on infrastructure and capital development.

“If these hefty financial obligations remain unpaid, PSALM will be compelled to contract new borrowings in order to timely liquidate maturing obligations of the Napocor [National Power Corp.]—a vicious cycle that will result in Psalm absorbing additional interests and other finance charges,” Psalm President Irene Joy Besido-Garcia was quoted in a statement as saying.

Last Thursday, San Miguel’s power unit South Premiere Power Corp. said it has paid a total of P314.6 billion to Psalm as of January 2020 for its administration of the capacity from the 1200-megawatt Ilijan power plant in Batangas. However, the Department of Finance (DOF) still pointed to the SPPC as the one with the “highest unpaid account in the sum of P23.94 billion as of December 31, 2019.”

The DOF noted that there is a pending case before the Regional Trial Court (RTC) of Mandaluyong City where the SPPC is asserting another formula for computing its payables to the Psalm. This case has been pending since September 2015, according to the DOF.

The DOF said in a report the Psalm disclosed that its average cost of borrowings for 2019 was at 5.07 percent.

Although its revenue collections reached P98.3 billion, the Psalm said there are still P422.2-billion remaining obligations from Napocor that PSALM will need to raise money for.

The P33.62-billion delinquent accounts form part of the P95 billion in unpaid charges owed to PSALM not only by IPPAs but by other industry players as well such as electric cooperatives (ECs) plus receivables inherited from Napocor or those still subject to reconciliation, Garcia said.

The DOF said it has since instructed Psalm to run after IPPAs over the delinquent accounts and cooperatives.

According to Finance Undersecretary for Legal Affairs BayaniAgabin, the PSALM collected last year around P70.41 billion from its various IPPAs.

Agabin added that Psalm was ordered by the DOF chief to immediately initiate collection cases against erstwhile IPPAs of the Unified Leyte Strips of Energy in Tongonan, Leyte, particularly Good Friends Hydro Resources Corp. of Fernando Borja and the Waterfront Mactan Casino Hotel Inc. that allegedly have delinquent accounts with the Psalm.

Contracts of these two IPPAs—Good Friends and Waterfront—were terminated by the PSALM in August 2017 and October 2019, respectively, for nonpayment.

Good Friends owes the Psalm around P1.21 billion while Waterfront has unpaid obligation of P87.74 million, the DOF said.

Two IPPAs of Filinvest Development Corp.—FDC Utilities Inc. for the Unified Leyte Strips of Energy contract and FDC Misamis Power Corp.— for the capacity of Mindanao I and II Geothermal Power Plants are also being compelled by the Psalm to pay their delinquent accounts amounting P1.17 billion and P2.63 billion, respectively.

Both IPPA contracts were also terminated by PSALM for nonpayment, according to the DOF. The amounts that are due PSALM are the subject of two separate arbitration proceedings initiated by these Filinvest companies, it added.

Notwithstanding the ongoing arbitration, Filinvest recently expressed to Psalm its willingness to settle the delinquent accounts, Garcia said.

Vivant-Santa Clara Northern Renewables Generation Corp. (Northern Renewables), which administers the IPPA agreement for the Bakun Hydroelectric Power Plant in Ilocos Sur, also has an unpaid account of P4.19 billion.

Garcia said the Psalm expects to collect this year additional payments from Northern Renewables in view of a settlement agreement they had submitted to the court.