SC orders withdrawal of contract for Naga Power plant rehab

MANILA, Philippines - The Supreme Court (SC) has ordered state-owned Power Sector Assets and Liabilities Management Corp. (PSALM) to withdraw the contract allowing SPC Power Corp. to rehabilitate the Naga Power Plant Complex (NPPC) in Cebu.

This came after the High Court invalidated the sale of the 153.1-megawatt (MW) Naga Power Plant Complex (NPPC) in Cebu to SPC.

The decision stemmed from a filing by Sen. Sergio Osmeña III which questioned SPC’s “right-to-top” the bidding held in 2013.

“The right of first refusal (right to top) granted to Salcon Power Corp. under the 2009 Naga (Land-Based Gas Turbine) LBGT-LLA is hereby null and void. Consequently, the asset purchase agreement (NPPC-APA) and land lease agreement (NPPC-LLA) executed by the Power Sector Assets and Liabilities Management Corp. and SPC are annulled and set aside,” the SC said in its decision.

The NPPC contract is a 25-year lease over the land containing the Naga complex.

Two firms, namely the Aboitiz Group’s Therma Power Visayas Inc. (TPVI) and SPC, submitted bids during the third round of auction for the NPPC in 2013.

TPVI emerged as the highest bidder with a P1.09-billion offer, versus SPC’s P859 million, resulting in the award to the Aboitiz firm.

However, SPC exercised its right to top the winning bid of TVPI with a payment of P1.14 billion. The company has a land lease agreement with the government for the Naga facility until 2020, which contains a provision for the right to refusal.

PSALM then awarded the NPPC to SPC.

In his petition, Osmeña argued the right to top provision “must be supported by a consideration separate from the lease contract and may be withdrawn at any time by PSALM in the absence of such consideration.”

Osmeña also said the right to refusal option violates RA 9136 or the Electric Power Industry Reform Act (EPIRA) Law and RA 9184 or the Procurement Law.

“SPC’s exercise of its right to top is disadvantageous to the government and that the provision enables SPC to skirt around eligibility requirements for a qualified bidder,” Osmeña said.

The SC found the filing meritorious and ordered the withdrawal of the award to SPC.