San Miguel pays $4.8 M fees to PSALM

For Ilijan IPPA Contract

MANILA, Philippines — San Miguel Corp. has paid $4.8 million in various fees to the Power Sector Assets and Liabilities Management Corp. (PSALM) as of end-October even amid their ongoing dispute over the Ilijan power plant contract.

The amount, roughly equivalent to P245 million, is part of SMC’s contractual obligations under the independent power producer administration (IPPA) of the 1,200-megawatt (MW) Ilijan power plant in Batangas through subsidiary South Premiere Power Corp. (SPPC).

“This is clear proof that we religiously pay PSALM and honor our contractual obligation under the Ilijan administration agreement,” SMC president and COO Ramon Ang said.

The statement was made to belie PSALM’s allegation that SMC does not pay its obligations.

“The records will show that we have paid more than enough, and we religiously abide by our contractual obligation as administrator of Ilijan,” Ang said.

“PSALM is in fact net cash positive from their contract with us having already gained P30 billion as of August 2017. How can they claim we still have underpayments and that they are losing money under the IPPA agreement?” he added.

SMC bagged the Ilijan IPPA in April 2010 after it outbid other parties with a $870 million offer. SPPC was then issued the certificate of effectivity as the Ilijan plant’s IPPA.

By the time the administration agreement with PSALM expires in 2022, SMC said it would have paid PSALM a total of P384 billion or about $7.68 billion for the 20-year -old power plant.

Earlier, SPPC filed a case against PSALM after the latter illegally terminated its IPPA in 2015, treating it as an administrator in default.

Supporting PSALM, Energy Secretary Alfonso Cusi had said SMC should settle its unpaid obligations since it  entered into a contract with government for the IPPA of the Ilijan plant.

But SPPC said PSALM’s willful breach of contract was the result of a flawed interpretation of certain provisions related to its generation payments under the IPPA agreement.

Ang has, in turn, urged PSALM to honor the IPPA contract and follow the rule of law “because it’s turning off investors.”