PSALM life extension to prevent transfer of P300-B debt to nat’l government

The bargaining chip dangled by the Department of Energy (DOE) on the proposed corporate life extension for state-run Power Sector Assets and Liabilities Management Corporation (PSALM) is to prevent transfer of P300 billion worth of its residual debts to the national government coffers.

“At this time, one of the things that we actually need to do in order to prevent an increase in rates and in order to prevent government from having to absorb some P300 billion in 2026 when the life of PSALM ends, we will have to extend the corporate life of PSALM,” Energy Secretary Raphael P.M. Lotilla stated.

The energy chief is referring to the balance of the long-term debts as well as lease obligations with the independent power producers (IPPs) of the National Power Corporation (NPC) that had been transferred to PSALM upon the divestment of the former’s big-ticket power assets.

As of May 2024 data from PSALM, the company’s scale of debts yet to be settled hovered at P283 billion.

Stretching the corporate existence of PSALM is among the key amendments being pushed in the Electric Power Industry Reform Act (EPIRA), one of the priority legislations declared by President Marcos in his recent State of the Nation Address (SONA).

Lotilla emphasized “there has been agreement in Congress to go ahead with that.” PSALM’s corporate life under the current provisions of EPIRA will end in June 2026.

Beyond debt transfer predicament, Lotilla similarly indicated that PSALM is being aligned as counterparty to the planned rehabilitation of the Agus plant in Mindanao; on top of its continuing function in the privatization of the undisposed assets of its precursor-company NPC.

“In the case of the Agus hydropower plants in Mindanao, we need to have a counterparty to rehabilitate the Agus power plants. Right now, although the installed capacity of Agus is 1,000 megawatts, the dependable capacity is only 600MW,” he noted.

Lotilla added “there is still the potential of rehabilitating it back to 1,000MW – and therefore produce an additional 400MW for Mindanao and also for other parts of the country through the Mindanao-Visayas interconnection.”

The capacity shoring up for Mindanao grid, he said, will strategically cater to the electricity demand growth in the region – including that of the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM).”

“The growth of the need for power and the growth of demand in Mindanao is also growing by at least 6.0% annually – and it is going to continue to grow as the ‘peace dividend’ that the President had pointed out in the case of BARMM, is one of the fastest growing regions in Mindanao right now, and that means more power,” the energy secretary reiterated.

PSALM is likewise carrying on with the divestment of the remaining assets of NPC – primarily the Caliraya-Botocan-Kalayaan (CBK) plant as well as the supply contract of the Mindanao coal-fired power plant in Mindanao.

Lotilla qualified that for the Mindanao coal’s plant site, there is already a plan being firmed up in transforming the area to host projects for other energy technologies – either for a gas plant or renewable energy (RE) installations.

“Then we have other assets of PSALM, for example, the location of the North Mindanao coal plant which is going to be closed down can be made available for newer and cleaner technologies to be put up in the same area,” he stressed.