SMC sets US$3.5-B counter-billing versus PSALM on Ilijan plant

By Myrna M. Velasco – July 26, 2018, 10:00 PM
from Manila Bulletin

The energy subsidiary of San Miguel Corporation (SMC) is willing to pay the P22.396-billion booked receivables of Power Sector Assets and Liabilities Management Corporation (PSALM) for the 1,200-megawatt Ilijan gas plant, but the company said it will lodge a counter-billing of US$3.5 billion to the state-run firm on capacity payments that shall be reckoned on prices from the Wholesale Electricity Spot Market (WESM).

SMC president and COO Ramon S. Ang

“On your computation, if you are serious (referring to PSALM), we will pay you…but the price from now on, the contract should now be based on WESM and we think based on projection that by year 2022, you would have owed us at least US$3.5 billion,” SMC President and COO Ramon S. Ang has stressed to reporters; as he countered the calculations in the receivables contained in the 2017 audited financial statement of the state-owned company.

Ang noted that if calculations will actually be dated back from year 2010, which has also been the reckoning date in PSALM’s billings, the counter-claim of SMC subsidiary South Premiere Power Corporation (SPPC) can go as high as P200 billion. “We are just reminding the government that we will pay you P20 billion today, but you will owe us P200 billion,” the SMC president said.

The counter-billing, he explained, shall result from shift in price reference for the Ilijan capacity – that will be from baseload cost reference to average settlement prices in the WESM.

“If you are saying I owe you P20 billion, I will pay you in cash. You think I don’t have money? I will bring the check to PSALM office tomorrow,” Ang reiterated.

He further asked PSALM management, with the approval of its Board, to put in writing as to what price calculation it would really want to base the Ilijan capacity billings – whether spot prices or contracts that are anchored on baseload capacity deliveries.

In fact, he emphasized that in the Independent Power Producer Administration (IPPA) deal for the Ilijan plant, PSALM already gained US$631-million total payments until end-June this year – based on the remittances made to it by SPPC, the SMC vehicle that won the supply contract privatization for the 1,200-megawatt Ilijan plant.

Broken down, that accounted for P205.33 billion of generation payments; and fixed monthly total payments of P58.92 billion.

On the disputed pricing reference continuously carried by PSALM on its financial books, the SMC subsidiary firm has already elevated a case to the Court of Appeals – and is now awaiting final judicial ruling.

SPPC primarily countered what it deemed as PSALM’s “willful breach of contract from a flawed interpretation of certain provisions of its IPPA agreement.”

The suit similarly sought that PSALM shall “stop from illegally terminating the Ilijan IPPA and treating SPPC as an administrator in default.”

The SMC president thus emphasized, “again, it’s very clear. We are religiously honoring our contractual obligation to PSALM. In fact, they are already making billions out of the agreement.”

He added that their company’s wish is just for the state-run company to “refrain from releasing questionable data that put us in a bad light.”

Ang averred “we want nothing more than for the pending cases to be quickly resolved,” while asserting that “in the meantime, we wait and let the courts decide.”