SPC Power turns over 153.1-megawatt Naga power plant complex to PSALM

By Victor V. Saulon – July 17, 2018 12:02am
from BusinessWorld

SPC POWER Corp. has turned over the 153.1-megawatt (MW) land-based power plant in Naga City, Cebu to the Power Sector Assets Liabilities Management, Inc. (PSALM), ending the legal tussle over the ownership of the asset.

In a disclosure on Monday, SPC said it had executed a joint turnover certificate with PSALM on July 13, 2018, resulting in the listed company turning over the Naga power plant complex to the agency in charge of privatizing the government’s power generation assets.

“Thus, SPC turned-over the Naga Power Plant to PSALM while PSALM returned the bid of SPC,” the company told the stock exchange.

It said the turnover is pursuant to the decision of the Supreme Court (SC) in Osmeña versus PSALM et al., declaring as null and void the asset purchase agreement and land lease agreement covering the complex, entered into by PSALM and SPC Power.

The move paves the way for Aboitiz Power Corp. to take hold of the complex after years of legal proceedings that ended in its favor.

Sought for comment, AboitizPower President and Chief Executive Officer Antonio R. Moraza said in a text message: “We have to go in and assess [the] condition of existing units and what we will do as future potential.”

He added that the rehabilitation of the power plant is the most likely “interim next step” for the company.

AboitizPower also told the stock exchange that the plant was physically turned over and accepted by TPVI on Monday. It said the power plant complex is composed of diesel and coal power plants.

“Our team has taken possession of the power plant complex and are now assessing the facility in preparation for maintenance and rehabilitation works. We are also conducting an inventory of the assets on site,” said Celso C. Caballero III, TPVI chief operating officer.

The case — Sergio Osmeña III vs. PSALM, Emmanuel R. Ledesma, Jr., SPC and Therma Power Visayas, Inc. (TPVI) — stemmed from the acquisition in 2009 by SPC of the power plant through a negotiated bid.

SPC also entered in the same year a land lease agreement with PSALM that included the company’s right to top the price of a winning bidder for the sale of any property in the vicinity of the leased assets.

PSALM later bid out the Naga plant located in the leased premises, with AboitizPower unit TPVI submitting the highest bid and receiving the notice of award on April 30, 2014. SPC told PSALM of its intent to exercise its right to top the winning bid, while asking that the land lease agreement be for a term of 25 years from closing date.

This led to Mr. Osmeña filing on June 16, 2014 a petition for certiorari and prohibition before the Supreme Court with prayer for the issuance of a temporary restraining order and/or writ of preliminary injunction to enjoin PSALM from making the award of the Naga plant to SPC. The respondents were Mr. Ledesma, PSALM’s head at that time, along with SPC and TPVI.

In his petition, Mr. Osmeña argued that the right to top should be invalidated as it defeats the purpose of a fair and transparent bidding for a state asset, and it discourages interested bidders because of the unfair advantage given to SPC.

Despite TPVI’s objection, PSALM awarded the contract to SPC on July 25, 2014. PSALM and SPC then executed an asset purchase agreement for the plant.

On Sept. 28, 2015, the SC declared in the case that the right to top and the asset purchase agreement executed in favor of SPC are null and void. The parties then filed various motions for reconsideration, which the High Court denied.

On Oct. 5, 2016, the SC issued a notice of judgment and resolution clarifying that the nullification of SPC’s right to top did not invalidate the entire bidding process. Thus, it ordered the reinstatement of the notice of award dated April 30, 2014 in favor of TPVI.

The court also annulled and set aside the asset purchase agreement and the land lease agreement executed between SPC and PSALM, and directed the government agency to execute with dispatch the same deals in favor of TPVI.

Subsequent motions for reconsideration from both SPC and PSALM were denied by the SC, which on Nov. 28, 2016 ruled with finality and ordered that no further pleadings, motions, letters, or other communications will be entertained in the case. The court also ordered the issuance of entry of judgment.

On Feb. 14, 2017, TPVI received a copy of the entry of judgment, which states that the Oct. 5, 2016 resolution of the SC became final and executory on Nov. 28, 2016.

In May this year, TPVI received the certificate of effectivity from PSALM initiating the purchase of the facility. The certificate implements the Sept. 28, 2015 SC decision, which upheld the April 30, 2014 award to the company.

Shares in SPC Power went up 0.56% to close at P5.38 each, while those of AboitizPower were down by 0.54% to P36.50 each.