Disadvantageous relations

It turns out that the erstwhile tenant, San Miguel Corp. unit South Premiere Power Corp., which still owes the government P24 billion in unpaid dues under its independent power producer administrator agreement, is now the owner of the 1,200-megawatt Ilijan natural gas plant.

Last June, the state holding firm Power Sector Assets and Liabilities Management Corp. turned over the Ilijan power plant in Batangas to SPPC parent SMC Global Power Holdings Corp., supposedly to comply with the terms of the IPPA. A deed of sale was signed last 3 June.

SPPC was commissioned for the Ilijan power plant under an administration agreement signed on 26 June 2010.

The transfer happened despite a case pending in the Mandaluyong Regional Trial Court since 2015 related to a breach of contract.

To begin with, the Ilijan Plant has a very unique ownership setup prior to its transfer to the SMC unit.

The power plant in Batangas City, which draws fuel from the Malampaya natural gas field, was constructed and owned by the Korean KEPCO Ilijan Corp. under an energy conversion agreement with state firms National Power Corp. and PSALM.

SPPC, as IPP administrator, was required to remit to the government generation charges based on the wholesale electricity spot market, but SPPC insisted on computing its arrears based on the amount under a power supply agreement with distributor Meralco.

The government then filed a complaint with the Mandaluyong RTC in September 2015 for SPPC to comply with the terms of the contract.

PSALM said it did not have a choice but to turn over Ilijan’s ownership to SPPC, because this was provided in the contract that, nonetheless, the SMC unit appeared to have violated.

A status quo should have been followed since a writ of preliminary injunction was issued by the Mandaluyong RTC in September 2015.

The turnover pushed through “without prejudice to PSALM’s legal positions in, and the eventual outcome of, civil case MC15-9629. This civil case is still pending in RTC Mandaluyong,” according to PSALM.

In 2020, in the guise of offering to help government raise funds amid the then surging pandemic, SMC Global offered to pay off capacity charges for the Ilijan power plant two years ahead of schedule, or about P22.68 billion, in exchange for government ceding Ilijan’s ownership to it.

Had the government agreed to the offer, its claim with the courts would have been placed in peril.

Then Finance Secretary Carlos Dominguez III turned down the offer, calling the conditions attached to it as “preposterous.”

Dominguez had a parting word with PSALM and SMC, which was the directive of former president Rodrigo Duterte not to allow any private company to benefit or to secure a deal until “they settle their full accounts with the government.”

SMC appeared to have muscled its way through to finally bag Ilijan, the country’s biggest power plant.

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