Questions SMC must address

San Miguel Corp. and state firm Power Sector Assets and Liabilities Management Corp. have the duty to inform the public about the ramifications of the recent transfer of ownership of the 1,200-megawatt Ilijan gas-fired power plant.

Last 3 June, a deed of sale was signed in which the biggest power plant of the country was transferred to South Premiere Power Corp., a unit of SMC energy arm San Miguel Global Power, from PSALM to supposedly fulfill an Independent Power Producer Administration agreement signed in 2010.

The deal was rather unusual, and seven such contracts were awarded since 2009, two of which went to a smc subsidiary after the conduct of auctions.

The IPPA was supposedly in line with the privatization thrust of the government.

In the Ilijan plant deal, the Build-Operate-Transfer was entered into by PSALM and the Korea Electric Power Corp. for the construction of the natural gas plant.

With the IPPA, the ultimate beneficiary of the BOT arrangement was SMC and not the government.

The deed of sale was signed despite SMC’s arrears on generation charge remittances to government, estimated at P30 billion, as a result of the difference in the method of computation.

SMC had insisted on basing the IPPA obligation on the agreed tariff with Meralco under a Power Supply Agreement.

Its contract with government, however, specified that the amount will be based on the prevailing price at the Wholesale Electricity Spot Market.

The dispute has been with the Mandaluyong Regional Trial Court since 2015. An injunction order favoring SMC led to the transfer of ownership.

The court order enjoined PSALM “from further proceeding with the termination of the IPPA agreement between SPPC and PSALM while the main case is pending.” Thus, the court order remains in force seven years after it was issued as the case dragged.

The litigation stemmed from an earlier indication of PSALM to terminate the IPPA deal over the same dispute. SMC had incurred P6.46 billion in payables to PSALM by then.

Another question bugging SMC is what happened to the P35-billion worth of banked natural gas from Malampaya that should be supplied to SPPC’s Ilijan.

Ilijan had stopped a supply contract with Malampaya almost simultaneously as the ownership transfer.

The Udenna group, which used to control the Malampaya consortium, had offered to give priority to the supply of the banked gas to allow the government to benefit from it.

Legislators led by Senator Sherwin Gatchalian, then energy panel chairman, threw roadblocks to the Malampaya redevelopment plan of the Dennis Uy conglomerate.

It would also be incumbent on Gatchalian to explain to Filipinos what happens now to the contingent banked gas, the amount of which could have benefited the economy immensely.

Udenna said the banked gas is a contractual obligation “to Philippine National Oil Co. per an off-take contract.”

In turn, PNOC has committed to allocate the banked gas to holding firm PSALM which, in turn, will sell the fuel to Ilijan.

Aside from discarding the contract with Malampaya, SPPC is also shifting to the use of liquefied natural gas that SMC will import.

Taken as a whole, the deal with SMC over the strategic Ilijan power plant may end up to the government being screwed in ways more than one.

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