Selective disclosure
The IPPA is based on a variation of the build-operate-transfer scheme which instead of the government as a beneficiary, the ownership was transferred to SMC under a privatization program.
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Daily TribuneThe IPPA is based on a variation of the build-operate-transfer scheme which instead of the government as a beneficiary, the ownership was transferred to SMC under a privatization program.
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San Miguel Corporation president and chief executive officer Ramon Ang made an impassioned declaration that all is well with the Asian conglomerate despite the recent decision of the Energy Regulatory Commission.
ERC rejected the petition of the corporate behemoth's energy unit SMC Global Power for a P4.80 per kilowatt hour increase in contracted fixed rates under two power supply agreements of generation companies South Premiere Power Corp. and San Miguel Energy Corp.
SMC Global Power petitioned the ERC for temporary adjustments for six months to recover losses from higher costs of coal and the supply restrictions from the fast-depleting Malampaya natural gas field.
Ang cited savings from lease payments on the Ilijan and Sual plants which were the two generation companies subject to the rate hike petitions of San Miguel Global Power.
As of June, SMC Global Power no longer needed to pay P12 billion per annum in capital lease payments under its Independent Power Producer Administration contract for the Ilijan natural gas plant.
He added that the energy firm will save from capital lease payments of about P14 billion per year under its Sual power plant IPPA, effective October 2024.
The SMC Global owner has cornered high-capacity power projects through the so-called IPP agreements for Sual and Ilijan while affiliate Strategic Power Development Corp. has the same arrangement for the San Roque hydroelectric plant.
Ang may not be disclosing enough regarding the deals, however.
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.
The IPPA is based on a variation of the build-operate-transfer scheme which instead of the government as a beneficiary, the ownership was transferred to SMC under a privatization program.
SPPC was commissioned for the Ilijan power plant under an IPPA signed on 26 June 2010.
The ownership transfer pulled through despite a pending case in the Mandaluyong Regional Trial Court since 2015 related to a breach of contract between PSALM and SMC Global Power.
The Ilijan natural gas plant in Batangas City was constructed by the Korean KEPCO Ilijan Corporation under an energy conversion agreement with the 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 to compute its arrears based on the fixed amount under the power supply agreement with distributor Meralco.
The government then filed a complaint with the Mandaluyong Regional Trial Court 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. The SMC unit appeared to have cavalierly violated the deal by imposing its terms.
SMC Global Power ran up obligations of P34 billion with the government as a result of the computation dispute.
In 2020, in the guise of offering to help government raise funds to battle the pandemic, SMC Global Power offered to pay off capacity charges for the Ilijan power plant two years ahead of schedule of the ownership transfer or about P22.68 billion in exchange for government ceding Ilijan's ownership to it.
Then Finance Secretary Carlos Dominguez III turned down the offer calling the conditions attached to it "preposterous."
Dominguez then quoted for SMC 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."
Nothing came out of it and SMC Global Power which owes the government an arm and a leg still wrestles for ownership of Ilijan.
