The Supreme Court has declared as null and void the right of SPC Power Corp. to top the price of a winning bidder on the Naga power plant contract auctioned by state-owned Power Sector Assets and Liabilities Management Corp.
“Consequently, the asset purchase agreement and land lease agreement executed by Power Sector Assets and Liabilities Management Corp. and SPC are annulled and set aside,” the high court said.
PSALM last year turned over the 153.1-megawatt Naga Power Plant to SPC Power after offering the highest bid for the plant.
PSALM conducted the bidding for the Naga power plant on March 2014, in which Therma Power Visayas Inc. of the Abotiiz Group emerged as the highest bidder with an offer of P1.09 billion. SPC offered the second highest bid of P859 million.
The condition of the sale gave SPC the “right to top” the price of the winning bidder for the Naga plant, as stipulated under the agreement signed between PSALM and SPC in 2009.
SPC paid PSALM P1.14 billion in May 2014, exercising its right to top the offer of Therma Visayas. PSALM issued the notice of award and the certificate of effectivity to SPC in July 2014.
Senator Sergio Osmeña III, however, filed a case with the SC last year seeking to stop the sale of the Naga power plant complex in Cebu to SPC Power and nullify the stipulation in the lease agreement contrary to public policy.
Therma Visayas asked PSALM to hold the turnover in abeyance pending the resolution of the case filed by Osmeña. The turnover of the facility to SPC, however, pushed through.
The high court, meanwhile, said SPC’s right to top under the land lease agreement was void “for lack of valued interest or right to the object over which the right of first refusal is to be exercised.”
The court said the property subject of the right of first refusal was outside of the leased premises covered by the agreement.
It added that the contention of SPC regarding right of way, operational requirements “are clearly not analogous to a lessee’s legitimate interest on the property being leased.”
The court also said SPC had never operated the Naga land-based gas turbine.
“We hold that the grant of right to top to SPC under the LBGT-LLA is void as it is not founded on the said lesses’s legitimate interest over the leased premises,” it said.
The SC also debunked SPC’s argument that the privatization of the Naga Power Plant Complex was even more advantageous to the government because it resulted in a higher price (P54 million more) than Therma Visayas’ winning bid.
“Whatever initial gain from the initial price obtained for the NPPC compared to the original bid price of TPVI is negated by the fact that SPC’s right to top discouraged more potential buyers from submitting their bids, knowing that even their most reasonable bid can be defeated by SPC’s exercise to right to top,” it said.
The court said attracting more bidders was still the better means to secure the best offer for the government.