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Gatchalian asks government to honor Ilijan power deal

Senator Sherwin Gatchalian urged the government to honor the privatization contracts in the energy sector, specifically that of the 1,200-megawatt Ilijan natural gas power plant in Batangas.

State-run Power Sector Assets and Liabilities Management Corp. has been insisting on pursuing the collection of P19.75 billion against San Miguel Corp. unit South Premiere Power Corp. for the Ilijan power plant, citing the need to pay its own obligations. 

“For me, it’s very basic... San Miguel won fair and square through a transparent bidding... The highest bidder which is San Miguel is about $800 million and then the lowest bidder which is Aboitiz is about $100 million. There is a huge disparity. San Miguel will pay eight times more than the lowest bidder. But what is important is the bidding was fair and square,” Gatchalian said.

South Premiere won the contract as the independent power producer administrator of the Ilijan plant in bidding conducted by PSALM in 2010 with an offer of $870 million.

“If you want to attract businesses and foreign investors and you have a transparent bidding, why after five years say the payment is not sufficient. You’re reneging on the original contract. It doesn’t send a good signal to our potential investors,” the senator said.

Gatchalian, chair of the Senate Committee on Energy, said the Philippines wanted to attract more investors in the power generation sector but it should honor its contracts.

“We do not want to be branded as as a country that doesn’t honor our contracts especially through a transparent bidding... From a standpoint of increasing our investments and improving the credibility of the country internationally, government should not renege on biddings and contracts especially the power sector because the power sector is a very capital intensive sector and we need to make sure that government is credible in honoring its contracts,” he said.

“We have to learn how to honor our contracts especially in capital intensive industries,” he added.

San Miguel earlier chided PSALM for continuing to demand the payment of its alleged debts on the Ilijan natural gas plant, calling it an act of bullying when the case is already with the court.

South Premiere filed a case against PSALM in 2015 after it terminated the Ilijan IPPA agreement due to differences in the computation of generation charges.

San Miguel president and chief operating officer Ramon Ang said the issue was pending at the Mandaluyong Regional Trial Court. 

“This is bullying. They cannot just dictate on what works best for them. We have to follow due process,” Ang said.

Topics: Sherwin Gatchalian , Power Sector Assets and Liabilities Management Corp.
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