Power Sector Assets and Liabilities Management Corp. on Monday defended its decision to terminate the contract with independent power producer administrators such as Phinma Energy Corp., the power arm of the Phinma Group.
“In every decision we make, we ensure that we strictly followed what is written in the IPPA AAs [administration agreements], putting in mind that PSALM’s paramount role is to uphold the interest and welfare of the government and to protect it from financial repercussions when issues arise such as the non-compliance with contractual obligations,” PSALM officer-in-charge Lourdes Alzona said in a statement.
Phinma Energy filed a complaint and sought a temporary restraining order against PSALM with the Makati City regional trial court last week for terminating their agreement and forfeiting on the company’s performance bond.
Sources said some companies aside from Phinma Energy also encountered difficulties in its IPPA agreement with PSALM for the Unified Leyte Geothermal power plants strips of energy.
The strips cover 240 MW, of which 200 MW were auctioned and 40 MW were retained by PSALM as security asset.
Aside from Phinma Energy, PSALM awarded 40 MW to FDC Utilities Inc., 40 MW to Unified Leyte Geothermal Energy Inc. and 40 MW to Aboitiz Energy Solutions Inc.
Around 3 MW was allotted to Waterfront Mactan Casino Hotel Inc., 20 MW to Good Friends Hydro Resources Corp. and 17 MW to Vivant Energy Corp.
PSALM said deficiencies in obligations on the part of the IPPAs were addressed according to the terms stipulated under the IPPA administration agreement.
It said IPPAs’ contractual obligations to PSALM were privatization proceeds utilized for paying IPPs for the costs incurred in producing electricity.
“Non-compliance will compel PSALM to contract new loans to shoulder these obligations to the detriment of the government and consumers. These borrowings will be recouped from consumers in the form of universal charges,” PSALM said.
PSALM said the IPPA administrators were aware and “considered the market risks inherent in the business and have studied business strategies that will allow them to yield profit margins.”
“As to the implementation of Unified Leyte Geothermal Power Plant, through PSALM trading strategies, it is ensured that the strips of energy are fully dispatched, providing IPPAs security from market volatility. PSALM assists IPPAs in their bilateral contract applications with the Energy Regulatory Commission by providing them support documents used as basis for approval by the regulatory body,” it said.
PSALM said it also exhausted all diplomatic steps before terminating the IPPA agreement due to administrator’s default.
It said negotiations and mediations”•the more amicable schemes”•were used for dispute resolution.
Alzona, however, said discussions and agreements which transpired between PSALM and the IPPAs were all elevated to PSALM board chaired by both the Energy and Finance Departments for final direction before these became relevant and binding.
Phinma Energy, formerly Trans-Asia Oil and Energy Development Corp., was declared one of the winning bidders for the right to administer 40 MW “strips of energy” from the Unified Leyte power plants on Nov. 7, 2013.
Shortly after winning the bid, however, super typhoon Yolanda struck Region 8 on Nove. 8, 2013, resulting in extensive damage to ULGPP.
Phinma Energy cited that PSALM awarded the strips to the winning bidders after a one-year delay.
PSALM issued the notice of award to Phinma Energy as the IPPA for the 40 MW worth of strips of energy of the Unified Leyte plants in January 29, 2014.