State-run Power Sector Assets and Liabilities Management Corp. said Wednesday it forfeited the P400-million performance bond of FDC Misamis Power Corp., a power unit of Filinvest Development Corp. that administers the Unified Leyte geothermal power plants.
PSALM said in a statement it had no other recourse but to invoke “administrator default” on the part of FDC Misamis as the “consequence of unilaterally rescinding the Independent Power Producer Administrator administration agreement for the energy capacity of Mindanao Geothermal Power Plants [1 and 2].”
The agency said FDC’s decision to rescind came amid efforts to resolve its outstanding financial obligations to PSALM comprising of generation charges.
PSALM said that based on provisions of the agreement, FDC’s arrears were computed at P404.995 million (inclusive of interest) as of Nov. 30.
PSALM also terminated its IPPA agreement with Phinma Energy Corp. and forfeited its performance bond because of alleged default as administrator of the Unified Leyte power plants.
Phinma Energy, formerly Trans-Asia Oil and Energy Development Corp., and FDC are among of the winning bidders for the right to administer 40 megawatts “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 Nov. 8, 2013, resulting in extensive damage to the ULGPP.
PSALM, however, defended its position to terminate the IPPA agreements, saying that it exhausted all diplomatic steps before the necessary termination of IPPA AAs was put into effect due to the administrator’s default.
“In every decision we make, we ensure that we strictly followed what is written in the IPPA AAs, 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 earlier.
PSALM said the IPPAs’ contractual obligations 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,” it said.
The Unified Leyte geothermal plants include Malitbog, Mahanahdong and Uppoer Mahiao geothermal plants. The plants were built by National Power Corp. and operated by Energy Development Corp. through a power purchase agreement.
PSALM, pursuant to the Electric Power Industry Reform Act of 2001 or Epira, issued the invitation to bid for the strips of energy of the Unified Leyte plants in 2001. The strips total 240 MW, of which 200 MW were auctioned and 40 MW were retained by PSALM as security asset.
Phinma Energy and FDC Misamis, along with five other IPPAs, were awarded strips of energy with associated 40 MW of capacity at a bid price of P4.6629 per kilowatt-hour.