Conglomerate San Miguel Corp. offered to pay capacity charges of P22.68 billion on the 1,200-megawatt Ilijan natural gas power plant in full, or over two years ahead of schedule, to help cash-strapped Power Sector Assets and Liabilities Management Corp. manage its liabilities.
San Miguel president and chief operating officer Ramon Ang, in a letter sent to PSALM, said his offer was separate from the alleged “overdue receivables” of unit South Premiere Power Corp. amounting to P23.9 billion.
The disputed amount stemming from the differences in computing generation charges is the subject of a court case pending since 2015.
Capacity charges, meanwhile, represent capital payment by San Miguel to PSALM as administrator of the Ilijan plant, which is spread over the term of the contract.
PSALM calculated the generation charges based on the Wholesome Electricity Spot Market prices to maximize its earnings from the independent power producer administrator, while SPPC uses a fixed rate approved by the Energy Regulatory Commission.
SPPC said selling Ilijan’s reliable base load capacity to the WESM would have exposed consumers to the erratic surges of prices in the market and put them in violation of the power supply contract.
Ang said the amount that San Miguel was offering would also help PSALM raise funds for the government that could be used for various state projects, including funding efforts aimed at addressing the Covid-19 virus.
“While we have an ongoing court case with PSALM regarding the computation of generation fees for the Ilijan plant, as a stakeholder in the power industry, and more importantly, a proactive partner of government in nation-building, we sincerely want to help PSALM raise funds for government,” said Ang.
“Right now, the best and quickest way we can do this ahead of a decision on our case, is to fully pay the P22.6 billion remaining balance in capacity charges of SPPC for the Ilijan power plant, in full,” Ang said.
As payment for its right to market the capacity from the power plant, SPPC is supposed to pay PSALM fixed monthly payments up to June 2022 under the original IPPA contract.
San Miguel, through SPPC, originally won the bidding of the Ilijan plant for $870 million.
By the time the contract ends in 2022, SPPC would have paid P392 billion for the Ilijan plant, more than double its bid price, broken into P97.5 billion in fixed monthly capacity fees and P294.7 million in generation fees.
A brand-new power plant with the same capacity as Ilijan would cost only about P40 billion today.
SPPC has paid PSALM P240.7 billion in generation charges and P73.9 billion in capacity charges as of January 2020.
“We have to let the courts decide on the case and let due process take its course. Both the Supreme Court (SC) and the Court of Appeals (CA) have already said it is the Mandaluyong RTC that has jurisdiction over the case. Let’s not muddle the facts and confuse the public,” Ang said earlier.