Non-performing energy contracts face DOE ax

Published October 13, 2018, 10:00 PM By Myrna M. Velasco

https://business.mb.com.ph/2018/10/13/non-performing-energy-contracts-face-doe-ax/

The Centralized Review and Evaluation Committee (C-REC) of the Department of Energy (DOE) is instituting policy on automatic termination of energy contracts rendered to have been “failing” on their submitted work programs.

The department’s C-REC noted that such shall apply to service contracts (SCs) in renewable energy projects, petroleum as well as coal operating contracts.

The DOE stated “C-REC shall implement automatically the contract provisions on the expiration of term or termination as stipulated in various contracts.”

It noted in particular that most energy project contracts carry “automatic termination clause;” and such is the precept that the department has been opting to automatically implement.

In a resolution of the DOE body chaired by Energy Undersecretary Donato D. Marcos, it was further stipulated that “no show-cause order shall be necessary to terminate the respective contracts issued to developers who either failed to perform their respective obligations and/or whose pre-development stage have already expired.”

For instance, in petroleum service contracts, project proponents are required to submit seven-year work program, hence, if they cannot keep pace with the development timelines submitted, it was explained that their SCs may already be concluded.

That is with the exception of service contracts though wherein delaying factors have been beyond their control – such as the enforcement of drilling moratorium at “conflict areas” within the West Philippine Sea.

For RE contracts, developers are bound to undergo pre-development phase prior to advancing their respective ventures to commercial fruition.

In many cases at pre-development stage, projects are either hobbled by non-viability of targeted resource or stifled by excruciating approval processes especially at host community levels – hence, project timelines are often breached.

Termination as well as cancellation of business deals had already been resorted to by the energy department in the past- chiefly for non-performing ventures if reckoned on work programs under their service contracts.