SMC power unit wins injunction vs PSALM

Business World Online
Posted on September 29, 2015 09:39:00 PM

A REGIONAL Trial Court has barred the Power Sector Assets and Liabilities Management Corp. (PSALM) from terminating its contract with a unit of San Miguel Corp. (SMC) over a dispute on generation payments for the 1,200-megawatt (MW) Ilijan cogeneration facility in Batangas.

The listed conglomerate told the stock exchange yesterday that “the Regional Trial Court of Mandaluyong City, Branch 208, issued on Sept. 28... an order granting preliminary injunction in favor of SPPC.

SPPC or South Premiere Power Corp. is a wholly owned of SMC Global Power Holdings Corp., which in turn is the energy arm of San Miguel.

The order granted by the court stopped state-owned PSALM “from further proceeding with the termination of the independent power producer administration (IPPA) agreement between SPPC and PSALM while the main case is pending.”

San Miguel further said next hearing on the main case is scheduled for Oct. 22.

The dispute between the two parties stemmed from PSALM’s decision to terminate its contract with SPPC citing the latter’s “continuous refusal” to pay fees worth over P6 billion.

The termination of the contract, however, was put on hold after the same regional court’s initial issuance of a temporary restraining order that stopped PSALM from exercising its authority to end the deal.

Ramon S. Ang, SMC Global chairman, last month claimed that PSALM’s financial claims were “erroneous” and its decision to terminate the contract was “abrupt.”

He added SMC Global will sue PSALM management -- which is currently headed by recently appointed President Lourdes S. Alzona -- due to “intentional breach of contract.”

The official, however, said that SMC Global has yet to come up with the filing and a decision on which court the filing will be made.

PSALM said earlier that the decision to terminate its contract with PSALM is geared at stopping the government from incurring “unnecessary losses” due to non-payment of SPPC’s obligations worth P6.46 billion covering Dec. 26, 2012 to April 25, 2015.

But Mr. Ang said SMC Global already paid P180 billion to PSALM -- consistent with the contract -- but PSALM wanted over P6 billion more.

The P180 billion payment covers fixed monthly payments and variable generation payments billed by PSALM since SPPC took over the contracted capacity of the Ilijan plant in 2010 until August 2015.

He added that the administration agreement with PSALM provides that the regulator-approved rate should be used instead of the rates at the Wholesale Electricity Spot Market.

SMC Global Power is a wholly owned subsidiary of listed conglomerate San Miguel Corp.

San Miguel bagged the Ilijan IPPA contract when it was auctioned off by PSALM on April 16, 2010. source