04 Jun 2014
With the outstanding unpaid obligations of the Davao del Norte Electric Cooperative, Inc. (DANECO) already ballooning to more than PhP500 million (PhP576,453,319.08), the Power Sector Assets and Liabilities Management (PSALM) Corporation warned that the provinces of Davao del Norte and Compostella Valley - areas being served by DANECO - could face massive blackouts due to an impending disconnection.
"After exhausting all possible remedies, PSALM has issued a final demand to DANECO for failure to comply with its financial obligations, and the period to comply with such final demand has already lapsed on 21 March 2014," according to PSALM President and Chief Executive Officer Emmanuel R. Ledesma, Jr. PSALM has already requested the Department of Energy (DOE) for approval of the issuance of the Notice of Disconnection to DANECO.
Mr. Ledesma disclosed that the issuance of the Notice will be in compliance with Section 4.1.D. of the Implementing Rules and Procedures of DOE Circular No. DC2010-05-0006 ("Terminating the DWSA for WESM and Declaring a Disconnection Policy"), which provides for the grounds and conditions for the issuance of the Notice of Disconnection. These include the failure of a customer, as to this case of DANECO, to comply with its financial obligation with PSALM under their power supply agreements or any existing contracts for the supply of electricity and Restructuring Agreement.
When the power accounts were transferred from the National Power Corporation to PSALM in June 2009, DANECO's outstanding obligation amounted to about PhP230 million (PhP232,944,772.01). In March 2011, PSALM approved the restructuring of DANECO's outstanding Value Added Tax (VAT) account amounting to PhP106,556,231.49, with a monthly amortization of PhP4,439,842.98 for a period of two (2) years or from March 2011 to February 2013. While the electric cooperative fully settled its VAT obligation, it has failed to fully settle its monthly Power Bills (PB) starting July 2012.
Based on representations of DANECO, its operations starting June 2012 was affected due to the legal dispute between DANECO-National Electrification Administration (NEA) group and DANECO-Cooperative Development Authority (CDA) group, and the effect of Typhoon Pablo in Davao del Norte and Compostela Valley - the areas being catered to by DANECO.
In June 2013, PSALM and DANECO-NEA entered into an agreement for the three-year restructuring of DANECO's outstanding obligation amounting to PhP274,993,033.54 as of 31 March 2013. The monthly amortization of DANECO was set at PhP8,149,992.40 covering the months of May 2013 to April 2016. DANECO-NEA is religious in paying this monthly restructured amortization.
However, DANECO continued to incur unpaid PB for the reason that while DANECO-NEA group was dutifully paying PSALM for its PBs, the DANECO-CDA group's payment is not up-to-date as the last was made in December 2013.
From March 2013 to April 2014, the average monthly billings of DANECO was PhP92.26 million, composed of monthly PB amounting to PhP83.29 million, monthly interest charges due to non-payment of monthly billing in the amount of PhP0.82 million, and monthly amortization on the restructured account of PhP8.15 million. Its average monthly payment was only PhP64.36 million or only 69.76% of its average monthly billings. As a result, DANECO's total outstanding obligation amounted to PhP576,453,319.08 as of 30 April 2014.
This outstanding obligation is expected to continuously increase due to the shortfall in DANECO's monthly payments to PSALM. PSALM has diligently exhausted the following remedies to assist DANECO in the payment of its financial obligations:
- Approval of the second Restructuring Agreement for the settlement of DANECO's outstanding obligations amounting to PhP274,993,033.54 as of 31 March 2013;
- Grant of extension to DANECO to fully settle its outstanding account by November 2013; and
- Issuance of a notice of collection and two (2) final demand letters and repeated follow-up with DANECO for the settlement of its outstanding obligations.
Strategic Communications and Partnership Division |