PSALM's Official Statement on the Ilijan Power Plant IPPA AA Case

06 Jun 2019

The Orders recently issued by the Regional Trial Court of Mandaluyong (RTC Mandaluyong) denying the Motion for Reconsideration of PSALM are purely on procedural and jurisdictional matters. The Orders did not pass upon the substance of the termination by PSALM of the Independent Power Producer Administration Agreement (IPPA Agreement) with South Premiere Power Corp. (SPPC) (a subsidiary of SMC Global Power Holdings Corp.) by reason of the latter’s breach of contract and default. It is therefore wrong to publicly claim that the RTC Mandaluyong has already upheld the legal position of SPPC relative to the termination of the IPPAA.

PSALM's Motion for Reconsideration, which the recent Order of the RTC Mandaluyong denied, is about the conduct of the modes of discovery which is a stage in the legal proceedings. Essentially, the RTC Mandaluyong wants PSALM to submit to such modes or discovery. In the interest of transparency, PSALM will be disclosing all the documents requested and as ordered by the RTC.

The RTC Mandaluyong has also ruled in the same Order that it has jurisdiction over the case. PSALM has been questioning the jurisdiction and competence of the RTC Mandaluyong as the EPIRA granted original and exclusive jurisdiction to the Energy Regulatory Commission over all cases contesting rates and fees, which is what the entire case is all about. PSALM thus intends to timely avail of all legal remedies relative to this jurisdictional matter.

SPPC continues to collect money and profit from the IPPA Agreement of the Ilijan Power Plant from its power and electricity customers but under-paying the government for the amount due, PSALM receivables of which has now ballooned to P19.75 Billion. SPPC’s default and breach of its contractual obligations, particularly the underpayment of amount due to government was a subject of the Commission on Audit’s adverse findings that also prompted PSALM to terminate the Agreement.

The IPPA Agreement for the Ilijan Power Plant was offered to the private sector in 2010 to unburden the government pursuant to EPIRA. A public bidding was conducted for the IPPA Agreement wherein SPPC conducted its due diligence, including the legal interpretation of the pricing scheme and the contractual terms when it submitted its bid and eventually won as Administrator of the Ilijan Power Plant. In case of any erroneous financial modelling on the part of SPPC in submitting its bid price, it should not blame the government for its own faulty business judgments. SPPC cannot just unilaterally decide to remit to PSALM whatever amount it wants to remit and interpret the pricing scheme in the IPPA Agreement to serve its business interests and to gain more profit. PSALM’s legal position and all its billings to SPPC are firmly grounded on the wordings of the IPPA Agreement, which is the same interpretation when the contract was bidded out and disclosed to all the bidders.

All payments remitted to PSALM from privatization efforts, including payments of SPPC on the IPPA Agreement, are used to liquidate the outstanding obligations assumed from National Power Corporation (NPC). And if only the P19.75 Billion arrears of SPPC were promptly paid, PSALM could further reduce the NPC obligations by such amount and lessen the universal charges passed on to all Filipino electricity consumers.

To reiterate, there is no ruling yet by the RTC Mandaluyong on the issues pertaining to the termination by PSALM of the IPPA Agreement with SPPC. Any statements claiming otherwise are purely misinformation and obviously meant to mislead the public about the real status of this case.

While the case is pending and to pursue its legal mandate, PSALM will continue to issue billings in accordance with the specific formula clearly indicated in the IPPA Agreement. Nothing more; nothing less. It is PSALM’s duty to the public to pursue its legal position in the courts of law to protect the greater interest of the government and the Filipino people.

Corporate Communications Division
Tel. No. (632) 9029067