PSALM welcomes the issuance of EO No.126

05 Mar 2021

The Power Sector Assets and Liabilities Management Corporation (PSALM) wishes to thank President Rodrigo Roa Duterte and the Department of Finance for the issuance of Executive Order (EO) No. 126. This EO No. 126 reduces the 2020 real property tax (RPT) due on property, machinery and equipment used for production of electricity by independent power producers (IPPs) covered by build-operate-transfer contracts (BOTs) with government-owned or controlled corporations (GOCCs).

PSALM is a counterparty to several of these BOTs with IPPs and is thus responsible for the payment of the RPT obligations on such property, machinery and equipment. PSALM became a counterparty when Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA) transferred to PSALM these BOT contracts from the National Power Corporation (NPC), including the responsibility to pay the RPT obligations.

With EO No. 126, the RPT to be paid by PSALM for 2020 is reduced to an amount equivalent to an assessment level of fifteen percent (15%) of the fair market value of such property, machinery and equipment, depreciated at a rate of two percent (2%) per year, less any amount already paid. All interests and penalties on such deficiency RPT are condoned. RPT payments already made over and above the reduced RPT shall be applied to RPT for the succeeding years.

"With the issuance of EO No.126, PSALM's RPT obligations due for taxable year 2020 amounting to about P1.038 billion at 80% assessment rate would be reduced to about P200 million at 15% assessment rate. This would translate to an estimated savings of P838 million for PSALM, which amount can therefore be utilized by PSALM for the payment of other maturing obligations assumed from NPC,” PSALM President and CEO Irene Besido Garcia said.

Contracts of PSALM with IPPs covered by EO No. 126 include contracts on Ilijan Natural Gas Power Plant, the Pagbilao Coal-Fired Thermal Power Plant, the Sual Coal-Fired Thermal Power Plant, the San Roque Hydro-Electric Power Plant and the Mindanao Coal-Fired Thermal Power Plant.

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