By Myrna M. Velasco
International arbitration cannot be a legal option to resolve the P19 billion dispute on the Ilijan gas-fired power asset because the terms of the independent power producer administration (IPPA) contract places such jurisdiction with the local courts – and there is already a pending case on the matter.
And if the case will not be decided by the Mandaluyong regional trial court (RTC) at the lapse of the build-operate-transfer (BOT) contract of the Ilijan plant by year 2022, the subsidiary of San Miguel Corporation indicated that it is willing to put up P19 billion bond with the court so the ownership of the facility can be aptly transferred to South Premiere Power Corporation (SPPC), the IPP administrator of the asset.
According to SMC President Ramon S. Ang, the bond could be awarded to state-run Power Sector Assets and Liabilities Management Corporation (PSALM) if it will eventually win in the dispute case, but if SPPC scores legal victory, the amount shall revert to the San Miguel firm with corresponding interest charges and premium to be paid by PSALM.
The transfer of ownership is warranted under the back-to-back-to-back contracts underpinning the IPPA deal with PSALM – and this is to be accomplished in July 2022.
While the case is ongoing, Ang reproached the state-owned firm to stop “wielding its power indiscriminately to mask its own shortcomings;” and it must not resort “to changing the bidding rules” on the asset post its divestment phase.
The Ilijan dispute case is pending at the Mandaluyong RTC, and the court is requiring PSALM on “production of documents” by June 6 this year. That was following the RTC’s decision that denied PSALM’s objection and has instead ordered the government-run firm “to produce the requested evidence and interrogatories.”
Ang opined that if PSALM really has basis on its claimed underpayments of P19 billion, then it may steadfastly turn in the basis of its calculations as well as corresponding evidence-documents as mandated by the Court.
The way the entire issue is being handled, he stressed, is indefensible and illegal because it does not conform with the terms when they were still inviting investors/bidders for the asset. “This is bullying. They cannot just dictate on what works best for them. We have to follow due process,” the SMC chief averred.
He qualified that in the IPPA arrangement with PSALM for the Ilijan plant, the government already gained P35 billion – generally from generation fees; as well as on capacity fees because the US dollar component of that is being levied with 15-percent interest charges; while the peso component has interest charges of 17-percent.
At the end of the IPPA pact in 2022, the net gain of PSALM is estimated hovering at P47 billion because the interest charges had been set at constant 15-17% compared to the prevailing interest rate of 5-6% for current borrowings, including the bonds issued by the national government. Total payments for the asset as of end-April already reached an aggregate P289.1 billion; and this is seen escalating to as much as P390.61 billion by 2022.
He reiterated “PSALM cannot unilaterally decide on the issue and that it should be left for the courts to decide on.”
Ang similarly set on record that “we continuously honor our obligations,” hence, in turn “we only ask that they respect the sanctity of our agreement.”