San Miguel defends offer to pay capacity charges on Ilijan power plant in advance


Conglomerate San Miguel Corporation on Thursday defended its offer to pay the capacity charges for its 1,200-megawatt Ilijan natural gas power plant two years ahead of schedule, saying it was a gesture of good faith.

San Miguel said the prepayment would help boost government resources needed to address the immediate social and economic impact of the COVID-19 pandemic.

It said the turnover of the Ilijan power plant in Batangas to power unit South Premiere Power Corp. “is a natural consequence of prepaying the remaining P20 billion capacity charges (now down to P14 billion as of January 31, 2021).”

The company said since the start of the independent power producer administration (IPPA) agreement with the government, SPPC has already paid approximately P83 billion in capacity charges and P260 billion in generation charges as of end January.

“If all the capacity charges are paid then the selling price of the Ilijan power plant would have been deemed paid. In fact, SPPC would have overpaid, as P98 billion would have paid for a brand new, and not a 25-year old, power plant,” San Miguel said.

“Despite this, SMC is committed to continue discussions with the government to swiftly resolve the issue and help boost the country’s economic recovery in these trying times,” San Miguel said.

State-run Power Sector Assets and Liabilities Management Corp. on Wednesday rejected the proposal of SPPC to advance in full its monthly payments due under an IPPA agreement on the Ilijan power plant.

PSALM president Irene Garcia said SPPC’s latest offer, outlined in a letter dated January 11, 2021, called for an early turnover of the power plant ahead of the June 2022 schedule under the IPPA agreement upon full settlement of the monthly payments.

PSALM said SPPC still owes PSALM P23.07 billion in generation payments as of end December 2020 per PSALM’s books. The computation of generation payments due PSALM from SPPC is the subject of the pending court case.

Generation payments refer to the cost of energy based on the specific formula provided for in the IPPA agreement, while monthly payments refer to the fixed monthly amounts due to PSALM based on the IPPA’s financial bid for its right to own the power plant at the end of the IPPA agreement.

Finance Secretary Carlos Dominguez, in its meeting with PSALM, reminded the agency about the latest directive of President Rodrigo Duterte not to allow any private company to benefit or secure a franchise until “they settle their full accounts with the government.”

The Ilijan power Plant was constructed and owned by KEPCO Ilijan Corp. (KEILCO) under the Energy Conversion Agreement (ECA) with National Power Corp./PSALM.

SPPC was appointed the IPP administrator for the Ilijan power plant in 2010.

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