SMC appeals to government to honor Ilijan contract

MANILA, Philippines — San Miguel Corp. (SMC) is appealing to government to honor its contract for the 1,200-megawatt (MW) Ilijan combined-cycle power plant after having been demanded to settle unpaid obligations when it had already paid P238 billion to the Power Sector Assets and Liabilities Management Corp. (PSALM).

South Premiere Power Corp. (SPPC), the holder of the independent power producer administration (IPPA) contract, has been religiously paying its contractual obligations which has amounted to P238 billion as of August, SMC president and COO Ramon Ang said in an interview with reporters yesterday.

Of the total amount, P187 billion is for energy fees for fuel and variable operating and maintenance costs (VOM), and P51 billion in capacity fees to cover the payment for the power plant.

Based on SMC’ records, SPPC would have paid PSALM a total of P384 billion, broken down into P287 billion in energy fees and P97 billion in capacity fees, at the end of the contract in 2022.

The P97 billion payment for capacity fees, or roughly $2 billion, is effective payment for the 20-year old power plant by then.

Moreover, PSALM has already gained P30 billion from its IPP administration agreement with SPPC.

All these belie PSALM’s claims that SPPC does not honor its obligations under the Ilijan power plant agreement.

 “SMC asking PSALM to honor the contract and follow the rule of law because it’s turning off investors,” Ang said.

Last month, Energy Secretary Alfonso Cusi said SMC should settle its unpaid obligations since it has has entered into a contract with government for the IPPA of the Ilijan plant.

“That is the contract, they have to pay. If they want government to honor the contract, they also have to honor their contract,” Cusi had said.