PSALM expects nearly P1 B savings from tax breaks

MANILA, Philippines — State-run Power Sector Assets and Liabilities Management Corp. (PSALM) expects to generate nearly P1 billion in  savings after President Duterte issued the real property tax breaks (RPT) to power producers.

In a statement, PSALM welcomed Executive Order 88 signed by President Duterte, which reduces RPT liabilities of the power generation facilities of independent power producers (IPPs) under build-operate-transfer (BOT) arrangements.

PSALM president and chief executive officer Irene Joy Besido-Garcia said the agency would greatly benefit from the EO “because under PSALM’s BOT arrangements, the real property tax is contractually assumed by PSALM.”

“With the issuance of EO 88, PSALM anticipates that its RPT payments will be reduced to P205.5 million. PSALM will be able to save P890.5 million which can then be utilized for the settlement of maturing financial obligations of (National Power Corp.),” she said.

EO 88 orders the reduction of RPT on property, machinery and equipment that these IPPs use to produce electricity.

Specifically, it lowers the realty tax to a tax based on an assessment level of 15 percent of fair market value of the said property, machinery and equipment depreciated at the rate of two `percent.

PSALM has five contracts in its portfolio with IPPs that will be covered by EO 88. These include the Ilijan natural gas power plant, the Pagbilao coal-fired thermal power plant, the Sual coal-fired thermal power plant, the Mindanao coal thermal power plant and the San Roque hydro electric power plant.

He invoked public interest in ordering the condonation or the reduction of the RPTs and interest for any year in any province, or city, or municipalities within Metro Manila. 

PSALM is the agency mandated by Electric Power Industry Reform Act (EPIRA) of 2001 to handle the sale of the remaining state-power assets and the financial obligations of Napocor. It has seven years left in its corporate life ending in 2026.        

It reduces debts through the privatization of government-owned assets, collection of the proceeds and its effective implementation of its liability management program.

Since it was started, PSALM has privatized 31 generation assets, including the Magat hydroelectric power Plant, Tiwi-Makban geothermal power plants, Pantabangan-Masiway hydroelectric power plant, Masinloc coal-fired thermal power plant and Batangas (Calaca) coal-fired thermal.

Its remaining generating assets include the Malaya thermal power plant in Rizal, the Agus I, II, IV to VII and Pulangi hydroelectric power plants in Mindanao, the Mindanao coal-fired power plant and some real estate properties.

As of the end of May, the state-run firm still had P433.7-billion remaining payables. 

PSALM has seven years left in its corporate life ending in 2026.