NIA signs P20 million deal with SNAP-MI

MANILA, Philippines — The National Irrigation Administration (NIA) has signed a P20 million settlement and release agreement with SN Aboitiz Power-Magat Inc. for SNAP-MI’s utilization of excess irrigation water for power generation.

In a statement, the NIA said SNAP-MI agreed to pay the amount in full and settle issues regarding its earlier acquisition of the 360-megawatt Magat Hydroelectric Power Plant (MHEPP) from the National Power Corp. (NPC) in a competitive bidding conducted by the Power Sector Assets and Liabilities Management Corporation (PSALM).

“The parties also agreed to modify the operations and maintenance (O&M) agreement, such that the service fee payable by SNAP-MI to NIA shall be computed based on the allocated Irrigation Diversion Requirement (IDR), whether or not such IDR was utilized by SNAP-MI for the generation of electricity,”the NIA said.

As part of the acquisition in 2006, NIA entered into an O&M agreement with SNAP-MI on Dec. 13, 2006 for the non-power components of the Magat Dam owned and operated by NIA primarily for irrigation purposes and secondarily for power generation.

The NIA emphasized that in the course of the implementation of the O&M agreement, some issues have arisen in relation to the interpretation and application of certain provisions.

In June 2008, in order to resolve the issue on the pricing of water for the volume used in excess of the IDR during times that the actual reservoir elevation is above the Rule Curve Elevation, the MHEPP oversight committee (OC) issued a resolution providing the unit price of water to be adopted in computing the water service fee for MHEPP.

The two parties have different positions on the service fee adjustment provided in Section 3.1.1 of the O&M agreement, particularly on the frequency, rate, increase/decrease, and conditions applicable thereto (Issue No. 3).

The NIA said that both parties also agreed to exert commercially reasonable efforts to reach a mutually beneficial agreement to resolve issues.