Power shortage feared amid PSALM cash woes

Warning that the precarious power supply situation in the country could turn into an outright crisis if it loses funds due to a garnishment order by a local court, Power Sector Assets and Liabilities Management (PSALM) Corp. has warned partners against releasing the state firm’s receivables and bank deposits to any third party.

“If our funds are garnished, our long-term debts would become immediately due and demandable,” PSALM president and CEO Emmanuel R. Ledesma Jr. said in a statement. “This will result in operating cash deficit, which will lead to power shortage nationwide.” PSALM and its private sector partners have received garnishment notices stemming from a finalized Supreme Court decision, circa 2008, on a class suit filed by National Power Corp. (Napocor)-Drivers and Mechanics Association members over their termination in 2003.

PSALM’s current loan agreements state that garnishment is a ground for default which will activate the payment an “acceleration clause”—meaning creditors will demand immediate payment of loans. Also, defaulting in one loan will cause other loans into default mode, making way for a flood of demand letters to PSALM.

Ledesma said this would make PSALM obligated to instantly settle outstanding obligations amounting to P329 billion as of June 2014. An unscheduled expense such as this would force PSALM to rely on the national government for support through advances or additional government borrowings, he said.

And if PSALM runs out of funds, it would be virtually unable to perform its functions, Ledesma said, which includes operating the remaining state owned energy facilities: Malaya thermal power plant in Luzon, Power Barges (PBs) 101 and 102, and Naga coal-fired thermal power plant (CFTPP) in Visayas, and PB 104 in Mindanao. Together, these facilities produce around 430 megawatts (MW) in dependable capacity.

PSALM is also providing the fuel requirements of the Ilijan natural gas power plant (NGPP) in Luzon, as well as the Zamboanga diesel power plant (DPP) and General Santos DPP in Mindanao. The private-sector Independent Power Producer (IPP) operators are not allowed to procure fuel for these facilities.

Ledesma also said that if the Independent Power Producer Administrators allow the garnishment of payments to PSALM, the state firm would be unable to pay IPPs, in breach of its contract. PSALM is contractually responsible to pay for the capacity fees for the following power plants with appointed IPPAs: Bakun Hydroelectric Power Plant (HEPP), Ilijan NGPP, Pagbilao CFTPP, Sual CFTPP and San Roque HEPP. The capacity/energy fees for the following power plants without IPPAs are, in contrast, PSALM’s direct obligations which will likewise be adversely affected: Benguet Mini-Hydros, Caliraya-Botocan-Kalayaan HEPP, Casecnan HEPP, General Santos DPP, Mindanao CFTPP, Mt. Apo 1 and 2 Geothermal Power Plant (GPP), Unified Leyte GPP and Zamboanga DPP.