San Miguel to sue PSALM over contract breach

SMC Global Power Holdings Corp. chair Ramon S. Ang said his company would sue Power Sector Assets and Liabilities Management Corp. (PSALM) for abruptly and unilaterally terminating the Independent Power Producer Administrator (IPPA) contract of SMC unit South Premiere Power Corp. (SPPC) for the Ilijan power plant in Batangas.

“We will pursue them (PSALM) until we get the justice,” Ang told reporters.


The new management of PSALM did not know how to honor its contract, Ang said, adding that there seemed to be some “malicious intent” in its action.

SPPC is a wholly owned subsidiary of SMC Global Power, which is a 100-percent owned by San Miguel Corp.


Ang said the San Miguel group wanted to participate in more energy privatization bidding but the case against PSALM was hampering its efforts and San Miguel Global Power Corp.’s plan to list on the Philippine Stock Exchange.

The firm also asked PSALM to refrain from issuing misleading statements about the case—which the power company said was based on erroneous computation of claims—noting that the “status quo” should be observed to stem public perception that the case could result in a disruption in supply or price escalation.

The firm assured the public that prices would remain stable as long as the status quo was in place.

The company said that by illegally terminating the IPPA agreement for the Ilijan power plant, PSALM was going back on its mandate and reversing the privatization of the power generation asset.

According to PSALM, the TRO runs counter to the provisions of Republic Act No. 9136 or the Epira Law, which mandates PSALM to manage the orderly sale, disposition, and privatization of National Power Corp. generation assets, including IPPA contracts.

Global Power said that when PSALM awarded it the IPPA agreement for the Ilijan plant, the agency had already met its first mandate to privatize the asset.

“In illegally terminating the IPPA agreement, however, PSALM is reversing the privatization of an NPC (Napocor) asset, in violation of its mandate under the Epira,” SPPC said.


SPPC said it was not asking the court to “restrain the implementation of the provisions of the Epira.” It is merely restraining the breach of the IPPA agreement of the Ilijan Power Plant by PSALM.

“The action of SPPC in restraining the termination of the IPPA Agreement is not restraining or enjoining the provisions of Epira. Rather, it is an action to compel PSALM to implement the provisions of the Epira by honoring the privatization of an NPC asset, as required by Epira,” the company said.

SPPC asserted that the RTC had proper jurisdiction over the case, as clearly stated in Section 38.3 of the IPPA Agreement, which states: “exclusive venue of legal processing or actions arising out of this agreement should be in the courts of Metro Manila, and each party irrevocable accepts…the jurisdiction of the aforesaid courts.”

The company said the conflict was a contractual dispute arising from the IPPA Agreement and, therefore, its resolution should be guided by the terms and conditions of the contract itself and the general contract law.

The IPPA recognized that as a “garden variety contract,” the contracting parties (PSALM and SPPC), have at their disposal all the available judicial remedies in regular courts (not just the SC), available to other equally situated parties.

PSALM contests the grant of the temporary restraining order (TRO) on the termination of the government’s contract with SPPC on Ilijan, saying it should not be under the jurisdiction of the Mandaluyong Regional Trial Court (RTC).

PSALM claims that for the period Dec. 26, 2012 onward, SPPC underpaid its generation payments due PSALM “by unilaterally and erroneously applying prices which were much lower than those required under the Ilijan IPPA-AA that the company entered into.”

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