PSALM stands pat on Naga plant sale decision

The Power Sector Assets and Liabilities Management (PSALM) Corp. has stood its ground on the sale of the Naga power plant complex (NPPC) last year to listed firm SPC Power Corp.

This is despite the Supreme Court’s recent declaration that its basis, which was SPC’s “right to top” the winning bid for the power asset, was “void.”

“For the record, the Department of Justice (DoJ) affirmed the legality of the ‘right to top’ the adjoining properties within the NPPC accorded to the owner of the Naga Land-based Gas Turbine (LBGT) Power Plant in connection with the privatization of NPPC. The DoJ’s confirmation was made prior to the commencement of the NPPC sale process. The Office of the Government Corporate Counsel is representing PSALM in the SC,” PSALM CEO Lourdes S. Alzona said in a text message.

SPC, owner of the Naga LBGT Power Plant, was granted the right to top the highest bid on the sale or lease of the properties within the vicinity of the Naga LBGT power facility, subject to the payment of a premium of 5 percent over the highest bid on these adjacent properties.

The “right to top” was provided in the Land Lease Agreement (LLA) executed among PSALM, National Power Corp., and SPC in 2009. The LLA was executed pursuant to the Asset Purchase Agreement for the Naga LBGT power plant.

In a decision promulgated Sept. 28, 2015, the Supreme Court declared the asset purchase agreement (APA) and the land lease agreement (LLA) between PSALM and SPC for the sale of the Cebu-based power plant to be “annulled and set aside.”

This comes one year after PSALM formally turned over the Naga power plant complex to SPC.

The Supreme Court decision said that the grant of right to top to SPC under the LBGT-LLA (Naga Land-Based Gas Turbine-Land Lease Agreement) is void as the parties failed to show that such a deal was founded on the lessee’s legitimate interest over the leased premises.

SPC’s argument that the privatization of power plant complex was even more advantageous to the government, simply because it resulted in a higher price (P54 million more) than winning bid of a competing firm was also rejected.

The Naga Power Plant consists of the 52.5-MW Cebu 1 and 56.8-MW Cebu 2 coal-fired thermal power plants, and the 43.8-MW Cebu Diesel Power Plant 1 composed of six 7.3-MW bunker-C fed power units.