San Miguel Corp. is willing to pay in full and in advance the entire P22.6 billion that its power generation subsidiary will owe to the Power Sector Assets and Liabilities Management Corp. (PSALM) over the next two years, with one more sweetener: no discount for early payment.
Thus said the country’s largest conglomerate on Wednesday (March 11), which stressed that the move is meant “ to show its sincerity in helping the cash-strapped government entity.“
“We are offering to advance the full settlement of the undiscounted monthly payments due for the period March 26, 2020, until the end of the agreement on June 26, 2022,” SMC Global Power Holdings Corp. president Ellen Go said at a House inquiry on PSALM’s financial woes on Wednesday.
PSALM and SMC’s South Premiere Power Corp. (SPPC) have been locked in a legal battle since 2015 over the computation of generation charges for SPPC’s administration of output from the 1,200-megawatt Ilijan Power Plant in Batangas.
“We are making this offer in good faith with the fervent intention of helping the government in undertaking its priority programs, including containing the spread of the NCOV-19 virus,” Go said, using the previous reference to COVID-19.
The SMC executive said the company’s initiative to prepay capacity fees in full, equivalent to two years of advance payments, and using undiscounted rates, would allow PSALM to maximize fully its earnings from SPPC, which is already more than double the original bid price.
SPPC said it will not negotiate for any discount, so that PSALM can get the full benefits of its prepayment.
As of January 2020, SPPC has paid PSALM P240.7 billion in generation charges and P73.9 billion in capacity fees.
By the time the contract ends in 2022, SPPC would have paid a total of P392 billion for the Ilijan plant, consisting of P294.7 in generation charges and P97.5 in capacity fees.
PSALM has, however, claimed that what SPPC still owes is another P23.9 billion, based on its calculation of generation charges for November and December 2013, using Wholesale Electricity Spot Market (WESM) rates.
SPPC used a fixed rate approved by the Energy Regulatory Commission. SPPC said that selling to the WESM, which acts like a stock market for power supply from independent producers, would have put it in violation of its supply contracts, as well as exposed consumers to erratic price surges in the WESM.
“We would like to point out that this offer is without prejudice to our legal position with respect to our ongoing dispute with PSALM on the proper amount of generation payments,” Go said at the House hearing.