SMC offers full payment for Ilijan plant to help PSALM

March 10, 2020

San Miguel Corp. (SMC) president Ramon Ang has offered to pay capacity charges for its 1,200-megawatt Ilijan Power Plant amounting to P22.68 billion in full, over  two years ahead of schedule, to help cash-strapped Power Sector Assets and Liabilities Management Corp. (PSALM) manage its liabilities. 

Capacity charges represent capital payment by SMC to PSALM as administrator of Ilijan, spread over the term of its contract.

Ang, in a letter sent to PSALM, said his offer is separate from the alleged “overdue receivables” of its power arm South Premiere Power Corp (SPPC), amounting to P23.9 billion. The amount is the subject of a court case pending since 2015, stemming from differences in computing generation charges.

It will be recalled that PSALM calculated generation charges based on the Wholesome Electricity Spot Market (WESM) prices to maximize its earnings from the IPPA, while SPPC uses a fixed rate approved by the Energy Regulatory Commission (ERC). 

SPPC said selling Ilijan’s reliable baseload capacity to the WESM would have exposed consumers to surges of prices in the market and put them in violation of their power supply contract. 

Ang said the amount it is offering would also help PSALM raise funds for the government that can be used for various state projects, including funding efforts aimed at addressing the COVID-19 virus.  DMS