Phinma Energy to sue PSALM for IPPA contract termination

Phinma Energy Corp. is taking state-run Power Sector Assets and Liabilities Management Corp. (PSALM) to court for suddenly terminating its independent power producer administrator (IPPA) contract for the Unified Leyte geothermal power plants (ULGPP).

In a disclosure to the Philippine Stock Exchange, Phinma said it received authorization from its board of directors to file a case against PSALM to stop it from terminating its IPPA for ULGPP’s strips of energy on grounds of the administrator’s default. Strips of energy is the capacity of a plant that range from one MW up to a maximum of 40 MW.

In November 2013, the company — formerly called TransAsia Oil and Energy Development Corp. — was announced as among the seven winners of the IPPA contracts to administer strips of energy of the ULGPP.

Totaling 200 megawatts, the IPPAs included Phinma Energy for 40 MW, Aboitiz Energy Solutions Inc. for 40 MW, Vivant Energy Corp. for 17 MW, FDC Utilities Inc. for 40 MW, Unified Leyte Geothermal Energy Inc. (ULGEI) for 40 MW, Good Friends Hydro Resources Corp. for 20 MW and Waterfront Mactan Casino Hotel Inc. for 3 MW.

As IPPAs, winners will manage the contracted output of the power facility which could be traded at the Wholesale Electricity Spot Market (WESM), the country’s trading floor for electricity.

But during the same period, Typhoon Yolanda severely hit Region 8 which resulted in extensive damage to ULGPP.

Phinma Energy said PSALM awarded the IPPA contract for the strips of energy a year after the typhoon.

Since the power facility was severely damaged, the power company has been re-negotiating the terms of the agreement with the state-run firm.

“In several letters to PSALM, Phinma Energy formally sought the renegotiation of the agreement and proposed several measures for relief. Representatives of PSALM and Phinma Energy met on several occasions. Phinma Energy wrote PSALM expressing the difficulties suffered by the administrators under the agreement,” it said.

“Phinma Energy, through counsel, wrote a letter exercising its right to withdraw from the agreement. Discussions on the termination were initiated. However, Phinma Energy received a notice from PSALM of the administrator default and PSALM has resolved to terminate the agreement and forfeit the performance bond,” it added.

ULGEI, a subsidiary of Lopez-led Energy Development Corp. (EDC), has turned down the award of the winning bids after Yolanda “devastated the physical and economic conditions of the Unified Leyte geothermal power plants.”

ULGPP is composed of the 125-MW Upper Mahiao, 232.5MW Malitbog and 180-MW Mahanagdong power plants, and the 51-MW optimization stations. It is covered by power purchase agreements between National Power Corp. (Napocor) and EDC.