Ippas’ and electric co-ops’ P59.23-B obligation plunges PSALM into debt
THE inability to collect overdue accounts from independent power producer administrators (Ippas) and electric cooperatives has sunk the Power Sector Assets and Liabilities Management Corp. (PSALM) deeper into huge debts.
Ironic, indeed! PSALM has been forced to take out loans that the government guarantees in order to timely fulfill its mandate of liquidating the financial obligations of the National Power Corp. (Napocor).
In 2018, PSALM borrowed about P23 billion to cover its maturing obligations. It borrowed $1.1 billion for accounts that had matured in May last year. This resulted in the government firm paying interests, guarantee fees and other finance charges of about P2.62 billion per year.
“Had the Ippas and electric cooperatives paid their obligations, PSALM would not incur this much additional expenditure,” PSALM President-CEO Irene Joy Garcia told BusinessWise.
Finance Secretary Carlos Dominguez III lamented that “all these borrowing costs could have, otherwise, been used by the government for the construction of public-school classrooms, or to build roads and bridges.” He instructed PSALM to relentlessly pursue collection efforts against these Ippas, and use all remedies available to protect the rights of the government and the Filipino people.
Ippas and electric cooperatives dominate the list of the top corporate entities with long overdue accounts
with the PSALM, amounting to a combined P59.23 billion as of December 2018. Many of these accounts were transferred in 2001 by Napocor to PSALM by virtue of Epira, or Republic Act 9136.
A PSALM report to Dominguez, chairman of the state-run firm’ s Board of Directors, showed that several I pp as have pending overdue accounts with PSALM a mounting to P 28.46 billion as of December 2018. Some of the Ippas are contesting in courts or in arbitral tribunals the amounts due.
South Premiere Power Corp. (SPPC), which administers the Ilijan gas-fired power plant in Batangas City, has the highest unpaid obligation to PSALM, in the sum of P19.75 billion. PSALM earlier terminated the Ippa, but the termination has been enjoined by the courts.
Vivant-Sta. Clara Northern Renewables Generation Corp., formerly owned by Vivant Energy and Sta. Clara Power Corp., owes P3.86 billion to PSALM, which awarded it an Ippa contract for the Bakun Hydroelectric Power Plant in Ilocos Sur. Vivant-Sta. Clara filed a petition for rehabilitation, and was recently purchased by North Renewable Energy Corp. Despite the change in ownership, the company has not yet settled its overdue account.
The Good Friends Hydro Resources Corp. of Lucio Lim Jr. has yet to pay PSALM P1.16 billion, while FDC Utilities Inc., led by Juan Eugenio Roxas as its president-CEO and a subsidiary of Filinvest Development Corp., owes P1.12 billion. Both Ippas were involved with the contract to administer the Unified Leyte Geothermal Power Plants.
As the previous Ippa for Mindanao I and II Geothermal Power Plants, the FDC Misamis Power Corp., a Filinvest Utilities subsidiary, also owes PSALM P2.56 billion.
The PSALM report also listed 10 electric cooperatives and industries with the largest unpaid obligations to PSALM, with a combined total of P28.74 billion as of December last year.
According to the report, the Lanao del Sur Electric Cooperative has the highest overdue account, amounting to P9.63 billion. Represented by its General Manager Nordijiana Ducol, Lasureco owes PSALM the largest and longest overdue amount dating back 16 years.
Second in the list is the Public Utilities Department of Olongapo City, although no longer a PSALM client, still owes P6.07 billion in obligations, representing over nine years of overdue power bills, over a decade of unpaid value-added tax (VAT) payments, and five years of penalties and interests.
The defunct PICOP Resources Corp. that used to be owned by TP Holdings Inc. is third, with an overdue account of P2.96 billion since 2008.
Fourth on the list is the Albay Electric Cooperative Inc., represented by Jelinda Pempeña and now known as the Albay Power Energy Corp. It is no longer a PSALM customer, but has P2.61 billion of power bills, VAT, and interests and penalties that has remained unpaid since 2006.
Ranked fifth and sixth, respectively, are the Maguindanao Electric
Cooperative Inc., led by Sultan Ashary Maongco, with P1.76 billion in unpaid obligations (more than 10 years of overdue power bills); and Global Steelworks International Inc. (now known as Global Steel Philippines), a subsidiary of Global Steel Holdings Limited, with an unpaid account since 2009 amounting to P1.68 billion.
There are other Ippas and electric coops which have been notorious in servicing their debts. The list is too long for them to be mentioned here.
Their mind-boggling debt is a heavy onus, not only on PSALM, but on the national government and the Filipino people, as well.
PSALM is mandated to manage all existing debt of Napocor, capital lease payments to Ippas, and the outstanding obligations of electric coops to the National Electrification Administration and other government agencies. In order to pay all principal and interest payments on time, PSALM had to take out government-guaranteed loans, the borrowing costs for which could have, otherwise, been spent more wisely, as Dominguez himself pointed out, on public-school classrooms and infrastructure that form the backbone of a healthy economy.
Until it receives all its payables, PSALM will find it impossible to realize its vision of becoming debtfree by 2026 in order to operate in “a competitive electric power industry through strategic asset privatization and financial management.”
For PSALM to solve the debt problem of these Ippas and electric cooperatives by borrowing more is preposterous and ineffective. The Duterte administration must come up with a workable solution fast before PSALM, the national government and the economy go bust.