Philippines: Phinma Energy to sue PSALM for IPPA contract termination

Philippines: 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 Trans-Asia 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, 232.5-MW 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.

--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---

Link to Original Article:
http://www.philstar.com/business/2017/09/12/1738118/phinma-energy-sue-psalm-
ippa-contract-termination

--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---

John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com