Philippines: PSALM to recover P3.69-B losses from IPP contracts

Philippines: PSALM to recover P3.69-B losses from IPP contracts

State-run Power Sector Assets and Liabilities Management Corp. (PSALM) is
seeking regulatory approval to recover another P3.69 billion from end-users
to recoup losses incurred from contracts with independent power producers
(IPPs).

PSALM has filed an application with the Energy Regulatory Commission (ERC)
seeking provisional authority to recover the stranded contract cost (SCC)
amounting to P3.69 billion incurred in 2016.

This will be passed on to consumers at a rate of P0.0429 per kilowatt-hour
(kwh) through the universal charge (UC).

If approved, PSALM said it would be able to pay off loan obligations and
generate savings by not resorting to refinancing.

"The amount, if collected, would enable petitioner to recover SCC which can
be used to service maturing loans and IPP obligations. Provisional approval
of this SCC will also keep petitioner from resorting to refinancing to
service its maturing debts, thus reducing, if not totally eliminating,
additional borrowing costs," the state-run firm said in its application.

The filing comes after the ERC recently allowed PSALM to collect over P37
billion from consumers under the stranded debt (SD) and SCC portions of the
UC.

This impending collection will relieve the state-run firm from additional
borrowings this year.

PSALM is the entity created under the Electric Power Industry Reform Act of
2001, the law that restructured the power industry by privatizing the
government-owned assets under the National Power Corp. (Napocor).

PSALM pays for its operations and Napocor debts and obligations, through
privatization of generating assets, sales of electricity from remaining
assets and borrowings.

PSALM continues to incur SD and SCC because the proceeds from privatization
of Napocor's assets and the revenue generated from the government-owned and
IPP plants are not enough to pay its contractual obligations with the
eligible IPPs and lending institutions.

But EPIRA allows it to recover the payment of Napocor's SD and SCC through
the UC.

SD refers to any unpaid financial obligations which have not been liquidated
by the proceeds from the sales and privatization of Napocor assets while the
SCC refers to the excess of the contracted cost of electricity under the
eligible contracts of Napocor with IPPs over the actual selling price of the
contracted energy output of such contracts in the market.

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Link to Original Article:
http://www.philstar.com/business/2017/08/02/1723602/psalm-recover-p3.69-b-lo
sses-ipp-contracts

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John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com