Early power crisis looms as Napocor loses P60-B case

Categories: Business Updates

Date: 05 Jan 2015

The looming power shortage may happen sooner, after the Supreme Court ordered the National Power Corp. (Napocor), through the Power Sector Assets and Liabilities Management Corp. (PSALM) to pay P60 billion in damages after losing a class suit filed by its former drivers and mechanics.

Energy Secretary Carlos Jericho Petilla warned power rates would go up once the notices of garnishment in the class suit are implemented.

Petilla told reporters at the sidelines of the Management Association of the Philippines General Membership Meeting yesterday PSALM would be left with a “financial imbalance” if the garnishment pushes through.

PSALM is the government corporation handling Napocor’s assets and liabilities.

“This will result in operating cash deficit, which will lead to power shortage nationwide,” PSALM president and chief executive officer Emmanuel Ledesma Jr. said yesterday.

Napocor, the state-owned power generation company, lost a class suit filed by former members of Drivers and Mechanics Association (DAMA) who were terminated in 2003.

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The group filed for damages and the SC, in a resolution dated June 30, granted their plea and ordered Napocor to pay P60 billion.

In accordance with the SC decision, sheriffs of the Quezon City regional trial court issued notices of garnishment to PSALM. The petitioners comprised about 8,018 beneficiaries.

If PSALM’s funds are garnished, Ledesma stressed its long-term debts would become immediately due and demandable. Under PSALM’s loan agreements, garnishment is a ground for default that will activate the payment acceleration clause.

“PSALM would be obligated to instantly settle outstanding obligations amounting to P329 billion as of June 2014,” Ledesma said.

Without any budget allotted for this unscheduled expenditure, Ledesma said PSALM would have to rely on the national government for support through advances or on-lending arrangements, which would entail additional government borrowings.

At present, PSALM is responsible for the fuel supply and operations budget of its power plants such as the Malaya Thermal Power Plant in Luzon, Power Barges (PBs) 101, 102 and 104 and the Naga Coal-fired Thermal Power Plant (CFTPP) in Visayas.

In all, PSALM’s plants produce 430 megawatts in dependable capacity.

PSALM is also obliged contractually to provide for the fuel requirements of independent power producer plants, namely Ilijan Natural Gas Power Plant in Luzon, and the Zamboanga and General Santos diesel power plants in Mindanao, the government corporation said.

Ledesma said PSALM is entitled to due process and has a mere subsidiary liability.

Power monitoring

Petilla, on the other hand, said they are keeping a close watch on the development of critical power projects in Luzon that could help avert a looming power supply shortage in the summer of 2015.

There are at least five crucial projects in the pipeline that could produce 1,035 MW in capacity if developed on time, Petilla said.

These projects include the 300-MW unit 1 of the Malaya power plant in Rizal, which will have to be rehabilitated next year, and the liquefied natural gas plant in Quezon of Energy World Corp.

The Department of Energy (DOE), Petilla said, has been helping plant developers with local government permits so they could proceed with construction immediately.

Petilla said the DOE is also hoping the 135-MW Puting Bato coal plant 1 in Batangas would be able to resume operations by December.

The DOE is also in talks with the Lopez Group for the early commissioning of the Avion 100-MW natural gas plant by March, ahead of the original September timetable, Petilla said.

The DOE is monitoring the completion of Southwest Luzon Power Generation Corp.’s unit 1 and 2 for a total of 300 MW.

The Philippines will need 9,011 MW of power next year, higher than this year’s demand of 8,717 MW on the back of the projected growth in the economy.

Petilla has proposed the declaration of a state of emergency in the power sector to allow the government to tap additional capacity.

Under Petilla’s plan, the government, through PSALM, would rent bunker-fueled power facilities to fill up the projected shortfall of 300 MW to 500 MW.

Businessmen have supported the plan but President Aquino has yet to decide on the proposal.
Written by: Iris Gonzales

Source: http://www.philstar.com/headlines/2014/08/27/1362214/early-power-crisis-looms-napocor-loses-p60-b-case

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