THE Power Sector Assets and Liabilities Management (Psalm) Corp. on Monday said a decision to terminate the independent power producer administrators (IPPA) administration agreement (IPPA AA) with Phinma Energy Corp. was done in accordance with the terms of the contract.
“In every decision we make, we ensure that we strictly followed what is written in the IPPA AAs, putting in mind that Psalm’s paramount role is to uphold the interest and welfare of the government and to protect it from financial repercussions when issues arise, such as the noncompliance with contractual obligations,” Psalm Officer in Charge Lourdes Alzona said.
Alzona’s statement came after Phinma Energy sued Psalm. In particular, the power firm asked a local court to issue a temporary restraining order (TRO) to stop Psalm from terminating a power contract involving the sale of the output of a geothermal power facility.
Psalm said “all diplomatic steps were exhausted” before the necessary termination of IPPA AAs was put into effect due to administrator’s default.
Besides, the state firm said investors knew the risks involved.
“Psalm ensures that the final IPPA AAs equitably represent sides of involved parties, and is certain that investors before acceptance of the IPPA AAs have well-thought of and considered the market risks inherent in the business and have studied business strategies that will allow them to yield profit margins. “
A civil case for damages and annulment of the agreement with prayer for a writ of preliminary injunction, writ of preliminary mandatory injunction and TRO was filed by Phinma Energy on September 13.
Phinma Energy, at that time operating as Trans-Asia Oil and Energy Development Corp., was declared as one of the winning bidders with the right to administer 40 megawatts (MW) “strips of energy” from the Unified Leyte Geothermal Power Plants (ULGPP) in Tongonan, Leyte.
On November 08, 2013, Supertyphoon Yolanda severely hit Region 8, which resulted in extensive damage to the ULGPP. It was only after a one-year delay that Psalm awarded the strips to the bidders.
Phinma Energy said it formally sought the renegotiation of the agreement and proposed several measures for relief expressed in several letters to Psalm.
Representatives of Psalm and Phinma Energy met on several occasions. Phinma Energy wrote to Psalm expressing the difficulties suffered by the administrators under the agreement. Phinma Energy 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. Consequently, Phinma Energy filed a case against Psalm and its former president, Emmanuel Ledesma Jr. Alzona pointed out that any deficiencies in obligations on the part of IPPAs are addressed according to the terms stipulated under the IPPA AA. Moreover, discussions and agreements between Psalm and the IPPAs are all elevated to the Psalm Board for final direction before these become relevant and binding.
“As to the implementation of Unified Leyte Geothermal Power Plant, through Psalm trading strategies, it is ensured that the strips of energy are fully dispatched, providing IPPAs security from market volatility.
Psalm assists IPPAs in their bilateral contract applications with the Energy Regulatory Commission by providing them support documents used as basis for approval by the regulatory body,” the state firm added.