PREIT expects revenue to stay at 51% of prior-year level as SIPCOR lease suspension drags on

Premiere Island Power REIT Corp. expects revenue to remain at about 51% of last year's level for as long as lease agreements with S.I. Power Corp. remain suspended. The suspension stems from a dispute over SIPCOR's operating permits, which the Court of Appeals reversed but the Energy Regulatory Comm

Villar-led Premiere Island Power REIT Corp. (PREIT) expects revenues to fall by 49% from last year as lease agreements with S.I. Power Corp. (SIPCOR) remain suspended amid an ongoing dispute over the power producer's operating permits.

“While the suspension remains in effect, the Corporation's revenue is expected to remain reduced at approximately 51% of the prior-year level,” PREIT said in a disclosure on Monday. The company said the reduction in revenue would continue for as long as its lease agreements with SIPCOR remain suspended.

SIPCOR filed an omnibus motion on 18 Aug asking the Court of Appeals (CA) to grant the injunctive reliefs sought in its petition for review, direct the Energy Regulatory Commission (ERC) to respect the status quo ante pending finality of the CA decision, or allow the ruling to be executed despite any appeal or motion for reconsideration. PREIT said the CA's 24 July decision reversing the ERC's revocation of SIPCOR's provisional authorities to operate (PAOs) is not immediately executory. The ERC, meanwhile, filed a motion for reconsideration dated 17 Aug. PREIT said it expects the appellate court to order SIPCOR to comment on the regulator's motion.

PREIT said the SIPCOR lease suspension would remain in effect until the power producer's PAOs are reinstated. Two of SIPCOR's three PAOs expired after the ERC revoked them and while the case was pending before the CA, while one PAO that was pending renewal expired in the same month it was revoked, PREIT said. The company said the revocation of the PAOs, which was later invalidated by the CA, prevented SIPCOR from renewing them.

The lease suspension has already weighed on PREIT's financial results. In the second quarter, rental income fell by about 49% to P77.86 million from P152.21 million a year earlier, while net profit dropped by about 61% to P49.35 million from P125.88 million. For the first half, rental income declined to P155.72 million from P304.42 million, while net profit fell to P99 million from P252.12 million. PREIT attributed the revenue decline to the suspension of its lease contract with SIPCOR due to the latter's inoperability. PREIT recognised no rental income from SIPCOR in the first half, compared with P148.70 million a year earlier. Its entire P155.72-million rental income during the period came from Camotes Island Power Generation Corp. (CAMPCOR).

PREIT owns land, buildings, and generation-related assets used by SIPCOR and CAMPCOR and derives rental income from leases to the two power companies. As of 30 June, its properties remained fully leased, although SIPCOR's power plants were nonoperational and its lease agreement remained suspended. SIPCOR is PREIT's parent company. It directly owns 25.71% of the REIT, while CAMPCOR holds 25.39%. SIPCOR also owns 94% of CAMPCOR, giving it an effective 49.58% interest in PREIT.

PREIT said SIPCOR is “currently exhausting all available remedies and undertaking the necessary steps to reinstate its PAOs by virtue of the CA Decision's execution and/or to restore the status quo prior to the revocation.” If SIPCOR's omnibus motion is granted, its PAOs are restored, and the lease agreements resume, PREIT expects its rental income from SIPCOR to resume, subject to the terms and conditions of the respective agreements. On Monday, shares in the company declined by 1.92% to close at P1.02 apiece.