SMC power units eye spot market

MANILA, Philippines — San Miguel Corp. (SMC) said its power units South Premiere Power Corp. (SPPC) and San Miguel Energy Corp. (SMEC) would need  to sell their power to the spot market and enter into bilateral contracts with other off-takers should their power supply deals with Meralco be terminated.

In a stock exchange filing, SMC said any termination will take effect 60 days from receipt of the order  denying the company’s  joint motion for price adjustment with Meralco.

SMC said the ERC orders dated Sept. 29 were received by SPPC and SMEC via electronic mail on Oct. 3.

Within the 60-day period, SMC said SMEC and SPPC are required to continue the supply of power to Meralco at a cost higher than the contracted price under the power supply agreements (PSAs).

“Nevertheless, SPPC and SMEC will continue to explore other legal remedies relating to the ERC orders,” the company said.

“Once the termination of the PSAs take effect, SPPC and SMEC will have to sell its power to WESM and enter into bilateral contracts with other off-takers, the pricing of which will be market-based, and thus will provide better financials and economics for SMCGP (SMC Global Power Holdings Corp.)  on consolidated basis,” it said.

According to SMC,  SMCGP and its subsidiaries will remain compliant with their  financial covenants under all existing loan agreements and other debt instruments based on the company’s internal evaluation.

“Nonetheless, these are not expected to have a material adverse effect on the consolidated financials of the company as well as in the operations and financials of SMCGP and its subsidiaries,” SMC said.

SMCGP earlier assured that Meralco’s energy supply would not be disrupted even following the denial of their joint petition for temporary relief by the ERC.

The company said it would never withhold  available power capacity to the detriment of the country and the consumers despite the present challenges.

Meralco previously said it would exert all available remedies to prevent the  termination of its PSAs with SPPC and SMEC.

Meralco, SPPC and SMEC filed for a temporary adjustment in the prices of their PSAs signed in 2019 to recover fuel costs amid the unprecedented spike in fuel prices.

The temporary rate hike was sought to allow the Sual and Ilijan facilities to not only recover some P5 billion in losses, but also ensure their fixed-rate PSAs are maintained over the longer term, and continue to mitigate the soaring cost of electricity for consumers.

SMCGP said  the temporary relief would have enabled the preservation of the few of the last remaining fixed-rate PSAs of Meralco that are responsible for keeping power rates in Metro Manila low compared to other parts of the country, amid surging global fuel prices.