Market cautious over impact of ERC decision on SMC stocks

MANILA, Philippines — Capital markets investors are watching with caution the impact of the power regulators’ denial of San Miguel Corp.’s request to recover losses from higher coal costs.

SMC president and CEO Ramon Ang said in a Bloomberg report that the conglomerate has money to pay even as a Bloomberg Intelligence report said SMC Global Power Corp. risks a funding shortfall of as much as $1 billion by June 2023.

An analyst said the 2024 bonds of SMC Global Power and the 2026 bonds of SMC’s oil unit Petron Corp. are also feeling price pressures.

Share prices of some SMC stocks were down as of last week.

SMC’s share price closed at P98.40 per share on Friday, down by 0.91 percent while Petron shares were down by 0.40 percent to P2.46 per share. Ginebra San Miguel shares were also down, but only slightly by 0.10 percent to P101 a piece. On the other hand, San Miguel Food and Beverage Inc. shares were up by 2.21 percent to P36.95 each.

The Energy Regulatory Commission (ERC) recently denied SMC’s joint petition with Meralco for temporary relief on their 2019 power supply agreements (PSAs).

The joint plea was meant to recover losses, estimated at P15 billion, from the unexpectedly high price of coal and supply restrictions from the Malampaya gas field.

“The temporary relief would have enabled us to preserve 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,” SMC said in a statement.

SMC said the denial of the petition “will not only cripple us, but more importantly, burden consumers who will have to face higher electricity bills.”

If ERC granted the temporary relief, electricity prices in Luzon would have increased by 30 centavos per kilowatt hour (kWh), but without the relief Meralco has estimated an increase of at least 80 centavos up to P1.30/kwh in the price of electricity over the next three to four months.