SMC sees P20-B losses as Meralco PSA undergo bidding

San Miguel Corp. (SMC) is projecting losses of P20 billion when its two power projects with power supply agreements (PSA) with Manila Electric Co. (Meralco) are subjected to competitive bidding, its top official said.

SMC chairman Ramon Ang does not expect the Energy Regulatory Commission (ERC) to approve the company’s two PSAs with Meralco. Instead, the power projects would undergo competitive selection process (CSP) to secure off-take agreements.

The CSP requires distribution utilities (DUs) to undertake competitive bidding to secure PSAs with generation companies.

“I’m no longer expecting… The faster way to secure agreements is through CSP. But it will have a huge impact on earnings, around P20 billion a year,” Ang said.

ERC chairman Agnes Devanadera earlier said the power regulator would have to dismiss three PSAs of Meralco if environmental compliance certificates (ECCs) would not be secured within the month.

An ECC issued by the Department of Environment and Natural Resources (DENR) to the generation company is part of the requirements of PSAs.

Of the three PSAs, two are with SMC plants, namely Central Luzon Premiere Power Corp. (CLPPC) and Mariveles Power Generation Corp. (MPGC). The other one is with Global Luzon Energy Development Corp. (GLEDC) of Global Business Power Corp.

CLPPC and MPGC will each build a 4x150-MW circulating fluidized bed coalfired power generating facility in Pagbilao, Quezon and Mariveles, Bataan which are scheduled to start operations no later than 2021 and 2020, respectively.

Under the PSAs, Meralco will purchase up to 528 MW of capacity from the San Miguel power plants.

Ang said the rate for the two PSAs is P5 per kilowatt-hour (kwh) and subjecting it to CSP would bring this down to the current rate of around P3 per kwh.

“We have no choice because electricity prices right now are low. Because of the very strong competition and supply surplus, no one will be able to sell electricity above P3 per kwh,” he said.