By Sheldeen Joy Talavera, Reporter
THE PHILIPPINE Competition Commission (PCC) announced on Monday that it has sanctioned the $3.3-billion significant agreement among three energy titans, permitting them to advance with their collective acquisition of power plants and a liquefied natural gas (LNG) facility in Batangas, albeit subject to specific stipulations.
In a declaration on Monday, the PCC conveyed its endorsement of the joint acquisition of two gas-fired power stations and an LNG terminal by Meralco PowerGen Corp. (MGen), Therma Natgas Power, Inc. (Therma), and San Miguel Global Power Holdings Corp. (SMGP).
“The transaction, deemed pivotal for bolstering the nation’s energy supply, is conditioned to ensure equitable competition and enhance transparency,” the competition regulatory body remarked.
MGen operates as the power generation division of Manila Electric Co. (Meralco), while Therma is a fully owned subsidiary of Aboitiz Power Corp. (AboitizPower) through Therma Power, Inc. (TPI). SMGP serves as the energy sector arm of conglomerate San Miguel Corp.
Within the framework of the $3.3-billion agreement, MGen and AboitizPower will collaboratively invest in two of SMGP’s gas-fired power facilities: the 1,278-megawatt (MW) Ilijan power station and the newly established 1,320-MW combined cycle power plant.
The trio will also allocate funds towards the LNG import and re-gasification terminal owned by Linseed Field Corp. in Batangas.
In a combined statement, MGen, AboitizPower, and SMGP expressed their approval of the PCC’s sanction, indicating that the undertaking is anticipated to “enhance the nation’s energy security and infrastructure.”
“The firms conveyed their gratitude for the PCC’s detailed examination process and reiterated their joint commitment to fostering a competitive energy marketplace that delivers tangible advantages to Filipino consumers,” the energy leaders stated.
Following the approval, the organizations assured their adherence to all regulatory mandates and committed to “working closely with stakeholders to harmonize their initiatives with the government’s energy objectives.”
“This collaboration underscores the mutual vision of MGen, AboitizPower, and SMGP in addressing the growing energy demands of the Philippines while endorsing transparency, fairness, and long-term viability in the energy industry,” they remarked.
Nonetheless, the PCC has highlighted “potential competition issues” identified during its scrutiny of the mega-agreement, “including risks of coordination within the national power generation sector and foreclosure in power supply arrangements with distribution utility firms.”
The PCC remarked that the “ultimate” parent companies — Pilipinas Enterprise Management Holdings, Inc.; Aboitiz & Company, Inc.; and Top Frontier Investment Holdings, Inc. — had presented “voluntary commitments” on Oct. 18 to rectify these competitive issues.
The PCC reviewed these commitments, incorporating feedback from stakeholders, industry participants, the Department of Energy (DoE), and the Energy Regulatory Commission (ERC).
The PCC announced its approval of the resulting voluntary commitments from the firms on Dec. 20, asserting that these stipulations are “crucial for sustaining a competitive market.”
“Vital safeguards include PCC supervision of the Competitive Selection Process (CSP) to guarantee that power supply agreements are granted through a clear and competitive bidding framework. This oversight aims to avert collusion or unfair practices,” it stated.
“The acquired firms must also function autonomously from their parent organizations, with stringent measures to differentiate IT systems, offices, and management to prevent coordination or unwarranted influence.”
The boards of directors of these companies should feature independent members, and internal trading divisions are to operate separately from affiliates, as per the PCC’s directives.
The PCC additionally instructed power plants to report unplanned outages within seven days to the DoE to enhance transparency. Reports pertaining to the competitive retail electricity market must also be “shared” with the PCC.
The parent companies are required to designate a competition compliance officer to oversee the adherence to these commitments, according to the regulatory agency.
“The PCC will inform the DoE and ERC regarding the imposed conditions, as well as facilitate alignment of existing guidelines and policies with competition law and policy to mitigate possible competition issues arising from analogous transactions,” it declared.
The PCC indicated that the conditions will be effective for five years, with the option for extension based on market circumstances. Breaches might incur daily penalties of up to P2 million per violation, among other consequences.
When asked for remarks, ERC Chairperson and Chief Executive Officer Monalisa C. Dimalanta stated that the commission has yet to receive a copy of the approval for the transaction.
“It is essential for us to evaluate the terms of such approval in order to validate and verify ongoing compliance by the involved parties with the pertinent aspects of the EPIRA (Electric Power Industry Reform Act),” she commented in a Viber message.
“We hope that the PCC’s endorsement signals a path forward that addresses these matters,” she added.
Terry L. Ridon, a public investment analyst and convenor of think tank InfraWatch PH, remarked that the establishment of the LNG facility should guarantee a stable and affordable power supply amid the country’s increasing demand.
“It should, however, represent just one of many power sources for our requirements, as LNG remains subject to fluctuations in global pricing, and it would be best if the country maintains an energy mix comprising various sources, with a clear inclination towards renewables,” he commented via Viber.
Juan Paolo E. Colet, managing director at China Bank Capital Corp., stated that PCC’s endorsement “opens the door for significant investments in our nation’s energy infrastructure that hopefully leads to lower energy costs.”
“The government evidently acknowledges the significance of LNG in diversifying the nation’s energy supply and guaranteeing energy security,” he stated through Viber.
Mr. Colet noted that SMGP stands to gain from an improved financial position and greater availability of resources for its alternative investments.
Meralco’s majority owner, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc.
Hastings Holdings, Inc., a division of the PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., holds an interest in BusinessWorld through the Philippine Star Group, which it governs.
