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ERC turmoil to disrupt power plant financing, construction — Meralco

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Electricians from the Manila Electric Co. is ready to maintain a secondary transmission line in Manila in this Aug. 11, 2015 file photo. -- AFP

MANILA ELECTRIC Co. (Meralco) has warned about the cost on the distribution utility should the delay in the approval of its power supply agreements (PSAs) stretch beyond what is acceptable to its contractors.

“It will affect our timetable. It will affect the cost if the delay is protracted because the EPC (engineering, procurement, construction) contractor cannot hold on to the contract price for far too long,” Meralco Chairman Manuel V. Pangilinan told reporters.

Asked about how long Meralco can hold on to its previously agreed terms with its contractors, he said: “A few more months, I guess.”

“Beyond that then we will have to renegotiate the contract and the financing as well because both have been arranged already. I’m referring to Atimonan [One Energy, Inc.],” Mr. Pangilinan said.

Meralco needs approval from the Energy Regulatory Commission (ERC) for its power supply contracts, which its lenders need to ensure that the released funds for the construction of a power plant will bring a steady stream of revenues.

In May 2016, the distribution utility announced that it was seeking approval for seven PSAs for the purchase of 3,551 megawatts (MW), the biggest of which is from a unit of its power generation subsidiary.

The PSAs were based on its long-term load projections as it expects a continuous increase in electricity demand and number of customers, coupled with the impending expiration of contracts from 2019 to 2020.

Meralco’s application has encountered opposition and other issues, including the suspension of the four ERC commissioners and its former chairman for one year.

They were ordered suspended in December last year by the Office of the Ombudsman in connection with the revised implementation date of the competitive selection process (CSP), which it said favored a few power supply contracts.

CSP requires these contracts between power generation companies and distribution utilities to be subjected to price challengers, a process that is aimed at lowering electricity costs.

As a collegial body, the ERC needs the presence of at least three members of the commission to constitute a quorum and the majority vote of two members in a meeting is necessary.

“The main thing about Meralco is our PSAs. We can’t proceed to build one or two of our plants without the PSAs. So I would hope the government proceeds … to reconstitute the ERC,” Mr. Pangilinan said.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in BusinessWorld through the Philippine Star Group, which it controls. — Victor V. Saulon