Meralco in talks with generation companies for joint venture

MANILA, Philippines - Manila Electric Co. (Meralco) said it is in talks with at least four power generation companies (gencos) for a possible joint venture, a ranking company official said.

“We’re still continuing discussions with a number of potential partners. So we haven’t made a final choice of partner. But discussions are still ongoing with a number of them. We’re looking at potentially two to four partners,” chief operating officer Oscar Reyes said.

He said they are considering several factors before choosing a partner for its power generation business.

“The key in the choice of partner is one with whom can we bring capacity to operation at the soonest. There you’re talking of the status of development such as site, availability of site and permits. There are development considerations. Equally, if not more important, is who are the partners who will be able to generate power at the most cost competitive price so that we will be able to deliver power to the consumer at a more affordable level. So, cost competitiveness of generation, which translates to more affordable rates for consumers, and timing of completion, will provide us adequate supply,” he said.

Reyes said they are also optimistic they would be able to maintain the timeline for their power development plan.

The timetable remains, we’re looking at bringing in an additional 150 megawatts by 2012 and another 150 MW by 2013. And then for 2014, 2015 and 2016, we’re looking at 600 MW, 300 MW and 300 MW, respectively. The 1,200 MW will be either coal but we’re also looking at the option of LNG. The critical determinant will be price or cost competitiveness,” he said.

The Meralco executive pointed out that their end goal for going into power generation is to help lower the cost of electricity for its customers.

“We’re hoping for lower costs. Our aspiration is a much lower generating cost because that’s what our consumers are asking. It may be a tough challenge, but I think we have to be able to demonstrate that we tried to bring down generation costs to as low a level as possible,” he said.

He said they are also hoping that the power generation venture of Meralco would be able to help them sustain reliable supply of power in its franchise area.

“For now, we are looking at our own franchise area (to sell the power produced from its proposed power plants). But there have been other areas that have approached us with hopes that they can bring better service to their respective franchise areas. Better service in terms of 24/7 power supply rather than rotating brownouts,” he said.

Reyes said it would be Meralco’s privilege to be able to ease shortage of power in some areas, even those outside its franchise area.

We’re just being invited, so we have to be acceptable to the area and community. And it’s a long process. We’re looking at areas where we can bring value in terms of 24/7 electricity, better quality and affordable prices,” he added.

Meralco earlier said it plans to spend around $2 billion to put up some 1,500 MW worth of new capacities to ensure a reliable supply of power within its franchise area in the medium-term.

Meralco president and CEO Manuel Pangilinan had said the company was in the process of putting up a new subsidiary, Meralco Power Generation Co. (MPGC), to handle its power generation business.

On financing these proposed power projects, Pangilinan said they would likely raise funds both through equity and debts.

But he noted that the company is very well-positioned to invest on these power projects especially now that it has cash on hand of P20 billion as of end-September 2010.

According to Pangilinan, tapping strategic partners would also spread the risks for the company.

He, however, pointed out that they would want to maintain majority control of the power generation arm to be able to keep up with the commitment to lower power costs.

Meralco has not engaged in building power facilities since 1979.