SMC takeover of Aleco opens new opportunities

LEGAZPI CITY, Philippines -- The recent takeover by conglomerate San Miguel Corp. of the operation of the Albay Electric Cooperative (ALECO) offers new business opportunities, apart from solving the province’s lingering power problem.

Albay Gov. Joey Salceda said the “event is a game changer with significant positive consequences for the Albay economy and also sets a paradigm for the rehabilitation of other problematic power cooperatives distribution utilities.”

The takeover was formalized last Oct. 29 with the signing of a concession agreement between Aleco and SM Global Power Holdings representatives at the SMC head office at Ortigas Center, Makati. The formal takeover is set Dec. 26.

The SMC is set spend P250 million for Aleco’s capital expenditure and P350 million for the separation pay of employees who will be affected by the management takeover.

Salceda said “the assumption by SMC of Aleco’s debt is a form of investment and is a statement of faith in the robust fundamentals of Albay and of the countryside.”

 â€œWe also look forward to the positive externalities of this P4.7 billion investment by the country’s leading diversified conglomerate with an equity base of P245 billion,” he said.

 â€œImmediately, it comes to mind the complementarity of the Albay’s position as a gateway to Bicol and SMC’s aggressive expansion in air transportation. This opens up opportunities for new business and expanded operations with the scheduled completion of the Daraga International Airport by August 2016,” he added.

Salceda said with SMC’s current investment with the Philippine Air Lines, there is the possibility of opening up an Incheon-Daraga or HongKong-Daraga or Bangkok-Daraga routes. Incheon in South Korea and Albay has an existing sisterhood agreement.

The Daraga International Airport, also known as Southern Luzon International Airport, is a pet project of Salceda, aimed at putting Albay in the list of new international destinations, particularly in the field of tourism.

Salceda said his administration will stand watch over SMC’s operation of Aleco to see to it that the provisions in the agreement is religiously followed, particularly in raising the standard of service of the power coop.

He said San Miguel, under the agreement, would manage the operations of Aleco for 35 years, which could be extended for another 25 years. San Miguel aims to generate revenues of about P600 million annually after the rehabilitation.

The governor earlier said SMC may infuse another P1 billion to run and pay Aleco’s P3.6 billion. SMC takeover is seen as a pilot solution to solving economic woes of other ailing electric cooperatives in the country.

Aleco consumers chose SMC takeover instead of another electric cooperative assuming the operations. The coop has a debt of P3.7 billion, and was under constant threat of power cut off.

Salceda said Aleco would be better off in the hands of the private sector. Today, Aleco’s system loss is 24 percent which SMC hopes to trim down.