‘SMC power unit strong enough to weather storm’

MANILA, Philippines — Tycoon Ramon Ang, president and CEO of San Miguel Corp., is confident the company’s power unit can weather prevailing headwinds particularly the unfavorable ruling from the Energy Regulatory Commission (ERC).

Ang said SMC Global Power Holdings Corp. (SMCGP) remains fundamentally strong, with a sound strategy to manage all of its financial covenants and obligations.

“While we find the recent decision by the ERC denying our petition for temporary relief from skyrocketing global fuel prices unfortunate, SMCGP remains in a stable position to navigate these circumstances. We have never been more confident of the fundamental strength of our businesses,” Ang said.

Early this month, the ERC denied SMCGP’s petition for temporary relief from its fixed-rate power supply agreements (PSA) with Meralco.

“We’re confident that we will be able to manage the company’s maturing obligations in 2023 and beyond. If necessary, there will be SMC parent support. For our bondholders, SMC Global will continue to be fully-compliant with its financial covenants at all times,” Ang said.

By 2023, SMCGP will be realizing at least P8 billion to P10 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA) from its planned 1,0000-MW Battery Energy Storage System (BESS) project.

The company’s new Mariveles power plant is also expected to come online, contributing an additional P5 billion to P6 billion in annual EBITDA.

SMCGP has also been able to push further use of low-grade coal for its coal plants which are relatively cheaper than high-grade coal, reducing the cost for the company.

Furthermore, Ang said that as of  June, SMCGP no longer needed to pay P12 billion per annum in capital lease payments under its Independent Power Producer Administration (IPPA) contract for the Ilijan plant.

This will have a full-year positive impact for the company in 2023, he said.

SMCGP, meanwhile, continues to evaluate its options including the termination of the contract following the ERC decision.

With a termination of the PSA, the company can eventually dispatch the capacities originally covered by the PSAs, to supply either the Wholesale Electricity Spot Market; Meralco, for its emergency power requirements, or distribution utilities and electric cooperatives at prevailing market terms. These will allow SMCGP to recover in full its power generation costs.

Ang said there would be no penalties in the event of a termination as this would be in accordance with the provisions of the PSA.