It’s a complicated industry with a long list of abstract jargons that reflect the technical aspect of the sector; with an uncertain regulatory environment and blackouts that can happen anytime.
And yet, the country’s power sector has always been one of the favorite businesses of many of the country’s biggest conglomerates because it is profitable.
It’s no wonder that there is a strong undercurrent now in the sector – stronger than it usually is. Others call it an all out war between two conglomerates or a power grab of sorts.
There’s all sorts of stories going around the industry grapevine, encompassing generation, transmission, and distribution the three components of the country’s power industry.
San Miguel Corp.’s troubles
One topic now is the troubles of San Miguel Corp. with so many different versions firing up our Viber groups.
Supposedly, SMC’s power units are in big, big trouble after the Energy Regulatory Commission rejected its plea for a temporary relief from its fixed-rate power supply agreements with Meralco.
Addressing these concerns for the first time in detail, SMC president and CEO Ramon Ang said SMC Global Power Holdings Corp., will weather its present challenges.
How so?
Ang said that despite the rumors going around on SMC Global’s financial strength, the company has the “financial flexibility” to pay its obligations.
By 2023, he said, SMC Global would be realizing up to P10 billion in EBITDA from a 1,000 megawatt battery storage project.
SMC Global’s additional capacity, particularly from its new Mariveles power plant could also contribute up to P6 billion annually.
And as of last June, SMC Global 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.
“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 last week.
He gave the assurance as the company’s bonds have been feeling the price pressures as rumors about the company’s financial strength continue to make the rounds.
On SMC Global’s next move, he said the company is studying its options and that a termination of the painful power supply agreement remains a recourse.
“Ang also addressed misinformation being spread by some parties of supposed penalties to be incurred by SMC Global in the event of a termination. He emphasized there are no penalties associated with a termination, as this would be in accordance with the provisions of the PSA,” SMC said in a statement over the weekend.
NGCP
We’re also hearing stories of how two business groups are supposedly joining hands to gain control of the National Grid Corp. of the Philippines (NGCP), operator of the country’s power grid.
One of the business groups was part of the long list of companies originally interested in NGCP when it was up for privatization way back in 2003.
This is nothing new, however. It’s been like this for years with NGCP and it seems there’s no end to the controversies surrounding the company. NGCP is raking billions in profits.
It’s no wonder, the interest in it is as strong as a high-voltage electricity line.
Regulatory capture
Against this backdrop, there are questions on the credibility of our power regulators with ERC chairperson lawyer Monalisa Dimalanta, having been previously part of the Aboitiz Group.
All these issues tell us that there is really something brewing in the country’s energy sector, like a volcano about to erupt.
There’s a lot of lobbying and positioning and dirty tactics going around. It’s become murky these days with so many players wanting to have a bigger role in the industry.
This may be called an all-out war or a literal power grab.
Perhaps, the Big Boys or the country’s big power companies want to take advantage of President Marcos’ business-friendly administration to enter or re-enter the industry or for existing ones, establish a bigger presence in the lucrative sector.
In the meantime, as power players are caught up in their catfights, who’s making sure we have a long term energy plan?
Or do we consumers risk suffering from higher electricity costs or worse, no power at all in the very near future?
Isn’t it alarming that in 2020, we produced only 101.8 terawatt-hour (TWh) of power, which was actually what Vietnam produced way back in 2011 and less than what Vietnam produced in 2020 at 234.5 TWh, according to Mordorintelligence.com?
We need to catch up with our ASEAN neighbors in terms of power generation.
Our regulators need to ensure that our power players – from generation, to distribution, to transmission, are constantly fulfilling their commitments so that we have steady and reliable sources of power.
Policymakers also need to think long-term to secure new energy resources. These include amending the Electric Power Industry Reform Act of 2001.
In this lucrative industry where companies rake in billions in profits, power can be very addicting. But regulators and energy authorities must ensure that consumers don’t suffer from this ongoing and messy power play.
Iris Gonzales’ email address is eyesgonzales@gmail.com.
Follow her on Twitter @eyesgonzales. Column archives at EyesWideOpen on FB.