By Lenie Lectura – January 28, 2025
from Business Mirror
The country’s top power firms have achieved financial close for their liquefied natural gas (LNG) facility which recently received the green light of the government’s competition watchdog.
In separate disclosures, the Manila Electric Co. (Meralco), San Miguel Corp. (SMC), and Aboitiz Power Corp. said their subsidiaries have completed the financial close for the $3.3-billion gas deal.
The transaction involves the 67-percent stake acquisition of Chromite Gas Holdings, Inc. (CGHI) in South Premiere Power Corp. (SPPC), Excellent Energy Resources, Inc. (EERI), and Ilijan Primeline Industrial Estate Corp. (IPIEC).
CGHI is 60-percent owned by Meralco PowerGen Corp. (MGen) and 40 percent owned by Therma NatGas Power Inc. (TNGP).
The deal also involves CGHI and San Miguel Global Power Holdings Corp. (SMGP) acquiring 100 percent of Linseed Field Corp. (LFC) to operate an LNG (liquefied natural gas) import and regassification terminal in Batangas City.
As a result, CGHI will own 67 percent of SPPC, EERI, and IPIEC, while SMGP will retain a 33-percent stake in these entities and gains a corresponding interest in LFC.
LFC is a local unit of global infrastructure firm Atlantic, Gulf & Pacific Co. while SPPC owns and operates 1,278 megawatt (MW) Ilijan power plant.
MGen’s share in the deal will be financed through borrowings, particularly from the P75-billion credit faculty of Meralco with BDO Unibank Inc., Bank of the Philippine Islands, and Metropolitan Bank and Trust Co.
“Drawn already,” replied Meralco senior vice president and chief finance officer Betty Siy-Yap when asked if the company has tapped the credit line.
Moving forward, MGen President Emmanuel Rubio said the parties will now proceed to tick off the remaining items in the snag list.
“The team will focus on closing punch list items for Excellent Energy and the regas facilities. The third unit of EERI is still undergoing commissioning and we expect that to be completed within February.
We are also completing the first on shore tank and starter constructing the second. After these, we can then look at efficiency improvements and work to further ensure reliability for both EERI and SPPC,” said Rubio.
The transaction among the parties was recently approved by the Philippine Competition Commission (PCC). The PCC said that while the transaction supports the country’s energy security, the imposed conditions are vital to maintaining a competitive market. Key safeguards include PCC oversight of the Competitive Selection Process (CSP) to ensure power supply agreements are awarded through a transparent and competitive bidding process. This oversight aims to prevent collusion or unfair practices.
The acquired companies must also operate independently of their parent companies, with strict measures to separate IT systems, offices, and management to prevent coordination or undue influence. Boards of directors will include independent members, and internal trading units will operate independently of affiliates.
To promote transparency, power plants must submit reports on unplanned outages to the PCC within 7 days of reporting to the Department of Energy (DOE). Additionally, Competitive Retail Electricity Market (CREM) reports must be shared with the PCC.
The parent companies are also required to appoint a competition compliance officer to monitor the fulfillment of these commitments. The PCC will communicate to DOE and Energy Regulatory Commission (ERC) the conditions imposed, as well as coordinate on the alignment of existing guidelines and policies with competition law and policy to curb competition concerns that may arise from similar transactions.
The conditions will remain in effect for 5 years, with possible extensions depending on market conditions. Violations could result in daily fines of up to P2 million per infraction, until the entity fully complies, in addition to other penalties and sanctions.
“These safeguards strike a balance between encouraging investments in critical energy infrastructure and ensuring a fair and competitive market that benefits consumers, businesses, and the broader economy.
By addressing potential competition issues while supporting energy security, the approved transaction represents a key step toward bolstering the Philippines’ energy landscape,” the PCC said.