Meralco to sign shareholders' agreement

On Subic coal plant acquisition

By MYRNA M. VELASCO

July 16, 2011, 1:11am

MANILA, Philippines — Following the decision of its board on the acquisition of majority shares in the proposed Subic coal plant, the power generation arm of utility giant Manila Electric Company (Meralco) is already scheduled next week to ink the shareholders agreement with partners in the project.

In an advisory-statement to the media, original project sponsor Aboitiz Power Corporation indicated that the pact signing with Meralco PowerGen Corporation (MPG) and Taiwan Cogeneration International Corporation (TCIC) will be on July 22, 2011 at the Lighthouse Marina Resort in Subic Bay.

“The signing will formalize the agreement of the three parties to develop a 600-MW circulating fluidized bed coal-fired power plant project within the Subic Bay Freeport Zone consisting of two 300-MW generating units,” the company said.

In the deal firmed up by the parties, Meralco PowerGen will assume majority stake in the coal project – an investment thrust that the company has always batted for with its prospective partners.

No direct statement from project partners yet if the deal will also cover off-take arrangement with Meralco on the electricity to be generated from the plant.

Apart from meeting the demand of its captive customers or those which will not have choice yet with the introduction of industry open access, Meralco is also excited on prospects that it may be able cater to contestable customers outside its franchise area once it decides to enlist as retail electricity supplier.

So far, the power utility firm enthused that this will be its “showcase venture” as it pursues vertical reintegration as investment strategy in the deregulated power industry.

For this segment of its investment, Meralco executives previously hinted that they will opt for cash infusion of P9.0 billion for their equity portion in the project.

The coal facility, which is currently placed under corporate vehicle Redondo Peninsula Energy Inc.; is a solution being aligned to beef up power supply in the Luzon grid by 2015.

“The new power facility is expected to augment the generation capacity in the Luzon grid. It will also help ensure the availability of efficient, adequate and reliable power to the grid and competitively priced power for customers,” it was noted.

In Meralco’s case, this will be part of its short-term investment which shall address its needs for additional supply that would be coming from a baseload generation facility. The first undertaking it has been pushing for would be a peaking facility which it anticipates coming on-line by next year.

The longer-term investment proposition for Meralco would be a facility that may run on indigenously-extracted natural gas or imported liquefied natural gas.

At this stage though, the prime consideration they have been weighing is how to set scale on such kind of investment and what would be the supply-demand scenario when the LNG facilities would finally come on stream.