By Sheldeen Joy Talavera, A reporter
The PHILIPPINE Competition Commission (PCC) on Monday said it has approved a landmark $3.3-billion deal between three energy giants, allowing them to proceed with their acquisition of a joint power plant and a liquefied natural gas (LNG) plant in Batangas, but subject to certain conditions.
In a statement on Monday, the PCC said it has cleared the joint acquisition of two gas-fired power plants and an LNG terminal by Meralco PowerGen Corp. (MGen), Therma Natgas Power, Inc. (Therma), and San Miguel Global Power. Holdings Corp. (SMGP).
“This agreement, which is considered important in strengthening the supply of electricity in the country, is subject to conditions aimed at ensuring fair competition and promoting transparency,” said the competition infrastructure.
MGen is the power generation arm of Manila Electric Co. (Meralco) while Therma is a wholly owned subsidiary of Aboitiz Power Corp. (AboitizPower), through Therma Power, Inc. (TPI). SMGP is the energy arm of conglomerate San Miguel Corp.
Under the $3.3-billion agreement, MGen and AboitizPower will jointly invest in two SMGP power plants: the 1,278-megawatt (MW) Ilijan power plant and a new 1,320-MW combined cycle power plant.
The three companies will also invest in an LNG import and regasification terminal, owned by Linseed Field Corp., in Batangas.
In a joint statement, MGen, AboitizPower, and SMGP welcomed the approval of the PCC, saying the transaction is expected to “enhance the country’s energy security and infrastructure.”
“The companies expressed their appreciation for the PCC’s thorough review process and reaffirmed their shared commitment to developing a competitive energy market that brings real benefits to Filipino consumers,” the energy giants said.
With the approval, the companies said they were willing to comply with all the requirements of the law and promised to “closely cooperate with the stakeholders to align their efforts with the government’s energy goals.”
“This partnership highlights the shared vision of MGen, AboitizPower, and SMGP to address the growing energy needs of the Philippines while promoting transparency, fairness, and long-term sustainability in the energy sector,” the companies said.
However, the PCC said it had identified “competitive concerns” during the review of the major agreement, “including the risk of cooperation in the national electricity generation market and the closure of electricity supply agreements with electricity distribution companies.”
The PCC said the “last” parent companies – Pilipinas Enterprise Management Holdings, Inc.; Aboitiz & Company, Inc.; and Top Frontier Investment Holdings, Inc. — sent “voluntary commitments” on Oct. 18 to address these competition issues.
The obligations were reviewed by the PCC, taking into account the comments of stakeholders, industry stakeholders, the Department of Energy (DoE), and the Energy Regulatory Commission (ERC).
The PCC said it approved the companies’ resulting voluntary commitments on December 20, noting that the conditions are “essential to maintaining a competitive market.”
“Key safeguards include the PCC’s oversight of the Competitive Selection Process (CSP) to ensure that electricity supply contracts are awarded through a transparent and competitive bidding process. This scrutiny is aimed at avoiding conflict or improper practices,” he said.
“Acquired companies must also operate independently of their parent companies, with strict measures to separate IT systems, offices, and management to prevent collusion or undue influence.”
The board of directors of these companies should include independent members, while internal trading institutions should operate independently of their subsidiaries, the PCC said.
The PCC also directed power plants to submit reports on unplanned outages within seven reporting days to the DoE to improve transparency. Competitive electricity market reports must also be “shared” with the PCC.
The parent companies are also required to appoint a competition compliance officer to monitor compliance with these obligations, the infrastructure said.
“The PCC will liaise with the DoE and the ERC on the conditions laid down, and coordinate the compliance of existing guidelines with policies and competition law and policy to prevent competition concerns that may arise from similar transactions,” it said.
The PCC said the conditions would remain in place for five years, with the possibility of an extension depending on market conditions. Violation of the law may result in a daily fine of up to P2 million per violation, among others.
Asked for comment, ERC Chairperson and Chief Executive Officer Monalisa C. Dimalanta said the commission has yet to receive a copy of the transaction approval.
“It is important for us to review the terms of this authorization so that we can ensure and ensure the continued compliance of the organizations with the relevant provisions of EPIRA (Electric Power Industry Reform Act),” he said in a Viber message.
“We hope that the approval by the PCC points the way forward to address these concerns,” he added.
Terry L. Ridon, public investment analyst and convener of InfraWatch PH, said the launch of the LNG plant should ensure stable and affordable electricity supply amid growing demand in the country.
“However, it should be one of the many sources of energy for our needs, since LNG remains subject to fluctuations in world prices, and it would be very good for the country to be proud of the mix of energy from many sources, with a clear preference for renewables,” he said in a Viber message.
Juan Paolo E. Colet, managing director at China Bank Capital Corp., said the approval of the PCC “paves the way for greater investment in our country’s energy infrastructure that hopefully translates into lower electricity prices.”
“The government clearly recognizes the importance of LNG in diversifying the country’s electricity and ensuring energy security,” he said via Viber.
Mr. Colet said SMGP will benefit from an improved balance sheet and availability of resources for its other funds.
Meralco’s majority owner, Beacon Electric Asset Holdings, Inc., is a subsidiary of PLDT Inc.
Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund owned by MediaQuest Holdings, Inc., has an interest in it. BusinessWorld by using the Philippine Star Group, which controls it.
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