Meralco subsidiary corners majority stake in San Miguel’s $3.3-B LNG project

The power investment arm of Manila Electric Company (Meralco) will corner the majority stake of more than 40-percent in the $3.3 billion integrated liquefied natural gas (LNG) project originally owned and developed by SMC Global Power Holdings Corp. (SMGP) of the San Miguel group.

According to SMGP, the joint venture of Meralco Power Gen (MGen) and Aboitiz Power Corporation will acquire 67% both in the existing 1,278-megawatt Ilijan gas plant and its 1,320MW gas-fired power facility expansion project, plus the supporting liquefied natural gas (LNG) import terminal; then leaving the balance of 33% as the remaining equity of SMC in the entire venture.

It was explained that of the 67% shareholdings divested by SMGP, the lion’s share of 60% is held by MGen and that will be equivalent to 40.2% stake in the acquisition; while 40% in the pie will be for Aboitiz Power and that will redound to 26.8 share in the asset purchase. MGen and Aboitiz will be incorporating a special purpose vehicle (SPV) for this merger and acquisition (M&A) deal.

The existing Ilijan plant is currently owned and operated by SMC subsidiary South Premiere Power Corporation (SPPC); while the expansion facility is under the conglomerate’s other corporate vehicle Excellent Energy Resources Inc. (EERI).

SMGP Chairman and President Ramon S. Ang regarded the tie-up  as a landmark deal as this will bring three leading power companies to work together “to secure our country's energy needs while transitioning towards cleaner power sources.”

The Ilijan expansion plant has a newly-awarded long term 15-year power supply agreement (PSA) that was awarded by Meralco following its conduct of competitive selection process (CSP) in January this year – and that came with a corresponding tariff of P7.1094 per kilowatt hour with fuel pass-through provision in the contract.

And for the existing Ilijan generating asset, another Meralco PSA was also awarded for P7.0718 per kWh rate; which will also have a duration of 15 years.

The acquisition is subject to the approval of the Philippine Competition Commission (PCC); while the agreed levelized cost of electricity (LCOE) for the Ilijan plants would need approval by the Energy Regulatory Commission (ERC) prior to pass-on to consumers.

San Miguel said the partner-firms have yet to agree also on which entity will eventually operate the power plants and the LNG terminal, given MGen's biggest shareholdings in the venture.

MGen Chairman Manuel V. Pangilinan labeled the acquisition as a “pathbreaking venture,” while emphasizing that “apart from transforming the energy landscape of the Philippines, this symbolizes a milestone alliance among major players in the energy industry towards a more sustainable future.”

This is already the second major power project with Meralco-underpinned long term PSA that was acquired by its subsidiary MGen – the first one was the mammoth Terra Solar power project which calls for the rollout of 3,500MW of solar plus 4,500-megawatt hour (MWh) of energy storage systems.

The partner-firms indicated that the 2,500MW of LNG capacities will be strategically aligned as flexible technology-coupling for the targeted massive scale renewable energy (RE) installations in the country onward to 2030-2040 timeframes, as cast under the Philippine Energy Plan.

As highlighted by AP Chairman Sabin Aboitiz, “this effort will not only meet the country's energy requirements but also support its environmental objectives by significantly lowering emissions.”

San Miguel similarly emphasized that “this initiative is seen to help boost energy security and steer the country towards a cleaner, more sustainable future in line with the Marcos administration’s push for more natural gas in the country’s energy mix.”

There had been no specific investment figures given for each of the partner-firms, although it was specified that the value of the integrated gas venture had been at more than $3.0 billion.

“MGen and AP will jointly invest in two of SMGP's gas-fired power plants—the 1,278 MW Ilijan power plant and a new 1,320 MW combined cycle power facility which is expected to start operations by the end of 2024 – and together with SMGP will invest in almost 100% of the LNG import and regasification terminal owned by Linseed Field Corporation,” SMC stressed.

It was expounded that the three companies “will acquire the LNG import and regasification terminal of Linseed Field Corporation,” which was originally developed by controversy-ridden AG&P.

San Miguel noted the import facility “will be used to receive, store and process LNG fuel for the two power plants, thus fully integrating the local energy sector into the global natural gas supply chain.