San Miguel Corp. said Friday power subsidiary SMC Global Power Holdings Corp. will weather the financial challenges following the denial by the Energy Regulatory Commission of its petition for temporary relief from its fixed-rate power supply agreements with Manila Electric Co.
“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, SMCGP will continue to be fully-compliant with its financial covenants at all times,” SMC president and chief executive Ramon Ang said.
Ang said the company remained fundamentally strong, with a sound strategy to manage all financial covenants and obligations, even as it pursues expansion and transition to battery energy storage system and cleaner power technologies.
He assured investors and bondholders of SMC’s power unit that the ERC decision, while significantly impacting two power facilities with fixed-rate PSAs, would have no adverse implication on a consolidated basis for SMCGP.
Ang said the ERC decision was “unfortunate,” but “SMCGP remains in a stable position to navigate these circumstances.”
“We have never been more confident of the fundamental strength of our businesses,” Ang said.
Ang said that as of June 2022, SMCGP no longer needed to pay P12 billion per annum in capital lease payments under its independent power producer administration contract for the 1,200-megawatt Ilijan natural gas plant in Batangas. He said this would have a full-year positive impact on the company in 2023 and provides “a lot of financial flexibility” whether it opts for capital expenditure, refinancing, or paying down debt.
Ang also said SMCGP would realize at least P8 billion to P10 billion in earnings before interest, taxes, depreciation and amortization from the BESS projects by next year.
SMCGP said it would also no longer make capital lease payments of about P14 billion per year under its 1,200-MW Sual coal power plant IPPA, effective October 2024.
Meanwhile, SMC Global Power said its subsidiaries would collect the deferred generation charges for November and December 2013 billing period in the wake of a Supreme Court ruling.
SMGCP said in a disclosure to the Philippine Dealing and Exchange Corp. that it received on Oct. 18 from its legal counsel the notice issued by the SC en banc, which directed that the entry of judgment on the issue. The SC nullified the Energy Regulatory Commission order imposing regulated prices at the Wholesale Electricity Spot Market for the supply months of November and December 2013.
“After such entry of judgment is made, South Premiere Power Corp., San Miguel Energy Corp. and Masinloc Power Partners Co. Ltd., all wholly-owned subsidiaries of the corporation, will be able to proceed with the collection of the deferred charges for November and December billing periods from Meralco under their respective power supply agreements,” it said.
