San Miguel Corp. (SMC) will have a windfall of over P30 billion annually with the end of amortizations for its Ilijan and Sual power plants in the next two years—more than enough buffer to cover losses from its fixed price power supply deals—the conglomerate’s head said.
According to San Miguel president and CEO Ramon Ang, capital lease payments for its 1,200-megawatt Ilijan combined cycle plant ended in June of this year, thus freeing up P12 billion in cash.
Capital lease payments for the 1,200-MW Sual coal-fired power plant will also end by October 2024 and also free up an additional P14 billion in cash.
“With these two developments alone, we already have more than enough to cover the losses from the power supply agreements with Meralco, assuming the worst case scenario remains for the next seven years,” he said, adding that it’s unlikely that circumstances contributing to high fuel prices will not improve until 2029.
“So it’s really not a problem for us,” he said, adding that the conglomerate is also expecting additional windfall from four greenfield power plants which will begin operations between next year and 2025. “Remember that we are still facing a power shortage, so demand for electricity from these plants will be high.”
After ERC decision
Ang made the statement to address concerns about the conglomerate’s finances after the Energy Regulatory Commission (ERC) rejected a joint San Miguel-Meralco petition for regulatory relief to allow both firms to raise their electricity prices.
San Miguel, in particular, said it had so far lost P15 billion due to its 10-year fixed-price supply contract which it entered into with Meralco in 2019. This was because energy prices spiked early this year after Russia invaded Ukraine, causing the cost of coal to rise from $60 per ton to over $400 per ton.
Ang said that, even as the conglomerate will be able to weather the financial challenges brought about by the unlikely worst-case scenario, it is incumbent upon him to obtain the best financial terms for San Miguel’s shareholders.
“I have a fiduciary responsibility to all my stockholders, big and small, to get the best possible financial results for them,” he said.