BIZ BUZZ: SMC haters gonna hate
Once more, critics of San Miguel Corp. (SMC) are taking the opportunity presented by its termination of two other power supply agreements with Manila Electric Company (Meralco) to criticize the conglomerate for “having bitten off more than it can chew” —a familiar line used regularly by its haters from power industry rivals and regulators.
We’re talking about last week’s decision of San Miguel to cancel the deal to supply Meralco 1,800 megawatts of electricity from new power plants that will start operating in 2024.
Once more, the line being promoted by San Miguel’s haters is that the conglomerate won those contracts with “unreasonably low” bids and, as such, it must now make good on its commitment despite the change in market circumstances brought about by the pandemic and the global market turmoil.
Here’s the thing the critics have conveniently failed to mention though: San Miguel entered into these two contracts with Meralco in March 2021. And in the two years since, the Energy Regulatory Commission (ERC) has yet to give its approval for the agreements (a necessary precondition before they can be implemented). The regulator basically dribbled the ball for two years, running the clock down, to use basketball terms.
But under these contracts —Section 18.6.2(a) governing termination clauses, to be exact—San Miguel has the right to unilaterally terminate its power supply deals with Meralco if energy regulators fail to approve them six months after both parties seal the deals. And it’s explicitly stated that neither party will be liable for such termination, and no penalties will be imposed.
We’re not sure why the ERC allowed that time to lapse, but they also could have given the green light to those deals anytime from then until now, including the nine months that the current ERC leadership has so far served. But no such thing happened.
In the past, it was not uncommon for the ERC to order the amendment contracts before giving their go signal. That hasn’t happened yet, but Biz Buzz hears that San Miguel wasn’t keen on waiting around any longer for potentially unfavorable contract revisions that the regulator may order to be rammed down its throat, given the recent history of adverse ERC rulings.
So, no, San Miguel’s termination of the contracts isn’t because of unfavorable terms. It’s because the regulator failed to act on them expeditiously, our sources explained.
As for Meralco, it will now have to open bidding once more for 1,800MW of “greenfield” power supply for 2024. Once that happens, and unless the energy landscape changes dramatically soon, our sources say that the parties who will be eligible to bid for the new power supply deals under new and more current terms will be San Miguel and Aboitiz. Now that’s interesting.
—Daxim L. Lucas
Antitobacco smuggling moves facing headwinds
Those who are moving heaven and earth to stop the unabated smuggling into the country of agricultural products are surprised over the particularly fierce opposition to moves to include tobacco products in the fight.
This was made apparent by attempts behind closed doors to prevent House Bill No. 3917 of Reps. Sandro Marcos and Margarita Nograles from seeing the light of day.
To recall, HB 3917 seeks to strengthen and expand the coverage of Republic Act No. 10845, which classifies large-scale smuggling of commodities such as sugar, corn, pork and vegetables as economic sabotage, with a minimum penalty of P1 million and imprisonment of not less than 17 years.
Under the proposed measure, coverage will be expanded to include raw and finished tobacco, smuggling of which is estimated to have been depriving the country of P60 billion a year in revenues.
So who will benefit from not including tobacco in the proposed bills? Clearly, it’s the smugglers and others who gain from the illicit entry that harms the government, private sector and, more importantly, the tobacco farmers.
