PCC greenlights USD 3.3B LNG deal

The Philippine Competition Commission (PCC) on Monday said it has approved the USD 3.3-billion landmark deal among three energy giants, allowing them to proceed with their joint acquisition of power facilities and a liquefied natural gas (LNG) facility in Batangas, but subject to certain conditions.

In a statement on Monday, the PCC said it has greenlit 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).

“The deal, which is considered critical for strengthening the country’s energy supply, is subject to conditions aimed at ensuring fair competition and promoting transparency,” the competition watchdog said.

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 power arm of conglomerate San Miguel Corp.

Under the USD 3.3-billion deal, MGen and AboitizPower will jointly invest in two of SMGP’s gas-fired power plants: the 1,278-megawatt (MW) Ilijan power plant and the new 1,320-MW combined cycle power facility.

The three companies will also invest in the LNG import and re-gasification terminal, owned by Linseed Field Corp., in Batangas.

In a joint statement, MGen, AboitizPower, and SMGP welcomed PCC’s approval, saying that the transaction is expected to “boost the country’s energy security and infrastructure.”

“The companies expressed their appreciation for the PCC’s thorough review process and affirmed their shared commitment to advancing a competitive energy market that delivers real benefits to Filipino consumers,” the energy giants said.

With the approval, the companies said they are committed to complying with all regulatory requirements and pledged to “collaborate closely with 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 has identified “potential competition concerns” during its review of the mega-deal, “including risks of coordination in the national power generation market and foreclosure in power supply deals with distribution utility companies.”

The PCC said the “ultimate” parent companies — Pilipinas Enterprise Management Holdings, Inc.; Aboitiz & Company, Inc.; and Top Frontier Investment Holdings, Inc. — had submitted “voluntary commitments” on Oct. 18 to address these competition concerns.

The commitments were reviewed by the PCC, taking into account comments from stakeholders, industry players, Department of Energy (DoE), and the Energy Regulatory Commission (ERC).

The PCC said it approved the companies’ resulting voluntary commitments on Dec. 20, noting that these conditions are “vital to maintaining a competitive market.”

“Key safeguards include PCC oversight of the Competitive Selection Process (CSP) to ensure power supply agreements are awarded through a transparent and competitive bidding process. This oversight aims to prevent collusion or unfair practices,” it said.

“The acquired companies must also operate independently of their parent companies, with strict measures to separate IT systems, offices, and management to prevent coordination or undue influence.”

These companies’ board of directors should include independent members, while internal trading units should operate independently of affiliates, the PCC said.

The PCC also directed power plants to submit reports on unplanned outages within seven days of reporting to the DoE to promote transparency. The competitive retail electricity market reports should also be “shared” with the PCC.

Parent companies are also required to appoint a competition compliance officer to monitor the fulfillment of these commitments, the watchdog said.

“The PCC will communicate to DoE and ERC the conditions imposed, as well as coordinate on the alignment of existing guidelines and policies with competition law and policy to curb competition concerns that may arise from similar transactions,” it said.

The PCC said the conditions will remain in effect for five years, with the possibility of an extension depending on market conditions. Violations could result in daily fines of up to P2 million per infraction, among others.

Asked for comment, ERC Chairperson and Chief Executive Officer Monalisa C. Dimalanta said the commission has yet to receive the copy of the approval of the transaction.

“It is important for us to review the conditions of such approval so we can also verify and validate continuing compliance by the parties with relevant provisions of the EPIRA (Electric Power Industry Reform Act),” she said in a Viber message.

“We trust that the PCC’s approval signals a way forward that addresses these concerns,” she added.

Terry L. Ridon, a public investment analyst and convenor of think tank InfraWatch PH, said that the launch of the LNG facility should ensure stable and affordable power supply amid growing demand in the country.

“It should, however, be just one among the many sources of power for our needs, as LNG remains subject to global price fluctuations, and it would be best that the country boasts of an energy mix from multiple 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 that PCC’s approval “paves the way for a massive investment in our country’s energy infrastructure that hopefully translates to lower energy prices.”

“The government clearly recognizes the importance of LNG in diversifying the country’s power supply and ensuring energy security,” he said via Viber.

Mr. Colet said that SMGP stands to benefit through an improved balance sheet and the availability of resources for its other investments.

Meralco’s majority owner, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls. – Sheldeen Joy Talavera, Reporter