SMC Global Power Holdings Corp. and its subsidiaries will continue to service its loans and debt despite the Energy Regulatory Commission’s rejection of a joint petition with Manila Electric Co. for a rate increase.
“Based on the company’s internal evaluation, SMCGP and its subsidiaries will remain compliant with its financial covenants under all existing loan agreements and other debt instruments,” parent firm San Miguel Corp. said in a disclosure to the stock exchange.
The ERC issued orders denying joint motions for price adjustment filed by Meralco and South Premiere Power Corp. in ERC Case No. 2019-081 and by Meralco and San Miguel Energy Corporation in ERC Case No. 2019-083, under their power supply agreements dated Sept. 13, 2019.
The ERC orders were dated Sept. 29 and received by SPPC and SMEC, respectively, via electronic mail on the evening of Oct. 3.
“Nonetheless, these are not expected to have a material adverse effect on the consolidated financials of the Company and as well as in the operations and financials of SMCGP and its subsidiaries,” SMC said.
The ERC orders stated that any termination of the PSA would take effect 60 days from receiving the ERC orders.
SMC said that within these 60 days, SMEC and SPPC are required to continue to supply power to Meralco “at a cost higher than the contracted price under the PSAs.”
“Nevertheless, SPPC and SMEC will continue to explore other legal remedies relating to the ERC orders,” the company said.
It said that once the PSAs were terminated, SPPC and SMEC would have to sell their power to the Wholesale Electricity Spot Market, the trading floor of electricity, and enter into bilateral contracts with other off-takers, the pricing of which would be market-based.
SMC said this would provide better financials and economics for SMCGP on a consolidated basis.
SMC sought to recover P5 billion worth of losses arising from the unprecedented increase in coal prices and the gas constraints from the Malampaya gas project in northwest Palawan, equivalent to P0.30 per kilowatt-hour over six months.