““Bigness, economic clout, political connection mean greater power and being bigger, better, and best—the original BBB.”
It’s a battle of power blocs in the administration of President Bongbong Marcos Jr. (BBM). Politically, economically, and literally.
There are two major power blocs in the Philippines today—San Miguel Corp. and Aboitiz Equity Ventures, Inc.
Both are venerable companies. Business savvy made them big. Bigness made them control major sectors of the economy and also enormously politically connected.
Bigness, economic clout, political connection mean greater power and being bigger, better, and best—the original BBB.
Born 1890, SMC is 132 years old. The first Aboitiz arrived in the Philippines in 1870. San Miguel and Aboitiz have seen revolutions, wars, coups, People Power revolts, boom and bust times. They define what it means to be strong.
One other quality of both San Miguel and Aboitiz is that both seem to be politically resilient. They thrive and prosper, no matter where the political winds blow.
In 1983, while the Ferdinand Edralin Marcos administration was in the middle of its gravest political crisis, his long-time friend and ally, Eduardo M. Cojuangco Jr., bought 51 percent of San Miguel Corp. from the Zobel-Ayala and Soriano families.
ECJ bought 20 percent using his own money and another 31 percent using the pooled funds of coconut planters deposited with the United Coconut Planters Bank. Which ECJ funded and controlled.
Under President Corazon Aquino, her energy secretaries came from the Aboitiz Group, if not from the Aboitiz family itself. Today, under President BBM, the energy secretary has again come from—Aboitiz, of course.
Under President and CEO Ramon S. Ang, SMC has scaled heights no one could imagine before.
With P1.4 trillion in annual sales and P70 billion in annual profits, SMC is now dominant in nine major industries—fuel and oil, beer and beverages, power generation, infra and tollways, packaging, airports, water, resorts, and auto distributorship.
No one comes close. But many are playing catchup, like the Aboitiz family.
AEV has P328 billion in market value, P747.5 billion in assets, P65 billion in EBITDA or free cash, and P20 billion in annual profits. Most of the profits (52 percent) comes from power, with banking (Union Bank) contributing 31 percent, real estate 12 percent, and infra four percent.
So far, under the Marcos II administration, Aboitiz has the upper hand.
It seems. BBM’s chief economic adviser from the private sector is Sabin Aboitiz, 58. US-educated (Gonzaga University, Spokane, Washington, USA), he is the president and CEO of Aboitiz Equity Ventures, Inc., the publicly listed holding company of the Aboitiz family which they own 52 percent thru Aboitiz and Co.
As AEV CEO, Sabin makes only P5 million a year and claims he has no positions in government.
Sabin is chairman of two powerful AEV subsidiaries—Aboitiz Power Corp., the power generation and distribution company (it is the dominant electric generation and retailing company in the Visayas and Mindanao), and of Aboitiz Infracapital, the group’s infrastructure company.
Aboitiz intends to double its energy generation capacity to over 9,000 megawatts by 2030 by going heavily into renewables.
On the other hand, SMC nationwide has 19 percent of the Philippines’ total generation capacity. It will also go into renewables in a big way—storage battery, wind, solar, and waves.
An old adage of the Aboitiz family is go into any business where money can be made.
Accordingly, the family has noted that power (generation and distribution) and infrastructure are top moneymakers.
Power and infra are also the top moneymakers of the San Miguel group. Hence, their intense rivalry—in the business and in the bid for so-called regulatory capture.
BBM’s Energy secretary, Rafael “Popo” Lotilla, was an independent director of Aboitiz Power until July 11, 2022.
Popo’s appointment became controversial when the Department of Justice took the unusual step of ruling “Lotilla does not fall within the prohibition under Sec. 8 of the DOE law: “No officer, external auditor, accountant, or legal counsel of any private company or enterprise primarily engaged in the energy industry shall be eligible for appointment as Secretary within two years from his retirement, resignation, or separation therefrom.”
That may be so. But in business as in politics, perception is reality.
Under the Department of Energy is the Energy Regulatory Commission which by the way is also headed by a former Aboitiz executive.
SMC is seeking relief before the ERC for unfair terms imposed on it (by recent developments and by the government itself) for its power pricing.
According to Dax Lucas of the Inquirer, the decision on the joint petition by power distributor Meralco and power generation firms for a temporary rate increase to mitigate skyrocketing global fuel prices brought on by the Russia-Ukraine conflict is due soon.
A perceptive business writer, Dax explains: “The generation facilities–the Sual coal power plant and Ilijan gas plant, both under SMC Global Power Holdings—supply 1,000 megawatts or over 20 percent of Meralco’s total contracted capacity.
“They do so under a consumer-friendly fixed rate power supply agreement, which basically means unlike other power generation facilities, they do not pass on additional costs to consumers.
“Hence, even as global prices of coal and other fuels have gone up incredibly since last year, the plants have been absorbing all the fuel increases—partially mitigating the impact to consumers.
“(But) the increases have gotten so well beyond the initial projections set in the PSAs in 2019, that, if no temporary relief is given, the generation firms will have no choice but to terminate the PSAs.
“They are of course legally allowed to do so, as the PSAs have provisions for termination, one of which is a material ‘change in circumstances’.”