Meralco (Photo credit: Wikipedia)Manila Electric Co. (Meralco), the country’s largest power distributor, has secured 90 percent of its electricity needs for its customers over the next seven years.The roughly 2,900 megawatts (MW) in capacity will be cheaper than existing power deals and guarantee customers of reliable supply, company executives said.
“Meralco has signed new highly cost-effective, long-term power supply agreements with various generators for capacities up to 2,880 MW,” the company said.
“This is an integral part of the company’s strategy for helping contain power costs to consumers,” it added.
Specifically, power supply deals were finalized with Consunji-led SEM-Calaca Power Corp., Masinloc Power Partnerss Co. Ltd., Aboitiz-led Therma Luzon Inc., South Premiere Power Corp. and San Miguel Energy Corp.
Meralco will mostly source its electricity requirements from coal power plants, save for South Premiere’s natural gas and diesel plant.
Meralco president and CEO Oscar Reyes said the committed capacity accounts for 90 percent of Meralco’s needs.
The power contracts will give Meralco “some degree of stability until 2019,” Reyes said, adding that the new contracts are cheaper by roughly P1 per kilowatt-hour (kwh) compared with existing supply deals.
The new power supply agreements, without accounting for fuel price escalation, will average at P4.67 per kwh in 2013, lower than the P5.48 per kWh under existing contracts.
However, Meralco said the cheaper electricity might be tempered by higher prices at the Wholesale Electricity Spot Market (WESM).
“Our concern is the balance that we have not contracted...that is largely driven by WESM,” Reyes said.
Demand from customers has been increasing on the back of robust economic growth in the Meralco franchise area.
Consolidated customer accounts rose 3.7 percent to a record 5.11 million as of end-June as the company added 88,391 new customers from the start of the year.
In June, Meralco posted a new record high in sales at 2,942 gigawatt-hours (gwh), eclipsing the 2,776 gwh in June 2010 during the election season, Reyes said.
“What is foremost on our mind is the tightness in power supply,” said Meralco chairman Manuel V. Pangilinan, adding that this could lead to higher prices in the WESM.
Meralco, which is indirectly controlled by Hong Kong-based First Pacific Co. Ltd. and partly owned by San Miguel Corp., is looking to build its own power plant to ensure supply.
Meralco PowerGen Corp. is building a 600-MW coal-fired power plant in Subic, Zambales in partnership with Aboitiz Power Corp. and the local unit of Taiwan Cogeneration International Corp. The project is under the RP Energy Inc. consortium.
“The site preparation is almost complete,” said RP Energy president Aaron Domingo.
“We have finished the technical discussions [with the contractor] and we are now proceeding with the commercial discussions, which we expect to conclude by end of August,” Domingo said.
However, there were reports that the Supreme Court has issued a writ of Kalikasan against the coal plant.
“RP Energy has 10 days to file its verified response upon formal receipt of the order/writ and we will do so within the time frame allotted,” the company said in a statement.
“We respect the process and are mindful of the rights of those who filed the petition,” it added.
Meralco’s core net income, which strips out currency and derivatives-related items, surged 15 percent to P9.02 billion in the first half from P7.82 billion a year ago.
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