San Miguel Corp. power unit SMC Global Power Holdings Corp. said Monday two of its power plants suffered combined losses of P15 billion since 2021 amid skyrocketing global coal prices and supply restrictions from the Malampaya natural gas field.
SMC said it sought a temporary and partial cost recovery relief from the Energy Regulatory Commission for the losses it incurred from January to May this year amounting to P5.2 billion.
This will be in the form of a rate increase on its contract capacity under power supply agreements with Manila Electric Co., which will be amortized over six months.
The losses were incurred by SMC’s 1,200-megawatt Sual coal plant in Pangasinan and the 1,200-MW Ilijan combined cycle natural gas plant in Batangas.
SMC president and chief executive Ramon Ang said the company decided to absorb more than P10 billion in losses last year, which it did not file a claim for, considering the difficulties the country was experiencing from the pandemic.
“Unfortunately, those prices have increased by over 500 percent since then. We are not asking to recover all our losses, and neither are we asking for a permanent increase. We want to continue supplying Meralco with baseload power. What we are asking for is just a temporary and equitable relief to allow the power facilities to survive this difficult period and continue supplying power to Meralco,” Ang said.
SMC asked the ERC for a rate increase from January to May of P0.80 per kWh, or from P4.30 per kWh to P5.1 per kWh, for 670 MW of its contracted baseload capacity from the Ilijan plant and an average of P4 per kWh, from P4.30 to P8.30 per kWh, for 330 MW of its contracted baseload capacity from the Sual plant.
It said that assuming that the ERC granted the cost recovery claim, the net rate impact to Meralco would be P0.28 per kWh over six months.
Ang said the continuing spikes in commodity prices were unprecedented and became untenable.
“We have taken it upon ourselves to absorb over P10 billion in losses last year when coal prices reached an average of $176 per MT. Apparently, coal prices were just at $60 to $65 per MT when we entered into these PSAs,” Ang said.
“In fact, the widely held outlook at that time is that coal prices will even continue to go down because of a global shift in the energy mix. Well, due to various reasons, coal prices have continued to climb in 2021, and have recently reached unprecedented levels, as high as $440 per MT, as triggered primarily by the Russia-Ukraine conflict,” Ang said.
Coal prices averaged $176 per metric ton in the second half of 2021, up from just $99 per MT in the first half of the same year. The average coal price in 2019 and 2020 was only $69 per MT.
Coal prices in the global commodities markets breached the $400 per MT level, way beyond the $60 per MT to $65 per MT price range and long-term outlook contemplated at the time of SMC Global’s power supply agreements with Meralco in 2019.
SMC said the temporary relief would allow the power generation facilities to continue sourcing the necessary fuel and operate viably.
