Meralco sees big savings from changes in IPP deals

Manila Electric Co., the Philippines’ largest power distributor, said yesterday it expected savings of about P44 billion from changes in its power supply contracts with independent power producers (IPPs).

In a disclosure to the Philippine Stock Exchange, Meralco said it had renogotiated its power supply contracts with private firms First Gas Power Corp., FGP Corp. and Quezon Power Philippines Ltd.

It said Meralco and the three firms "had already commenced the drafting of the renegotiated terms and conditions into formal amendments to the power supply contracts."

"We are hoping that the amendments to the contracts could be signed and presented to the Energy Regulatory Commission for approval not later than the end of the year," Meralco said.

The news buoyed Meralco shares yesterday.

Its A-shares, restricted to Filipinos, leapt five percent or 0.75 centavos to P15.75 and its B-shares, open to foreigners, rose 2.15 percent or 50 centavos to P23.75.

Ivanna de la Peña, head of utility economics of Meralco, said the company buys about 60 percent of its power requirement from state-controlled National Power Corp. (Napocor) and 40 percent from IPPs.

Meralco signed a 25-year supply deal with First Gas, FGP Corp. and Quezon Power in the 1990s.

The utility started talks to revise its IPP contracts last year after Napocor succeeded in lowering its electricity costs by renegotiating contracts with private firms.

The Philippines has some of the highest power prices in Asia largely because of deals struck between the government and power producers in the early 1990s that resulted in hefty pass-through charges to customers as supply outstripped demand following the Asian financial crisis.