Meralco allots $2 billion for power generation

MANILA, Philippines - Manila Electric Co. (Meralco) is planning to spend around $2 billion to put up about 1,500 megawatts (MW) of new capacities to ensure a reliable supply of power within its franchise area in the medium-term.

Meralco president and CEO Manuel V. Pangilinan told reporters that the company is now in the process of putting up a new subsidiary, Meralco Power Generation Co. (MPGC), to handle its entry into the power generation business.

He said Meralco’s board approved last Friday the company’s plan to construct the 1,500 MW power facilities within the next six years. Initially, a 500-MW peaking plant will be put up within the next two years.

The Meralco chief said they are eyeing to build coal-fired power plants as these, at the moment, appear to be the most cost-effective source of energy.

Meralco senior executive vice president and COO Oscar Reyes noted that they hope to incorporate the power generation arm before the end of the year.

He also said they are now talking with several possible partners for this endeavor. “We have discussions with a number of companies. They have submitted proposals to us. We are currently looking at these proposals and would accept those that would offer the best benefits to the company and our customers.”

Pangilinan said they are bent on putting up their own power facilities to lower costs, adding they would be satisfied if they would receive offers which could bring down generation cost to below P5 per kilowatthour.

On financing these proposed power projects, Pangilinan said they would likely raise funds both through equity and debts. But he noted that the company is very well-positioned to invest on these power projects, especially now that it has cash on hand of P20 billion as of end-September 2010.

According to Pangilinan, tapping strategic partners would also spread the risks for the company.

He, however, pointed out that they would want to maintain majority control of the power generation arm to be able to keep up with the commitment to lower power costs.

Meralco has not engaged in building power facilities since 1979 when it ceased operations of the old Rockwell plant in Makati.