Cleared

This has to be good news for all consumers expecting a reliable and stable power supply for our economy in the coming years.

The Philippine Competition Commission (PCC) cleared the joint acquisition of power facilities and a liquefied natural gas terminal (LNG) by three energy giants. The PCC exercises oversight over mergers and partnerships by large corporations to check against monopolistic behavior endangering consumer interests.

The three energy giants involved in this acquisition are: Meralco PowerGen Corporation (MGEN), Therma Natgas Power Inc. (Therma) and the San Miguel Global Power Holdings Corporation (San Miguel Power). The deal is considered critical for strengthening the country’s energy supply. The PCC ensures that the unique arrangement ensures fair competition and promotes transparency.

This transaction involves MGEN and Therma, through their joint venture (Chromite Gas Holdings Inc. (Chromite) acquiring a 67-percent interest in South Premiere Power Corporation (SPPC), Excellent Energy Resources Inc. (EERI) and Ilijan Primeline Industrial Estate Corporation, all heretofore controlled by San Miguel.

In addition, MGEN and Therma (through their joint venture Chromite), along with San Miguel Power will jointly acquire 100 percent of Linseed Field Corporation (LFC). The company operates the LNG terminal in Batangas City.

As a result of this deal, MGAN and Therma, by way of their 60/40 ownership of Chromite, will control SPPC, EERI and Ilijan Primeline. San Miguel Power retains a 33 percent stake in the three companies. San Miguel Power gains a corresponding interest in LFC.

During the review process, the PCC identified a number of competition concerns. These include risks of coordination in the national power generation market and foreclosure in power supply deals with the distribution utility companies.

To address these competition concerns, the ultimate parent companies of the firms involved in the tripartite acquisitions submitted voluntary commitments last October to address the regulator’s concerns. The ultimate parent companies who signed the voluntary commitments are: Pilipinas Enterprise Management Holdings Inc. (PEHMI), Aboitiz & Company Inc. and Top Frontier Investment Holdings Inc.

The voluntary commitments were reviewed and validated by the PCC in consultation with industry players, stakeholders and other government agencies such as the Department of Energy (DOE) and the Energy Regulatory Commission (ERC). The energy sector is a thoroughly regulated section of the economy with the goal of ensuring competitiveness and protecting consumer interests.

On the basis of extensive consultations, the PCC approved the voluntary commitments on Dec. 20, 2024.

In approving the tripartite deal, the PCC recognized that this transaction supports the country’s energy security. However, the Commission is not completely relying on the voluntary commitments of the three parties involved in this deal. The PCC outlined additional safeguards to protect our energy consumers.

The PCC will exercise oversight on the Competitive Selection Process (CSP) to further ensure power supply agreements are awarded through a truly transparent and competitive bidding process. The government regulatory agency takes it upon itself to ensure that no collusion or unfair practices happen among the partners to this deal.

The acquired companies are also required to operate independently of their parent companies. Strict measures will be imposed to ensure separate IT systems, offices and management to prevent coordination or undue influence.

PCC wants the boards of directors of the acquired companies to include independent members. The commission will likewise ensure internal trading units will operate independently of affiliates.

To further promote transparency, the power plants are required to submit reports on unplanned outages to the PCC within seven days of reporting to the DOE. In addition, the Competitive Retail Electricity Market (CREM) reports must henceforth be shared with the PCC.

The parent companies are required to appoint a competition compliance officer to monitor full compliance with all the conditions set forth.

The PCC will communicate to DOE and ERC the specific conditions that it attached to the approval of the deal. The Commission will coordinate on the alignment of existing guidelines and policies with competition law to curb competition concerns that may arise from similar transactions in the future. To be sure, the framers of our original competition law could not have anticipated all the business permutations possible.

All the conditions mentioned above will remain in effect for five years with possible extensions, depending on market conditions. Any violation could result in up to P2-million daily fines per infraction until the errant entity is fully compliant. Other additional penalties and sanctions are prescribed.

Tough as the safeguards may sound, the PCC argues they are necessary to strike a balance between encouraging investments in critical energy infrastructure and ensuring a fair and competitive market that benefits consumers, businesses and the national economy. The approval of this tripartite deal proves the PCC is not an unwarranted hurdle to new investments.

The regulatory agency is, in fact, a partner for improving the country’s energy horizon.

P59:$1

Most banking analysts are forecasting the peso to remain within the P59:$1 range through the whole of 2025.

This might seem like bad news for those who are somehow hoping the peso will strengthen enough to help bring down inflation and make crucial imports – such as food and energy – more affordable. But the exchange rate is determined by a multitude of powerful economic and geopolitical forces that no single entity can override.

What the forecast exchange rate indicates is that inflation will continue to be a concern in 2025.