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2 SMC units submit lowest bids for 1,800-MW Meralco supply deal

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Two companies under the San Miguel group submitted the lowest bids during the competitive selection process (CSP) held by Manila Electric Co. (Meralco) for the supply of 1,800 megawatts (MW) of power in the next two decades starting 2024.

This comes as a network of civil society organizations, Power for People Coalition, has asked the Supreme Court to file a temporary restraining order against the distribution utility’s CSP.

In a press release Friday, Meralco said that the two “best” bids came from Excellent Energy Resources, Inc. (EERI) and Masinloc Power Partners Co. Ltd (MPPCL) which both offered a low levelized cost of electricity (LCOE). The two firms are subsidiaries of SMC Global Power Holdings Corp.

“EERI had a levelized cost of electricity (LCOE) of P4.1462 per kilowatt-hour (kWh) and Masinloc Power Partners Co. Ltd (MPPCL) offered P4.2605 per kWh. Both are significantly below the LCOE reserve price of P5.2559 per kWh,” Meralco said, citing the decision of its Third-Party Bids and Awards Committee (TPBAC).

EERI proposed to supply Meralco with 1,200 MW from the former’s natural gas-fired power plant, while MPPCL said that it would be able to provide the distribution utility with 600 MW from its coal-fired power plant.

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The offers of three other firms were identified as the “possible next best bids” by the TPBAC. These include the Mariveles Power Generation Corporation (MPGC), Atimonan One Energy Inc. (A1E), and GNPower Dinginin Ltd. Co. (GNPD), which had LCOEs of P4.3321 per kWh, P4.6338 per kWh, and P5.2500 per kWh, respectively.

St. Raphael Power Generation Corporation, which also submitted an offer, failed to meet the LCOE threshold as it offered a price of P5.4426 per kWh.

The LCOE would be used to compare power supply offers from various firms over a period of 20 years, Meralco Vice President and Head of Utility Economics Department Lawrence S. Fernandez said.

“Generation charges typically vary over time as a result of such factors as movements in fuel prices, exchange rates, inflation rates, etc. Thus, prices from a Power Supply Agreement will change over the term of a 20-year contract,” Mr. Fernandez told BusinessWorld in a text message on Friday.

“To more easily compare supply offers over a 20-year term, the offer price over the 20 years from each bidder is converted to an equivalent single or ‘levelized’ price of that bidder,” he added.

In a statement, TPBAC Chairman Ferdinand A. Domingo said that the committee managed the CSP according to all the rules set by the Department of Energy (DoE).

“The aforesaid bidders with the best bids will now undergo post-qualification within seven days from (today). Thereafter, the TPBAC shall issue respective notices of award in favor of those who satisfactorily passed post-qualification,” the TPBAC said.

The committee said the 2 bidders with the best bids were chosen after they passed a pre-qualification evaluation process.

Earlier, Meralco’s Mr. Fernandez said the deadline of bid submissions was on Jan. 27.

In a mobile message last month, he confirmed that there were 9 firms who submitted their documents on time.

“These represented an aggregate offered capacity of 5,850 MW. This total is more than three times the requirement of 1,800 MW,” Mr. Fernandez told BusinessWorld on Jan. 28.

PETITION FOR TRO

On Friday, the People for Power (P4P) Coalition, a network of civil society groups, filed a petition before the Supreme Court to issue a temporary restraining order against Meralco’s 1,800-MW CSP.

In a copy of the petition obtained by BusinessWorld, the P4P Coalition said that “the terms of reference for Meralco’s 1,800 MW tender are glaringly unfavorable for Meralco’s power consumers because did not comply with the DoE’s CSP Rules issued in 2018 and that they would not result in the least cost of electricity.”

“In 2019, Meralco released two tenders using, what it calls as, ‘prudent energy sourcing practices’ and ‘pro-consumer’ terms of reference, (such as) straight energy price with no automatic fuel pass-through and 100% guaranteed supply from all nominated power plants,” the P4P Coalition said in its petition.

“In 2020, Meralco released another tender for a 1,800 MW contract capacity, however, this time, reverting to old terms of reference that allow for electricity rates to fluctuate to as high as 32.4475 PhP/kWh (per kilowatt-hour), fuel costs to automatically pass-through to its electricity consumers, and power plant outages with costs reimbursable to electricity consumers,” it added.

Meanwhile, TPBAC chairman Mr. Domingo was quoted in Meralco’s press release as saying that the ongoing 1,800-MW CSP is seen to “provide an adequate and reliable supply of electricity at competitive rates to Meralco’s customers in the coming years.”

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has interest in BusinessWorld through the Philippine Star Group, which it controls.

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