METRO PACIFIC Investments Corp. Chief Finance Officer David J. Nicol said the group is assessing options for a liquefied natural gas (LNG) power plant owned by its unit Manila Electric Co. (Meralco) and parent First Pacific Ltd. in Singapore, where a surplus in power capacity has put a pressure on prices.
A unit of Manila Electric Co. (Meralco) and Hong Kong-based First Pacific Ltd teamed up in 2013 to buy a 70% stake in GMR Energy (Singapore) Pte. Ltd, which owned a 800-megawatt (MW) LNG power plant, for $488 million. GMR Energy (Singapore) was then renamed to PacificLight Power Pte. Ltd. after the acquisition.
Addressing rumors that they might sell the Singapore plant, Mr. Nicol noted there is no decision on the matter. MPIC is parent of Meralco and the Philippine unit of First Pacific.
“I think that there is a lot of surplus capacity in the Singapore market… and the power detector responded that there’s now so much that prices are difficult, that it’s hard to see anybody in the market making money and so I think there’s some talk of combining to try to reduce the surplus of capacity,” Mr. Nicol told reporters after the company’s annual shareholders’ meeting last week.
“We have several different offers, we haven’t made a choice… We’re looking for a structured solution,” Mr. Nicol added.
Mr. Nicol said they are currently talking with advisors for the deal.
The power plant is located on Singapore’s Jurong Island, and is the first in the country to be fully fuelled by LNG instead of piped natural gas. This was in response to the Singapore government’s policy to diversify its energy sources.
The LNG plant’s output is being sold to SP Power Assets Ltd., the retail market, and merchant supply operations.
Mr. Nicol explained the difference in producing power between the Philippine and Singapore markets, given the latter’s high economic growth.
“Because it’s got a quite high GDP (gross domestic product), the correlation to growing power consumption is quite low. Here it’s quite high. So I think it’s a merchant market, and that’s difficult,” the MPIC executive said.
He added that the group was not able to calibrate the change in pricing with the extra capacity coming in.
Meralco’s investment in the Singapore plant was part of its efforts to become a regional power player.
MPIC, Meralco’s parent, is one of three key Philippine units of First Pacific, the others being Philex Mining Corp. and PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. — Arra B. Francia