The Philippine Competition Commission Approves Joint Acquisition of Power Facilities and LNG Terminal

The Philippine Competition Commission (PCC) has given its blessing to three players for the joint acquisition of power facilities and a liquefied natural gas (LNG) terminal in Batangas City, Philippines.

This acquisition will see Meralco PowerGen Corp. (MGEN) and Therma Natgas Power Inc. (Therma), through their joint venture Chromite Gas Holdings (Chromite), get a 67% equity interest in South Premiere Power Corp. (SPPC), Excellent Energy Resources Inc. (EERI), and Ilijan Primeline Industrial Estate Corp. Additionally, MGEN and Therma, through Chromite, along with San Miguel Global Power Holdings Corp. (San Miguel Power), intends to jointly acquire 100% of Linseed Field Corp. (LFC), which operates the LNG terminal in Batangas City.

Asia Natural Gas & Energy Association (ANGEA) highlighted: “This is positive news for both energy security and the energy transition in the Philippines. Approval has been granted for a $3.3 billion collaboration between Meralco PowerGen (MGEN), AboitizPower and San Miguel Global Power on the country’s first integrated liquefied natural gas (LNG) facility. Expanding use of LNG will be vital to reducing the Philippines’ reliance on coal as it looks to maintain energy security and continue to grow investment in renewable energy.”

Furthermore, the acquisitions are anticipated to enable MGEN and Therma, through their 60/40 ownership of Chromite, to control 67% of SPPC, EERI, and Ilijan Primeline, with San Miguel Power retaining a 33% stake in these three entities and gaining a corresponding interest in LFC. The deal, which is perceived to be “critical” for strengthening the country’s energy supply, is subject to conditions aimed at ensuring fair competition and promoting transparency.

Commitments and Approval Process

The PCC’s review process identified potential competition concerns, including risks of coordination in the national power generation market and foreclosure in power supply deals with distribution utility companies (DUs). The parent companies – Pilipinas Enterprise Management Holdings Inc. (PEMHI), Aboitiz & Company, and Top Frontier Investment Holdings Inc. – submitted voluntary commitments on October 18, 2024, to address these issues.

Afterward, the PCC reviewed commitments and validated them, with input from industry players, stakeholders, the Department of Energy (DOE), and the Energy Regulatory Commission (ERC). As a result, the PCC approved the resulting voluntary commitments on December 20, 2024.

Ensuring Competition and Transparency

While the transaction supports the country’s energy security, the PCC claims that the imposed conditions are vital to maintaining a competitive market, with key safeguards including its oversight of the competitive selection process (CSP) to ensure power supply agreements are awarded through a transparent and competitive bidding process.

The regulator emphasized: “This oversight aims to prevent collusion or unfair practices. The acquired companies must also operate independently of their parent companies, with strict measures to separate IT systems, offices, and management to prevent coordination or undue influence. Boards of directors will include independent members, and internal trading units will operate independently of affiliates. To promote transparency, power plants must submit reports on unplanned outages to the PCC within seven days of reporting to the DOE.”

“Additionally, Competitive Retail Electricity Market (CREM) reports must also be shared with the PCC. The parent companies are also required to appoint a competition compliance officer to monitor the fulfillment of these commitments. The PCC will communicate to DOE and ERC the conditions imposed, as well as coordinate on the alignment of existing guidelines and policies with competition law and policy to curb competition concerns that may arise from similar transactions.”

Market Impact and Future Outlook

The PCC underlines that conditions will remain in effect for five years, with potential extensions depending on market conditions, while violations could bring daily fines of up to PHP 2 million (around $34,400) per infraction until the entity fully complies, alongside other penalties and sanctions.

The regulator believes these safeguards strike a balance between encouraging investments in critical energy infrastructure and ensuring a fair and competitive market that benefits consumers, businesses, and the broader economy.

“By addressing potential competition issues while supporting energy security, the approved transaction represents a key step toward bolstering the Philippines’ energy landscape,” elaborated the PCC.

Philippine recent LNG moves include the one First Gen made to secure LNG cargo from TG Global Trading, a subsidiary of Japan’s Tokyo Gas, a few months ago. The cargo was to be received and stored at the BW Batangas floating storage and regasification unit (FSRU), moored at the First Gen Clean Energy Complex (FGCEC) in Batangas City since last June.