It behooves San Miguel Corp. to absorb the P15-billion loss it claimed to have suffered from the power supply agreements it holds since these were self-inflicted.
As anticipation builds up on the next move of SMC before the 60-day temporary restraining order lapses, industry sources said SMC should not even consider the termination of the PSAs since it would mean huge suffering for the public who will shoulder higher prices.
"SMC should continue supplying despite its claimed loss because it will be consumers who will suffer. It should absorb the losses in the meantime since its other companies engaged in separate businesses showed strong earnings that contributed to the P19.8 billion total profit in the first half."
"The price of coal is also trending down. Thus, the situation that the company had cited as a reason for its accumulated losses is shifting," the source said.
Another official said it will be painful for SMC but it is partly to blame for the accumulated losses since it made an extremely low offer to corner the PSAs with Meralco.
"With the size of the conglomerate, it can find ways to augment the losses from its energy operations," the industry veteran indicated.
"Say, if you sell something, you can't continue with the business if losses accumulate," he said considering the dilemma that SMC is in.
"Common sense indicates that the PSAs it holds are not sustainable. There would come a point when they would have to cut their service for survival," he added.
"You can't keep selling on a losing proposition."
SMC, however, can now terminate the PSA because the TRO made the suspension of the agreement moot and academic since the court order disregarded the ERC order dismissing the price hike petitions.
"It's a no-win situation, everybody losses. Even if Meralco goes to court against San Miguel but in the meantime, something needs to be done to ensure that the electricity supply continues, at the least cost, to consumers," the source added.
Under protest
San Miguel Corp. said that it will continue with the power supply agreements at a fixed rate with Meralco but it will do so "under protest."
The Court of Appeal's temporary restraining order, however, effectively suspended the PSA between SMC arm South Premier Power Corp. and Meralco which clears the way for the company to abandon the deal.
In a 5 October ruling, the ERC dismissed the petitions of SPPC and affiliate SMC Energy Corp. for a temporary increase of a total of P4.80 per kilowatt-hour to recoup P5 billion out of its claimed P15 billion losses due to higher coal prices and the supply restrictions in the Malampaya natural gas project.
ERC urged the SMC companies to honor the provisions of the PSA providing a fixed rate that does not allow higher costs to be passed on to consumers.
"If it becomes fait accompli, Meralco does not have any choice but to look for sources of electricity, and prices are bound to rise."
Project road collapsed
The alarm was raised by ecology group Protect Verde Island Passage, meanwhile, over the collapse of the Batangas-Tabangao-Ilijan-Lobo road on Sunday, 27 November, due to the construction of the integrated liquified natural gas import terminal project of Atlantic, Gulf & Pacific International Holdings that is part of the SMC Ilijan gas facility in Batangas.
It is a sample of what the SMC project can do to the environment and the lack of transparency of the proponents in dealing with the damage they caused, the group said.
"If we cannot trust them to implement proper construction protocols, how can we trust these same companies not to shirk safety and environmental protocols once the terminal is operational?" Fr. Edwin Gariguez, Protect VIP Convenor, said.
The terminal under construction will provide LNG to the Ilijan power plant of SMC.
