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MarketScreener Homepage  >  Equities  >  PHILIPPINE STOCK EXCHANGE, INC.  >  Manila Electric Company    MER   PHY5764J1483

MANILA ELECTRIC COMPANY

(MER)
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Manila Electric : Meralco may turn Atimonan coal plant into merchant facility

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11/01/2018 | 04:39am EDT

THE Manila Electric Co. (Meralco) has considered the option of converting the shovel-ready $3-billion Atimonan One Energy (A1E) coal-fired power plant into a merchant facility or power plants that do not have long-term power purchase agreements to cover their output.

The utility firm is optimistic the regulators would soon approve the power supply agreement (PSA) application it entered into with A1E. The PSA approval is necessary before the project proponent can financially close the project and commence construction. This is because lenders require projects to present an approved PSA before extending loans to energy developers.

However, the utility firm's chairman is not discounting the possibility that the power project may be converted into a merchant plant.

'Yeah, why not? It's only money,' replied Meralco Chairman Manuel V. Pangilinan when asked if the Atimonan power plant can be converted into a merchant plant.

'We have given the greenlight to management to proceed with Atimonan. At first, we gave the limited notice to proceed, but eventually when they start shoveling, we will give them a notice to proceed. We don't want Atimonan to fall by the wayside like Redondo,' Pangilinan said.

More than two years since the PSA between A1E and Meralco for A1E's 2×600 megawatt (MW) plant was filed, A1E continues to await approval from the ERC. On August 30 A1E filed with the ERC its fourth 'very urgent motion' to resolve its PSA, highlighting significant negative impacts to the overall project in terms of total project cost, timetable and eventual power prices, as well as the country's power situation.

All the necessary agreements, particularly the EPC (engineering, procurement and construction) and loan agreements, are in place.

Financing has been arranged by the mandated lead arrangers and bookrunners with a mandate letter signed with a consortium of eight local banks. Transmission right-of-way acquisition is currently close to full completion.

Meralco PowerGen Corp. (MGen), the power generation arm of Meralco, said the option to convert it into a merchant plant is being considered as a last option.

'There are other options such as to go into competitive selection process first. We can go merchant also, but that's the last resort,' MGen President Rogelio Singson said. 'We will assess whether to go merchant or not.'

As delays hound the power project, Singson cited ballooning costs. Of the P150-billion project cost, Singson said P107 billion will be funded via bank loan.

'There's a P3-billion interest per year. Since the time we negotiated until today, there is a 3-percent increase every year,' Singson said.

Meralco President Oscar Reyes also cited adjustments in the exchange rate, another major factor in determining the project cost.

'Project cost has significantly increased because of the exchange rate. At the time we filed, the rate was between 46 and 48. Now, it's 53 to 54 to a dollar. Interest rate at the time we filed was low at below 4.4 percent. Now, it's up by at least 3 percent. It's P3 billion a year on the P107-billion loan and construction period of about 42 months. We still remain focused though,' Reyes said.

A1E is a 2×600 MW greenfield, ultra-supercritical pulverized coal-fired plant in Atimonan, Quezon, the first ultra-supercritical plant in the country. Completion of the first 600 MW is targeted by the third quarter of 2023, and the second unit by the first quarter of 2024.

(c) 2018 Business Mirror Provided by SyndiGate Media Inc. (Syndigate.info)., source Middle East & North African Newspapers

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Financials (PHP)
Sales 2019 314 B
EBIT 2019 30 291 M
Net income 2019 21 483 M
Finance 2019 20 335 M
Yield 2019 4,29%
P/E ratio 2019 19,89
P/E ratio 2020 19,16
EV / Sales 2019 1,33x
EV / Sales 2020 1,29x
Capitalization 436 B
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Mean consensus HOLD
Number of Analysts 14
Average target price 347  PHP
Spread / Average Target -10%
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Managers
NameTitle
Oscar S. Reyes President, CEO & Executive Director
Manuel Velez Pangilinan Chairman
Betty C. Siy-Yap Chief Finance Officer & Senior Vice President
Ray Celis Espinosa Non-Executive Director & Deputy CEO
Manuel M. Lopez Non-Executive Director
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