MANILA, Philippines – Diversified conglomerate San Miguel Corp. formally takes over ailing Albay Electric Cooperative (Aleco), Energy Secretary Carlos Jericho Petilla said over the weekend.
The two parties will sign the agreement tomorrow, Oct. 29, in a formal ceremony at San Miguel’s headquarters in Ortigas.
“The takeover is merely a formality because they’re already assessing right now. I don’t know how many people they have in Aleco but they are now doing the inspection works. The signing is for me, just ceremonial or formality,” Petilla said.
Under the agreement, San Miguel Corp., through SMC Global Power Holdings Corp. would be spending at least P250 million to pay off Aleco’s debts.
This is just the minimum, Petilla said. Albay Governor Joey Salceda has said that San Miguel also needs to spend for the plant’s rehabilitation, which could cost up to P1 billion.
Aleco’s system loss is 24 percent compared to the cap of 13 percent.
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Salceda attributed Aleco’s situation to its failure to collect from its customers and also to systems losses stemming from its obsolete equipment.
Once rehabilitated, however, Salceda said San Miguel would be able to generate revenues of about P600 million annually.
San Miguel will manage the operations of Aleco for 35 years, with the option to extend this for another 25 years.
Last July, Aleco had been disconnected from the main grid because of mounting debts, plunging Albay into darkness. It was reconnected the following day upon the intercession of Energy Secretary Carlos Jericho Petilla and after the cooperative agreed to disconnect their top 100 delinquent accounts.
The Philippine Electricity Market Corp. (PEMC) requested Aleco to be disconnected from the grid after it failed to settle its outstanding liabilities to power generators of roughly P1 billion.
PEMC operates WESM, the country’s trading floor for electricity.
Aleco’s total debts to electric companies and to National Electrification Administration have ballooned to roughly P4 billion, according to data from the Department of Energy.
As part of the rehabilitation plan, Petilla proposed the entry of the private sector such as SMC.
Manila Electric Co. (Meralco) and Aboitiz Power also expressed interest in taking over the cooperative but in the end, only SMC Global submitted a bid for the rehabilitation of the cooperative.