San Miguel's Ang notes novel ways to lower power, fuel costs


Posted at Feb 19 2009 01:09 AM | Updated as of Feb 19 2009 09:09 AM

With San Miguel Corp.'s significant stakes in the country's largest power retailer and oil refiner, the diversified conglomerate's president shared that there are creative ways to lower power rates and fuel prices.

In a presentation during the visit of President Arroyo at the headquarters of San Miguel in Pasig City, Ang said Manila Electric Company (Meralco), which distributes 60 percent of the country's total electricity consumption, could be more innovative in the way it sources and buys power.

These include piggy-backing broadband services onto the current infrastructure of the power retailer firm, and compelling Meralco's sister companies that sell power at lower cost.

San Miguel currently holds a direct 27 percent stake and key board and management positions in Meralco. The other major shareholder in Meralco is the Lopez family, who owns a direct 34 percent stake.

During his presentation, Ang said they have proposed to the Meralco board that the electric retailer buys cheaper power from the power plants also owned by the Lopez family.

First Gen, the power generating arm of the Lopezes, has a contract with Meralco for the latter to purchase the power it produces.

Ang said, "Hindi kasi nakukuha ang maximum power production ng mga planta nila.. Nasa mga 60 to 65 percent kaya mahal ang ibinebenta kuryente kay Meralco. Ang economical offtake is 80 to 82 percent." (First Gen's power plants are only producing at 60 to 65 percent capacity, that's why the power they sell to Meralco is expensive. The economical capacity is 80 to 82 percent.)

Ang explained the impact of more efficient First Gen power plants: "At 60 to 65 percent, First Gen would charge P10 per kilowatt. If you increase the offtake to 80 percent, the cost would go down to P4 per kilowatt."

Ang also noted that Meralco has been paying an additional P1 per kilowatt for the transmission of power since the power plants from which Meralco buys are in far flung areas.

Broadband over power lines
Ang said he is also toying with the idea of using the power lines as the same delivery infrastructure for broadband lines.

Ang said the additional income from broadband services could offset expenses related to Meralco's core business function of delivering power to end consumers.

Ang said they are thinking of offering broadband and high-speed Internet project via what is dubbed as the Meralco Broadband Over Power Lines.

San Miguel recently partnered with Qatar Telecom to offer broadband services in the Philippines. But their business plan originally involved a wireless technology called WIMAX.

Fuel prices
Since San Miguel is also in Petron Corp., the country's largest oil refiner, Ang likewise promised President Arroyo that they will lower petroleum prices.

For gasoline, Ang proposed the production of a lower kind of octane gasoline so that it can also lower its retail price by P6 to P7 per liter.

"Gasoline now is at 93 Octane. Car engines in models produced from 1986 onwards are all electronic fuel injection. These engines can take in gasoline by up to 75 octane. So if we come out with 80 octane, that is P6 to P7 per liter cheaper."

For diesel, it plans to sell to PUJs and PUVs diesel sold to factories, which retails at just P20/liter. Ang said, they are just waiting for certification on this from the DTI and the DOE.