Years after taking control of Manila Electric Co. (Meralco), tycoon Manuel V. Pangilinan sees the potential value of adding another Lopez family crown jewel to his growing energy empire.
Although no acquisition plans are on the table yet, Pangilinan said Lopez-led Energy Development Corp. (EDC) could be a strategic fit for Meralco PowerGen Corp. (MGEN), given its established presence in the renewable energy sector.
‘Well, it’s renewable. So it might be a good addition to the renewables of MGEN,’ he said when asked if EDC would be a good asset to acquire amid a $5-billion takeover bid from Indonesian conglomerate Barito Group.
EDC is the country’s leading geothermal power producer, with a portfolio that accounts for more than half of the Philippines’ total installed geothermal capacity.
Its geothermal facilities provide reliable baseload power, supplying the steady electricity needed to support the grid around the clock.
This makes EDC a strong potential complement to MGEN, which is developing what is touted to be the world’s largest integrated solar and battery storage facility in Central Luzon.
If such a deal were to happen, an EDC acquisition would mark another major milestone in the Pangilinan Group’s energy expansion, following its acquisition of the Lopez family’s stake in Meralco in 2009.
Pangilinan, however, clarified that no active discussions are currently underway between the two parties regarding a potential deal.
‘We’ll cross the bridge when we build it, so to speak. (It’s) so difficult to say,’ he said.
From a strategic standpoint, Globalinks Securities and Stocks Inc. head of sales trading Toby Allan Arce said Pangilinan’s remarks on EDC were ‘unsurprising,’ noting that the company is widely viewed as a ‘highly attractive’ asset.
‘Should MGen eventually pursue EDC, it would represent one of the most consequential transactions in the country’s energy sector, fundamentally reshaping the competitive landscape,’ Arce told The STAR.
Such a move, he said, could allow MGEN to accelerate its clean energy ambitions at a much faster pace than relying solely on organic expansion.
For First Gen, Arce noted that divesting a strategic asset like EDC would only be compelling if a buyer’s offer reflected a value greater than the long-term benefits of retaining the business.
‘However, the most significant implications of a potential acquisition would likely arise from competition and regulation rather than financing or industrial logic,’ Arce stressed.
For China Bank Capital Corp. managing director Juan Paolo Colet, Pangilinan’s comments have raised the prospect of EDC entering a ‘major MandA (merger and acquisition) deal.’
‘A potential MGEN bid for the country’s premier geothermal asset could reflect efforts to diversify its generation portfolio and manage regulatory and market risks as pressure mounts to reform EPIRA (Electric Power Industry Reform Act) and bring down power prices,’ Colet told The STAR.
First Gen previously confirmed Indonesia-based PT Barito Renewables TBK’s unsolicited, indicative and non-binding offer to acquire EDC but noted that no talks had yet taken place between the two parties.
In a chance interview, EDC president and COO Jerome Cainglet said the company had yet to receive full details of the Indonesian firm’s offer.