IEEFA warns SMC of potential risk of LNG


The Institute for Energy Economics and Financial Analysis (IEEFA) warned San Miguel Global Power Holdings Corporation (SMGPH) of the potential economic risks brought about by the temporary shift to liquefied natural gas (LNG) and expansion on fossil fuel.

In a report by the Philippine Star, IEEFA said in its report that SMGPH’s choice to use fossil fuels affected its financial position in recent years. 

Moreover, the institute opined that the company’s transition from coal to LNG might restrain its capacity to fulfill increasing financial commitments.

With more than 10,000 MW of proposed gas-fired capacity, SMGPH plans to complete 1,313 MW of gas-fired capacity and 1,900 MW of coal-fired capacity by 2025. Additionally, the corporation also intends to finish a 1,000 MW battery storage facility and an 800 MW solar facility. 

IEEFA energy finance analyst Hazel James Ilango said that with the company’s driven growth targets, it needed to increase its capital expenditures which have been funded by bonds, loans, and issuances of perpetual securities.

The institute noted that the corporation has Php 56 billion in issued bonds and Php 232 billion in perpetual securities since 2019. 

However, compared to 76% for fossil fuel projects, only 0.1% of the money from its most recent bond sale went to renewable energy initiatives. 

While the company’s loans enable it to meet its fossil fuel target, IEEFA LNG or gas research head Sam Reynolds stated that going overboard would put the company’s finances in jeopardy because SMGPH is anticipated to take twice as long as necessary to pay off its present debt based on its current earnings. 

Based on the company’s current earnings, the think tank expressed that SMGPH may be under pressure to bounce back from the debt. 

Reynolds added that since SMGPH is known as the largest power generation company, it has more power to aid the country in its goal to transition to renewable energy (RE). However, without RE technologies in place, financial instability might happen since LNG is unstable.