SPC Power Corporation (the Parent Company) was incorporated in the Republic of the Philippines and registered with the Philippine Securities and Exchange Commission (SEC) on March 11, 1994.
The Parent Company was formerly a venture company owned by members of the Salcon Consortium which entered into a Rehabilitation, Operation, Maintenance and Management Agreement (ROMM Agreement) with the National Power Corporation (NPC) on March 25, 1994 for the purpose of undertaking the rehabilitation, operation, maintenance and management of the 203.8 megawatt (MW) Naga Power Plant Complex (NPPC) in Colon, Naga, Cebu under the rehabilitate-operate-maintain-and-manage scheme as defined in the ROMM Agreement.
The ROMM Agreement provides that the Parent Company shall, at its own cost, rehabilitate, operate, maintain and manage the NPPC over the cooperation period of 15 years (Cooperation Period; up to May 29, 2009 for the Land-Based Gas Turbines (LBGTs), and up to March 25, 2012 for the Cebu Thermal Power Plant (CTPP) 1, CTPP 2 and Cebu Diesel Power Plants 1 (CDPP 1), as amended) commencing on the Turnover Date, as defined in the ROMM Agreement. Under the ROMM Agreement, the Parent Company receives from NPC, its sole customer, Operation and Maintenance (O&M) fees and energy fees derived from conversion into electricity of fuel supplied by NPC at no cost to the Parent Company throughout the Cooperation Period. The fees are subject to an agreed minimum energy off-take (EMOT), which is the minimum guaranteed energy purchase by NPC on a take-or-pay basis. The Parent Company is also entitled to a fuel efficiency bonus if the actual net heat rate of each of the power plants is less than the corresponding guaranteed net heat rate and be liable for a penalty if the actual net heat rate is greater than the guaranteed rate. At the end of the Cooperation Period, the Parent Company shall transfer to the NPC full possession of the NPPC, clean and unencumbered title to any and all the improvements, works and structures rehabilitated, constructed, improved and introduced by the Parent Company in the NPPC.
In resolutions dated September 28, 2001, the Board of Directors and Stockholders amended the primary purposes for which the Parent Company is formed. Together with its subsidiaries and associates, it is engaged in various business activities within the Philippines that include, among others, the development, construction, rehabilitation, maintenance, management, and operation of power generating plants, electricity distribution and related facilities in accordance with existing laws.
On April 2, 2002, the Parent Company’s common shares were listed in the Philippine Stock Exchange (PSE).
On June 30, 2004, the Parent Company, the NPC and the Power Sector Assets and Liabilities Management Corporation (PSALM) further amended the Implementing Agreement (IA) which implemented the covenants set forth in the Term Sheet and amended the ROMM Agreement and its First Amendment, by executing the Amended Implementing Agreement (AIA) which became effective on August 26, 2004. Salient matters of the AIA include, among others, a 20% reduction in the EMOT for the CTPP 1, CTPP 2 and CDPP 1 during the remaining Cooperation Period subject to certain conditions. As a consequence of the EMOT reduction, the Cooperation Period for the CTPP 1, CTPP 2 and CDPP 1 is extended for nearly three (3) years from May 29, 2009 to March 25, 2012.
After the Cooperation Period for the 55 MW LBGTs, on January 29, 2010, the Parent Company acquired the LBGTs for strategic purposes as the LBGTs are located in the Power Complex that is occupied by the Parent Company for the operation of the CTPP and CDPP under the ROMM Agreement until March 25, 2012, and under the Operation and Maintenance Service Contracts (OMSCs) until September 25, 2014.
After the expiration of the ROMM Agreement on March 25, 2012, OMSCs were awarded by PSALM to the Parent Company for the continuous operation and maintenance of CTPP 1, CTPP 2 and CDPP 1 for successive six-month periods up to September 25, 2014. Under the OMSC, the Parent Company receives service and operating fees from PSALM.
In 2014, the Parent Company participated in the bidding for the acquisition of NPPC (see Note 31 of the consolidated financial statements of the Parent Company and Subsidiaries).
On April 25, 2016, SIPC submitted the highest offer to PSALM in the negotiated sale of the 32-MW Power Barge 104 (PB 104). On June 16, 2016, the Parent Company executed an Amendment, Accession and Assumption Agreement between and among the PSALM and SIPC. Under the said agreement, SIPC assigned its rights and obligations as buyer of PB 104 to the Parent Company after PSALM gave its consent pursuant to the provisions of the covering Asset Purchase Agreement between SIPC and PSALM. On June 30, 2016, PSALM turned the PB 104 to the Parent Company and put under repair and rehabilitation prior to commercial operation which is estimated to commence in the second half of 2018.
On September 9, 2016, the Parent Company’s Board of Directors further amended the Company’s Articles of Incorporation in order to engage in the business of selling, brokering, marketing, or aggregating electricity to the end-users. The amendments were subsequently approved and confirmed by written consent of the stockholders representing at least 2/3 of the outstanding capital stock of the Parent Company. On January 4, 2017, the SEC approved such amendment.
The Parent Company has the following subsidiaries:
(i) SPC Island Power Corporation (SIPC). SIPC, a wholly owned subsidiary, was incorporated and registered with the SEC on June 26, 2001. It operates the 146.5 MW Panay Diesel Power Plant (located in Dingle, Iloilo) and the 22 MW Bohol Diesel Power Plant (located in Tagbilaran City, Bohol) which were acquired in March 25, 2009 through the assignment of the Parent Company’s rights and obligations to SIPC. It also owns and operates the Olango Diesel Power Plant (located in the Island of Olango, Lapu-Lapu City) which supplies all the generated electricity to Mactan Electric Company, Inc. (MECO), an associate.
(ii) Cebu Naga Power Corporation (CNPC). CNPC, a wholly owned subsidiary, was incorporated on August 12, 2015 to undertake the development, ownership, construction, operation and management of the new 2 x 150 MW CFBC coal-fired power plant to be built in the province of Cebu. As of December 31, 2017, further development for the construction of the new power plant has been temporarily suspended pending resolution of the issues and claims involving the Naga Power Plant Complex (see Note 31 of the consolidated financial statements).
(iii) SPC Malaya Power Corporation (SMPC). SMPC, a majority owned subsidiary, was incorporated in the Republic of the Philippines and registered with the SEC on September 22, 2011. SMPC participates in the annual bidding for the OMSC of the 650 MW Malaya Thermal Power Plant located in Pililla, Rizal (see Note 25 of the Consolidated Financial Statements).
(iv) Bohol Light Company, Inc. (BLCI). BLCI, a majority owned subsidiary, was organized on July 21, 2000 to engage in the business of supply and distribution of electricity, subject to applicable laws, rules and regulations. On July 10, 2003, the National Electrification Commission (NEC) granted BLCI’s franchise to operate electric, light and power services for a period of 25 years retroactive from October 20, 2000 to October 19, 2025 in the area presently comprised by Tagbilaran City, Bohol.
(v) SPC Light Company, Inc. (SLCI) and SPC Electric Company, Inc. (SECI). SLCI (majority owned) and SECI were incorporated on January 15. 2003 and October 17, 2002, respectively, primarily to design, construct, install, commission, rehabilitate, maintain, manage, operate and invest in power generation/distribution plants and related facilities. The Parent Company has the power to govern the financial and operating policies of SECI by virtue of an agreement.
The Parent Company also has the following associates:
(i) KEPCO SPC Power Corporation (KSPC). KSPC, 40% owned by the Parent Company, was incorporated on June 22, 2005 primarily to build, operate, maintain, own and manage the 2 x 100 Megawatt Circulating Fluidized Bed Combustion (CFBC) Boiler Coal-Fired Power Plant in Naga, Cebu.
(ii) Mactan Electric Company, Inc. (MECO). In July 1997, the Parent Company acquired 40% of MECO which was granted by the NEC, under Presidential Decree No. 269, a franchise for 25 years from October 10, 1991 to engage in, conduct and carry on the business of generating, buying and selling electric light for sale within the limits of the City of Lapu-lapu and the Municipality of Cordova in the Province of Cebu until October 9, 2016. On July 17, 2016, MECO was granted a renewal of its franchise for another 25 years.
The Group expects continued growth in terms of operating results and in the benefits it gives to shareholders with: (i) sustained improvements in the reliability and availability of existing power facilities, (ii) the anticipated commercial operation of PB 104 in the second half of 2018, and (iii) vigorous but careful pursuit of new opportunities.
With the development of a new 2 x 150 MW coal-fired power plant at the Naga Power Plant Complex already halted due to an adverse Supreme Court Decision, the Board of Directors has set its sights on other power project opportunities. New hydro power plant projects are presently being considered in the Visayas and other parts of Luzon.