Deal between tycoon friends sparks scrutiny of Philippine power sector

[MANILA] Philippine infrastructure tycoon Ramon Ang’s purchase of a stake in a family holding company from media scion Eugenio Gabriel Lopez III was intended to help settle a long-running family feud within the Lopez family – one of the country’s most influential corporate dynasties.

Instead, the private deal has become a regulatory hot potato, raising questions over ownership and competition in one of South-east Asia’s largest and highly concentrated power markets. 

The transaction followed earlier negotiations in which three branches of the Lopez family sought to sell their combined 70.8 per cent stake in Lopez Inc for about 45 billion Philippine pesos (US$716 million), effectively handing control of the family-owned entity to a new owner. 

But the final deal in August was considerably smaller. Only Lopez III, former chairman and CEO of media network ABS-CBN Corp, sold his 25.7 per cent stake in Lopez Inc to Ang for an undisclosed amount, in a bid to end the dispute.

“I have known the Lopez family for decades... all of them. I came in because I believe in these businesses... My interest is that the group comes out of this stronger,” Ang said in a statement to local media. 

The deal unwittingly drew the scrutiny of the Philippines’ Energy Regulatory Commission (ERC) in August, with the regulator saying it would conduct a preliminary review on its impact on competition in the country’s power market.

At the heart of the matter is whether Ang’s personal investment – made through his privately held Illumina Investment – gives him sufficient control or influence over First Gen, the clean-energy arm of the Lopez Group and the country’s third-largest electricity producer.

Ang chairs and leads San Miguel Corp, the two-trillion-peso conglomerate, whose power arm San Miguel Global Power is the country’s second-largest power company. 

Should the ERC find that Ang exercises sufficient control or influence over both groups, San Miguel Global Power and First Gen could be deemed as affiliates under the Electric Power Industry Reform Act of 2001 (Epira).

“There is a qualification for you to be considered an affiliate. There needs to be an element of control,” ERC chairman and CEO Francis Saturnino Juan said in a media briefing in August.

Lopez Inc owns 54.74 per cent of Lopez Holdings, which holds 60.67 per cent of First Philippine Holdings, which in turn controls 67.84 per cent of First Gen.

Epira prohibits single-power producers or affiliated groups from owning, operating or controlling more than 25 per cent of the total national installed capacity, or 30 per cent of the capacity within any regional grid.

In Luzon, the main island grid and the country’s largest power market, the threshold is capped at 30 per cent of the 20.4 gigawatt (GW) capacity, limiting producers to 6 GW each.

San Miguel holds nearly 25 per cent of Luzon’s installed capacity and First Gen accounts for 12 per cent.

Market observers said that the distinction between passive ownership and actual control will be decisive. 

Toby Allan Arce, head of sales trading at Globalinks Securities and Stocks, said affiliate status should depend on “control, influence and coordinated economic interests, rather than ownership links alone”.

“Companies associated with the Ang and Lopez groups recently secured separate supply contracts through a competitive procurement (process) involving electric cooperatives, illustrating that they continue to operate as distinct bidders in the market today,” Arce told The Business Times. 

San Miguel Global Power and First Gen’s generation footprint, if combined, would breach the regulatory caps, potentially triggering asset divestments and reshaping competition in the Philippines’ 3.3-trillion-peso energy sector.

“The ERC would have to look much more closely at whether future acquisitions, capacity additions, power supply agreements or other transactions could breach market share limits or weaken competitive pressure,” Arce noted.

“That said, affiliate status should not automatically be interpreted as an operational merger between San Miguel Global Power and First Gen,” he added.

Power giants

The two conglomerates rank among the Philippines’ most powerful businesses.

Full-year revenue at San Miguel Global Power totalled 157.2 billion pesos in 2025, down 23 per cent from the previous year as offtake volumes dropped 20 per cent.

First Gen’s revenue for the same period reached 52.1 billion pesos, up nearly 6 per cent from the year before, supported by stronger contributions from its geothermal and renewable energy portfolio.

A clear enforcement of competition rules could strengthen market credibility, but prolonged uncertainty over whether the two groups are considered affiliates would be more difficult for investors to price, Arce added.

The ERC inquiry comes as the Philippines attracts record levels of energy investment. In 2025, the Board of Investments approved 970 billion pesos in power projects, mostly renewables. 

In the longer term, the Department of Energy is targeting 25 trillion pesos in green investments to deliver another 25 GW by 2035, with full foreign ownership now permitted under the amended Public Service Act.

Russell Stanley Geronimo, founder of Geronimo Law, warned that if a top-tier minority stake, held through a personal vehicle without board representation, is deemed to constitute control, then “every conglomerate principal’s personal investments become regulatory events”.

He said that this could narrow the already limited pool of buyers for Philippine power assets, and entrench existing positions rather than promote competition.

“The ERC should draw the line at actual control and board participation rather than passive minority ownership, otherwise it would generally chill cross-investment,” Geronimo added.

Handful of players dominate

The public policy think tank Philippine Institute for Development Studies has called on the government to tighten competition safeguards. ERC data shows that five conglomerates control more than two-thirds – or 68 per cent – of the country’s power generation capacity.

Listed on the Philippine Stock Exchange with a market value of more than 202 billion pesos, Aboitiz Equity Ventures – the holding firm of the prominent Aboitiz family – leads the sector with a 24.3 percent share of total power generation capacity.

San Miguel comes in second with a 19.6 per cent share, followed by First Gen at 10.7 per cent, with Ayala Corp’s Acen and Manila Electric Company rounding out the top spots.

Together, the top three firms hold more than half of national capacity. The leader, Aboitiz, is within 0.7 percentage point of hitting the 25 per cent national limit.

In its mid-year update on the Philippine economy, the World Bank noted that the country’s generation capacity remains highly concentrated.

It added that “stronger competitive selection, greater transparency and closer regulatory oversight” of power supply agreements could address price concerns more effectively “than restricting affiliate transactions alone”.

The World Bank estimated that broader reforms to lower electricity costs and improve the efficiency of the power sector could create more than 161,000 jobs and lift the Philippines’ gross domestic product by more than 1 per cent by 2030.

The Philippines maintains South-east Asia’s second-highest residential and commercial electricity rates, at an average of US$0.20 and US$0.16 per kilowatt-hour, respectively, based on data tracker Global Petrol Prices.

The regulators are aware of the task at hand.

“We should be more vigilant in our monitoring efforts... so that prices are not unduly inflated to the detriment of our electricity consumers,” ERC’s chairman Juan said at an industry event in August.