The Market Monitor Minding the Nation's Business
By Lito U. Gagni and Riza Lozada
The country’s energy scenario has dimmed further as a result of the April 5 blackout in Mindanao that resulted in a collateral damage to AboitizPower’s 150-megawatt (MW) Unit 2 coal plant that would mean a 10-month delay in its commissioning.
Aside from this 150-MW shortfall in available power in Mindanao, Aboitiz’s revenues would be cut by a substantial P3.6 billion in foregone sales due to the April 5 Mindanao-wide blackout, which energy sources said would hobble the government’s efforts to address the looming power crisis, especially in Mindanao, where hydropower energy is affected with the onset of summer.
In a disclosure to the Philippine Stock Exchange, AboitizPower said the Mindanao blackout damaged the auxiliary components of the coal plant’s boiler and its electrostatic precipitator, an anti-pollution control that filters the coal plant’s pollutive emissions.
“TSI is currently conducting a more detailed assessment of the extent of the repairs needed and a full review to determine all contributing factors that led to the plant incident to ensure appropriate measures are taken,” AboitizPower said.
The company’s profit picture would also be affected by the increase in the tax rates for its Binga and Magat power plants. The two plants are no longer eligible for the income-tax holidays (ITH). Similarly, its Navotas and Pagbilao power barges would also lose their tax holidays.
Magat’s ITH expired July 2014, while Binga’s will expire this August. Both have yet to get their renewable-energy licenses.
The tax rates for Magat would go up from 10 percent to 30 percent; after August, Binga’s tax rates will rise from 5 percent to 10 percent rates.
With the non-commissioning AboitizPower’s Unit 2 150-MW coal plant and the increased tax charges for its other plants, the power firm’s profit picture could suffer as a result. Last year, the company earned almost P17 billion; in 2013, it earned P20 billion.
The company is also not expected to profit much from the rise in the Wholesale Electricity Spot Market (WESM) with the price spike that usually accompanies the energy costs due to the summer months when many power plants are unable to deliver power to the energy grid.
AboitizPower sells about 14 percent of its energy production to WESM. But a decision of the Energy Regulatory Commission (ERC) to limit the secondary price cap whenever the P9-per-kilowatt hour increase is breached within 72 hours.
The ERC implemented the price cap following the huge increase in energy costs two Decembers ago. The secondary price cap was set at P6.245 per kWh whenever the first cap at P9 per kWh has been breached. As a result, AP’s expected average price for its WESM sales is seen to amount to P5.15 per kWh compared to its 2014 average of P5.05 per kWh.
“TSI is currently conducting a more detailed assessment of the extent of the repairs needed and a full review to determine all contributing factors that led to the plant incident to ensure appropriate measures are taken,” AboitizPower said.
Despite the delay, TSI President and COO Benjie Cariaso Jr. assured the public that the status of Unit 2 would not affect the commissioning of the 150-MW Unit 1, which remains on schedule and should start commercial operations by the end of June 2015.
He said the company is working with its contractors and suppliers to make the necessary repairs to resume the commissioning of Unit 2.
“We will update all stakeholders of further developments. We remain committed to do everything we can to support Mindanao with its power needs,” Cariaso said.
TSI has signed supply agreements with more than 20 distribution utilities and electric cooperatives in Mindanao.
The company has earlier announced the expansion of the power plant to 645 MW.
AboitizPower is the holding company of the Aboitiz Group’s investments in power generation, distribution, retail and power services. Its distribution utilities operate in high-growth areas in Luzon, Visayas and Mindanao.