The Market Monitor Minding the Nation's Business
By Jerry Maglunog
Investing in the power sector is one that has the fewest risks if one can get the huge capital required.
Since investments in power is one of the most capital-intensive in the world, only a few conglomerates can afford to venture in this sector.
So far, at least eight Filipino-owned firms are investing heavily in the power sector, given the high profit margins for all those that have investments in the sector. Of the eight, one is a universal and commercial bank (UKB); the rest are into different businesses.
Metrobank, the second biggest UKB in assets, is one of those that decided to invest heavily in the power sector. Very recently, Metrobank signed a landmark loan agreement with Therma Visayas Inc., the joint venture of Aboitiz Power Corp. and Vivant Corp., for the construction of a new thermal power plant in Toledo City, Cebu.
Metrobank serves as the biggest lender among the 10 banks that are part of the deal; it lent P7.5 billion to the P31.97-billion term loan facility. First Metro Investment Corp. (FMIC), Metrobank’s investment banking arm, was also the transaction’s lead arranger and sole bookrunner.
The amount pooled together with other lender-banks will be used to fund the construction of the 300-MW coal-fired power plant in Barangay Bato, Toledo City, 49 kilometers west of Cebu City. The plant is expected to be completed and fully operational by the first quarter of 2018.
The thermal power plant aims to meet the increasing power demand in the Cebu and Visayas grid. Of the plant’s expected 300-megawatts (MW) output, 150 MW will be utilized by Visayan Electric Co. (Veco), 30MW by the Balamban and Mactan Enerzone, and the rest by various industrial and commercial customers in the region. According to Therma Visayas Inc., the dome-like structure will use circulating fluidized bed (CFB) technology for its boilers to ensure lower emissions.
Metrobank President Fabian Dee spoke on behalf of the lender-banks during the signing event. Also present for Metrobank were Mary Mylene Caparas, executive vice president and head of institutional banking sector, and Aanthony Ocampo, senior vice president and head of corporate banking.
Metrobank is one of the country’s premier UKBs and has the largest domestic network of 920 branches, and over 2,100 automated teller machines (ATMs) nationwide and 34 foreign branches, subsidiaries and representative offices.
“If you mind the huge backlog in power, you will realize why many firms want to invest in this sector,” said former National Economic and Development Authority Director General Romulo Neri. In Mindanao alone, according to the Department of Energy, there is an immediate need to fill a 700-megawatt to 800-megawatt shortage to avoid the recurrence of the almost daily two-hour brownouts.
The Wholesale Electricity Spot Market (WESM) was quoted as saying that power investors using diesel and gas were urged to invest because these are the fastest to be built than turbine or natural gas. So far, firms that signified intention to increase equity for power operations are San Miguel Corp., Aboitiz, Lopez Group and DMCI. The last recently sold its thrift bank just to capitalize in power sector in Region 4-B.
One foreign investor that threw its hat into the sector is the AES Corp., a Virginia-based energy company. In August last year, the firm announced it was planning to invest $1.2 billion in the Philippine power sector.
Andres Gluski, AES president and chief executive officer, said the company would invest fresh $1.2 billion in a 1,200-megawatt power plant in Masinloc, Zambales.
“The Masinloc project is very very attractive, we’ve already gotten the environment permits and now at the final commercial aspects. We’re willing to expand here in the Philippines, but this [Masinloc] is only what we have right now,” Gluski was quoted as saying.
Along with AES expansion in the Philippines, Gluski said the company is also moving its regional office from Singapore to Manila. “If we’re investing $1.2 billion—that’s a major operation—we’d like to have the head office here in the Philippines, in Singapore we don’t have any operation,” the AES official added.
In January, it was reported that AES local unit, AES Masinloc Power Partners Co. Inc., will commence construction of the P49.45-billion expansion of its Masinloc coal-fired facility by an additional 600 MW, which is double the existing capacity.
AES added consultation with international and local banks” are on going to finance the multibillion-peso project.
In 2013, Andy Horrocls, AES Philippine chief executive, said that the company completed the refinancing of a $500 million debt owed to a consortium of local banks, including Bank of the Philippine Islands (BPI), Rizal Commercial Banking Corp., Philippine National Bank and Security Bank.
In 2008, AES Philippines acquired the 600-megawatt Masinloc coal-fired power plant in Zambales for $930 million during a government auction. Horrocks said the acquisition is a key component of the power firm’s strategy to invest in areas where there is a significant need for new capacity.
“With the potential expansion of our successful Masinloc facility, we see an opportunity to contribute to economic growth, whilst garnering better business prospects through mutually beneficial partnerships with trusted local banks,” he added.