The Market Monitor Minding the Nation's Business
By Jerry Maglunog
Power generation is seen to become the major investment draw in the next administration, as the growing economy copes with an increased demand for electricity.
Former Energy Undersecretary Jose Layug estimated investments in power to cost about $2 million per megawatt (MW). “So, if an investor puts up 50 MW, that means an investment of $100 million,” he said.
There appears to be no stopping investors coming in to join the bandwagon of those now in the country to do business in the power industry, former Rep. Prospero Pichay Jr. noted.
“All of them are into power investments. It might be expensive, but the ROI (return of investments) is as quick as two years,” he said.
As early as 2009, the Department of Energy (DOE) has been seeking investors for several power projects in Mindanao. The island currently has an immediate 800-megawatt (MW) power backlog that needs to be addressed as soon as possible.
Already, four big businesses—two banks and two conglomerates—have infused no less than $300 million equity in power ventures there.
San Miguel Corp. (SMC) recently announced it was putting in $600 million in combined power and gas ventures until 2008.
Metrobank, through its mother unit GT Holdings, announced it would put up more coal and diesel-fired plants all over the Visayas and Mindanao to address recurring brownouts.
David M. Consunji, Inc. (DMCI) recently sold its banking unit, One Network Bank, to raise needed equity for its power plant in Palawan. Although its coal-fired, circulating fluidized bed power plant has been facing stiff resistance from environmental groups in Palawan, a province known for its strong advocacy for environmental protection, the firm appears determined to push through with it.
For the Ayalas, their unlisted power-generation unit, AC Energy Holdings Inc., is building a $1-billion coal-fired power plant in the southern part of the archipelago that is seen to generate up to 540 MW for Mindanao.
John Eric Francia, president and chief executive officer of AC Energy Holdings, Inc., said the company’s portfolio now includes wind-power projects, with solar-power projects expected to be added soon.
“We’d like to do more, but we also face some constraints,” he said, citing the limited tariff incentives available from the government for renewable-energy projects.
Last month, AC Energy signed a subscription and shareholders’ agreement with Bronzeoak Clean Energy Inc., the investment arm of Bronzeoak Philippines Inc., for the development, construction and operation of a solar-power farm in the Visayas.
AC Energy is also looking at investing in natural gas, although a decision may not come anytime soon, Francia said.
“While gas prices have been going down, so is coal price, so the gap is still there,” he added.
Francia said GNPower Mariveles Coal Plant Ltd. (GMCP) hopes to secure financing for the first phase of the expansion of its power plant in Mariveles, Bataan, by yearend, so construction could start by early 2016.
“In Luzon, we have another GN project; we have two-by-600 MW. We’re hoping to close that one fairly soon, as well,” Francia said.
The Ayala group, through AC Energy, holds a 17-percent stake in GMCP. Other stakeholders are project developer Power Partners, Ltd. Co. and Sithe Global Power LLC.
Francia said the additional plants, which would be placed “right beside” its existing two-by-300 MW coal-fired power plants, are “super critical.” The expansion program is targeted for completion in 2019 and will be divided into two phases.
Asked about the $1-billion funding requirement for the first 600 MW, Francia said: “We’re hoping to close by this year, that’s our target, at least for the first unit. We have to fund all of it to start construction.”
The group expects to sign a deal with an engineering, procurement and construction contractor “soon.” He added: “We haven’t decided yet on the turbine generator but it’s going to be a Western supplier.”