The Market Monitor Minding the Nation's Business
By Jerry Maglunog
The power sector and infrastructure remain the most promising investment destination in the country because of the huge backlog in power and the continuing increase in population.
Investments advisers and local economic managers suggest that the fastest way for investments to earn in the country is to engage in these sectors.
Dr. Gilbert Llanto, executive director and chief economist of the Philippine Institute for Development Studies (PIDS), a government think tank, said a hindrance to investors in the power sector is too much regulation imposed not just by the national government, but also by local governments.
“It’s one of the risks but the risks are overshadowed by profits in the long run,” Llanto said.
So far, only five conglomerates are very active in power-generation business. These are San Miguel Corp., Lopez Holdings, DMCI, Ayala and Aboitiz. The proof maximum profitability can be generated from the power sector is the increased market capitalization and revenues of these conglomerates with exposures in the sector.
Very recently, SMC, through its subsidiary SMC Global Power Holdings, reported P17.2 billion in revenues from the power business in just seven years. The hefty rise in revenues prompted it to embark on a $1.5-billion expansion plan in power investments. The majority of the funds will be from the proceeds of the sale of its Limay power plant.
The company disposed of its Limay asset because of the high cost of the diesel fuel used to run the power plant and is preparing for the acquisition of other power plants over the next several years. SMC Global Power Holdings is also planning to raise up to P27.3 billion ($624 million) this year, in what may be the country’s biggest initial public offering, to fund additional investments in power projects.
SMC Global Power said in a regulatory filing that it was considering adding 3,000 megawatts (MW) of new capacity in its power portfolio in the next 10 years via greenfield power projects requiring investments of about P90.4 billion.
The new facilities are composed of two coal-fired plants currently in advanced stages of planning—the 300-MW facility in Cavite and a 150-MW plant in central Leyte–and new power projects in Bulacan and Davao.
It also wanted to bid for a state contract to manage and use the power output of the 146-MW Naga power plant and the 588-MW Unified Leyte geothermal facility.
Aboitiz has a new feather in its cap following a win from a prestigious body due to effective management of a plant it operates. Aboitiz’s P33.31-billion, 15-year project finance facility of Pagbilao Energy Corp. (PEC) has been named the best power deal in the Triple A Asia Infrastructure Awards 2015 of the finance publication The Asset.
The proceeds of the facility are being utilized to finance the construction and development of a third coal-fired unit with a net capacity of 400 MW within the site boundaries of the existing Pagbilao power station in Quezon. The project, which is jointly developed by Aboitiz Power and TeaM Energy Corp., is expected to shore up power supply in Luzon by 2017.
The PEC deal is the single largest peso-denominated project finance transaction in the domestic market. It was participated in by a syndicate of seven domestic lenders.
It is just unclear how many future geothermal power sites will fall in Aboitiz, DMCI or SMC’s hands, as the Department of Energy and the Power Sector Asset and Liabilities Management announced that no fewer than 14 power sites are up for grabs.