Monday, January 31, 2011

SMC eyes revenue hike after oil, powergen consolidation

Business mirror

CONGLOMERATE San Miguel Corp. (SMC) expects to book significant increases in revenues and cash flow in 2011 following the first full year of consolidation of its oil refining and power-generation units, its top official said on Monday.
In an interview with reporters, SMC president Ramon S. Ang said sales could hit P530 billion this year while cash flow, as measured by earnings before interest, taxes, depreciation and amortization or Ebitda, will rise to $2 billion.
Ang said prior to consolidation, the company booked P100 billion in sales, while Ebitda amounted to $750 million.
SMC recently acquired a majority stake in listed Petron Corp. Its power plants comprise facilities in Sual, Limay, San Roque and Ilijan with a capacity of about 3,000 megawatts. SMC is eyeing to double this figure over the next five years.
Ang said SMC may take its power plants public using the so-called back- door listing rule, should this route prove “faster.”
The conglomerate, which has been diversifying outside food and drinks since 2007, has yet to consolidate its telecommunication and coal mining assets, the company president added.  
Ang spoke to reporters on Monday at the sidelines of an investor briefing hosted by unit San Miguel Pure Foods Inc., which is set to hold a P15-billion preferred share sale involving 15 million shares at P1,000 each. The offer will be held through February 14 to February 25.
Purefoods’ share sale may offer a dividend rate of 200 basis points to 250 basis points over the five-year benchmark bond at the Philippine Dealing and Exchange Corp., according to Eduardo Francisco, president of BDO Capital and Investment Corp.
BDO Capital is one of the arrangers of the company’s share sale next month. The dividend rate will be set on February 8.
Purefoods has allotted a capital spending budget of P2 billion this year for expansion, its president Francisco Alejo III said on Monday.
Bulk of the proceeds from the share sale is seen to fund Purefoods’s diversification into power, water, and other utilities to mirror the strategy of its parent company SMC.
SMC also plans to sell within this quarter up to 1 billion primary and secondary commons shares priced over P200 each to as much as P250.  
Funds to be generated from the sale will be used to fuel new acquisitions including toll road acquisitions which the company expects to announce soon.
Ang said last week the company is looking to buy into the Metro Manila Skyway project and the Southern Tagalog Arterial Road or Star in Batangas City.
SMC may ask for extension of Indophil due diligence
Less certain, however, is SMC’s planned takeover of Australia’s Indophil Resources NL, owner of a third of the undeveloped $5.9 billion Tamapakan gold-copper project in Mindanao.
“The due diligence is still ongoing. If we are not satisfied with our due diligence, we will ask for an extension [from Indophil] if they will allow us,” Ang said in Filipino.
The deadline for SMC to complete its study of Indophil’s finances has already been postponed to February 10 from the original date of January 10.
SMC has already paid $40 million for a 10.1 percent stake in Indophil, formalizing its entry both into Tampakan and the precious minerals sector.
SMC shares lost 5.17 percent to P168.8 each on Monday.

SunConnex allots $100 million for solar projects

By Donnabelle L. Gatdula (The Philippine Star) Updated January 31, 2011 12:00 AM

MANILA, Philippines -  SunConnex, a solar power developer based in the Netherlands, is planning to invest more than $100 million for solar power projects in the Philippines.
Jos Schlangen, SunConnex business development manager, said the company would want to build solar wind plants with as much as 50-megawatt (MW) capacity.
He said they would want to initially start with smaller projects with five to 10-MW capacity then go big with a 50-MW capacity project in the future.
Schlangen said they are now in the process of closing contracts with some potential partners. “SunConnex has seen and done it all before and we want to share that knowledge with our partners. You can count on us to be a reliable and trustworthy partner in this business. We can’t disclose names as we are in the process of closing contracts, but we are all over in the country, Luzon, Mindanao and Visayas,” he said.
At present, SunConnex is a specialized photovoltaic (PV) product distributor. Through local offices in five European countries, it offers a wide portfolio of reliable high-quality brands of solar modules, inverters, mounting systems and other accessories.
SunConnex was founded in 1989 and gained unique experience in several of the world’s largest PV projects throughout the last decades.
The SunConnex official said they also consider putting up larger projects.
“It is large, with a range of more than 50-MW, all over the country, yes we are the developer and we have local partners also to construct and to build, and we take care also of financing, and we do it ourselves or we could do it also with partners,” he said.
He said they are also talking with various potential financial institutions to help them finance some of their projects. “Yes, maybe talked to several banks and investors, that’s ongoing,” he said.
As with other renewable energy developers, the official said they would like to see the rate setting scheme finalized by the government soon. “But like everyone, with FIT, we can push a lot of buttons and things are moving but at the moment we are preparing like all the others,” he said.
FIT is a guaranteed revenue for RE developers set and approved by the government for a certain period of time.
He pointed out that the setting of the FIT would help the renewable energy developers firm up their goals.

Green Future Innovations to build P6-billion ethanol plant in Isabela

By Donnabelle L. Gatdula (The Philippine Star) Updated January 31, 2011 12:00 AM

MANILA, Philippines -  Green Future Innovations Inc. (GFII) is putting up a P6-billion bioethanol plant and cogeneration project in Isabela.
GFII has officially launched recently what is believed to be one of the country’s biggest renewable energy (RE) projects in the Philippines.
Reynaldo P. Bantug, GFII president, said the bioethanol plant in San Mariano, Isabela, is an offshoot of the partnership among top RE investors in Asia.
“This is the brainchild of GFII, a newly formed venture among Japan’s Itochu Corp. and JGC Corp., the Philippine Bioethanol and Energy Investments Corp., and Taiwanese holding company GCO.
Bantug said the multi-billion mega project will have a capacity of 54 million liters of bio ethanol and produce 100,000 MW of energy annually.
The GFII executive said “right now, we import our fuel needs, and foreign exchange goes to the rich Middle Eastern nations, this project will grow biofuel in the field,” he said.
The project will grow sugarcane in 11,000 hectare of idle and underdeveloped land for use as feedstock. Its massive infrastructure will produce enough bioethanol to displace 54 million liters of imported fossil fuel.
Apart from the economic benefits of the project, GFII reiterates the socio-economic impact this will bring to the farmers in the north. 
To be able to source 700,000 tons of sugarcane per year, GFI shall be signing growership contracts with about 4,000 farmer families thus having direct impact on the lives of about 20,000 Filipinos. 
GFII estimates it will need to spend about P1.6 billion per year for its feedstock, which shall have tremendous impact on the local economy of San Mariano.
The company official also said that more than 15,000 Filipinos will be employed by this project. 
The bio-ethanol plant is expected to be operational by the second quarter of 2012.
Senator Miguel Zubiri, who authored the Biofuels and Renewable Energy Acts, led the launching of the GFII project along with Isabela governor Faustino Dy III. 
The Biofuels Act of 2006 passed into law on Jan. 12, 2007, mandates that at least five percent of the total gasoline sold in the country be blended with five percent bioethanol by February 2009 and upon the recommendation of the National Biofuels Board and the Department of Energy, increases this mandated blend to 10 percent by 2011.

European solar power plant maker eyes Philippines

AMSTERDAM-BASED SunConnex plans to invest in solar power projects across the Philippines.

Jos Schlangen, SunConnex business development manager, said the company is keen on putting up between five- and 10-megawatt solar plants and has begun talks with potential partners for these projects.
“We can’t disclose names as we are in the process of closing contracts, but we are all over in the country, Luzon, Mindanao and Visayas,” he said.

SunConnex is a solar power developer with over 20 years experience in the industry. The company is present in five European countries, distributing various branded products and technologies.

For its proposed solar projects in the Philippines, SunConnex will initially invest $100 million, which could be financed through borrowing and equity from potential partners.

The proposed projects, however, would depend on the approval of the feed-in tariff (FIT) for renewable energy projects.

The FIT, which was mandated by the Renewable Energy Act of 2008, sets guaranteed payments over a definite period for renewable energy developers.

“Of course, we are waiting for FIT to be released then we are able to build a project,” Schlangen said.

The executive said that SunConnex eventually aims to put up large-scale solar power projects in the country with over 50 megawatts generating capacity.

“We are the developer and we have local partners also to construct and to build, and we take care also of financing, and we do it ourselves or we could do it also with partners,” he said.

Euan Paulo C. Añonuevo

Sunday, January 30, 2011

CA junks Writ of Kalikasan petition on power line project

Business World Online
Posted on January 30, 2011 10:58:08 PM

THE COURT of Appeals (CA) has dismissed a Writ of Kalikasan (nature) petition filed by residents in Makati City to halt the installation and operation of high-voltage power lines in their subdivisions.

In a 24-page decision promulgated Jan. 20, the appellate court’s former 17th division junked the petition of Magallanes Village and Villamor Air Base residents for failing to link the impact if electromagnetic fields (EMF) emitted by the power lines on the environment, including adverse effects to health.
"In failing to prove the causal link between the illnesses feared and the EMF generating from Meralco’s (Manila Electric Co.) power lines, petitioners have, in fact failed to discharge evidentiary burden," a copy of the decision obtained by BusinessWorld read.
Counsels for the petitioners could not be immediately reached for comment.
A total of 41 residents of Barangay 183, Zone 20 in Villamor, Pasay City, and Magallanes Village, Makati, filed the petition against Meralco, Ninoy Aquino International Airport Terminal (NAIA) 3 administrator Manila International Airport Authority and the barangay chairman and council members of Barangay 183 last November, claiming the EMF and extreme low frequency (ELF) generated by the 115-kilovolt wires could lead to diseases such as "cancer, leukemia in children, Alzheimer’s disease, depression, miscarriages, headaches, memory loss and insomnia."
Petitioners cited a section of Presidential Decree 856, or the Code of Sanitation of the Philippines, which states that "high-tension transmission lines shall never pass overhead or underground of residential areas."
However, the court said petitioners failed to specify the environmental damage or threat from the operation of the power lines which will supply electricity to NAIA-3.
"There is admittedly a glaring absence of any allegation directed against violation of petitioners’ right to a balanced and healthful ecology (or the right to health, as insisted by petitioners) and the purported environmental damage arising from the installation and energization of Meralco’s sub-transmission lines," the decision read.
The petitioners presented several studies to back up claims, especially on EMF and ELF relation to higher risk of acquiring leukemia, but the court said such studies were inconclusive.
"At best, the data gathered are purely statistical in nature with no scientific evidence or conclusion as to whether the leukemia suffered by the subjects had been caused initially by their exposure to EMF-ELF or the direct impression of some other factor, environmental or otherwise," the decision read.
The court added that petitioners also failed to substantiate claims that the electric posts were tilting on the direction of the houses, and that the wires were strung too close to houses.
"During the preliminary conference, petitioners could not state with certainty the distance of the electric wire from the house of one of the petitioners, let alone show the alleged tilting of the posts or the consequential damage to the drainage system," the decision said.
Meanwhile, the court accepted evidence submitted by Meralco indicating that the power lines emit a magnetic field of 16.7 milliGauss (mG), way below the 833mG exposure limit set by the International Commission on Non-Ionizing Radiation Protection that has been adopted by the Department of Health (DoH).
The court also noted that Meralco has obtained clearances and compliance certificates from DoH, Pasay City government, Department of Environment and Natural Resouces and other agencies before pushing through with the project.
"The construction of the poles and the energization of the sub-transmission lines are far from unauthorized or unlawful. In fact, they are more of a necessity than anything else," the decision read.

Dutch solar firm eyeing $100M worth of projects

Business World Online
Posted on January 30, 2011 08:54:37 PM

DUTCH COMPANY SunConnex B.V. plans to put up a total of 50 megawatts (MW) of solar facilities in the country.

SunConnex B.V. wants the government to set feed-in tariffs before starting solar power projects all over the country.
SunConnex business development manager Jos Schlangen told reporters the company wants to build solar plants with capacities that range from 5 MW to 10 MW.

“We are waiting for the feed-in tariff to be released then we are to build a project on the ground ... We can’t disclose the names as we are in the process of closing contracts but we are all over in the country,” said Mr. Schlangen.

He said the projects are estimated to cost about $100 million. There is no timetable yet for the solar projects.

The feed-in tariff is guaranteed payment given to investors of renewable energy through a universal charge. The government has set a second quarter deadline for determining the final feed-in tariff rates.

The company may tap local partners to help construct and finance the solar projects.

“We take care of financing and we do it ourselves. [But] we could do it also with partners. We have talked to several banks,” said Mr. Schlangen.

The company is busy with site visits and planning the project and is “discussing with partners about business concepts and details on financing,” he said.

SunConnex is a supplier of solar electric products and systems. It has offices in Italy, France, Spain and the United Kingdom. -- 
E. N. J. David

NEA should take over Albay power firm–Salceda

business mirror

LEGAZPI CITY—Albay Gov. Joey Sarte Salceda is urging the take over of the Albay Electric Cooperative(Aleco) by the National Electric Administration (NEA), saying it’s the only way to rehabilitate the dying firm and save the province from constant threat of power disconnection.
Salceda made the recommendation following a new threat from the PhilippineElectricity MarketCorp. (PEMC) to disconnect power supply to Aleco set for tomorrow, February 1.
The notice of disconnection was the second attempt from the PEMC since last September for the failure of Aleco to settle some P1.2 billion in electric bills. The first attempt was halted byPresident Aquinofollowing an appeal from Salceda.
The Albay governor admitted that Aleco with its 250,000 consumers is a problem cooperative in the hands of its current management, the Aleco board.
A source said Salceda had already given the green light for the controversial Aleco general manager Alex Realoza to step down.
The AkoBicolParty-list said Aleco is the second worst power cooperative in the country due to mismanagement and corruption.
Realoza, however, defended the Aleco board management, saying the power firm had already been under NEA management thrice for so long, twice under a Church representative and one year under the National Power Corp. He said under the NEA, Church and Napocor management, Aleco was never rehabilitated. Realoza said he will step down only if the Aleco board will tell him to do so.
On Friday last week  a multisectoral protest rally was held again in front of the Aleco office denouncing the cooperative’s alleged mismanagement and corruption.
Salceda was earlier reported to have floated the need to privatize Aleco, but the notion was strongly protested by the Church, the Albay Consumers Watch, militant groups and the NEA. The corruption and mismanagement issue also caused the unending infighting between the Aleco leadership and its employees’ union.
The source said privatization is the only solution to give life to the bankrupt Aleco.
Lawyer Bart Rayco said during the rally, his group is completing the documents for filing criminal charges against Realoza and the Aleco board.
Dante Jimenez, president of Volunteers Against Crime and Corruption, also joined the rally saying consumers have been suffering unconscionably highelectric-power bills.
Last November the Albay Consumers Watch said Aleco rate shot up by an average increase of 400 percent.
Salceda said Aleco owes P1.7 billion from the Power Sector Assets and Liabilities Corp. and P180 million to NEA.
Salceda said 60 percent of Aleco annual consumption of 300 million kilowatt-hours is dependent on the PEMC who sells power according to supply availability and demand. The PEMC is operating like a stock market, too costly for an electric cooperative, said Salceda.
In 2008 Aleco made a one-year contract with Napocor for its “operation and maintenance” through the efforts of Salceda in a bid to rehabilitate the dying Aleco. Some P250 million of funds from the Calamity Assistance Rehabilitation Efforts had been poured for Aleco’s rehabilitation by NEA in 2007 following Typhoon Reming,  but nothing had come out better, lamented Albay Rep. Al Francis Bichara.

Saturday, January 29, 2011

Ensure stable power supply in Mindanao, biz sector tells NEDA

By Germelina Lacorte | Saturday| January 29, 2011
DAVAO CITY (MindaNews/28 January) – Basic infrastructures, including stable power supply, topped the concerns raised by participants from the business sector during the regional consultation on the country’s development plan for the next six years, a National Economic and Development Authority (NEDA) official said.
Miguel Herrera, NEDA-XI Plan and Policy Formulation director, told MindaNews the business sector wanted these concerns to be addressed in the Medium-Term Philippine Development Plan (MTPDP) for 2011-2016.
Herrera said that in the consultation held in this city a few weeks ago the participants particularly cited doubts on the capacity and efficiency of the seaports and the number and quality of roads, especially the farm to market roads.
“The doubt on power stability is not just a problem in the region but in the entire Mindanao,” the official said.
Last year, a power shortage that affected most provinces of Mindanao and blamed on the El Nino phenomenon resulted in rotational power curtailment.
During the Mindanao Power Summit in December 2009, an official of the Mindanao Business Council said: “We have here a situation that clearly leads to a power crisis that would greatly affect the economy of Mindanao five years from now. Clearly, a power crisis looms in the south.”
Business sector participants also identified yet again the high cost of shipping and doing business with the local government units as one of the drawbacks of the region, Herrera said.
“They are disturbed on the matter that requirements of business permits and other documents in various LGUs that are not standardized, “he said.
The MTPDP 2011-2016 embodies President Benigno S. Aquino III’s “Social Contract with the Filipino People.”
The plan deals on policy, industry competitiveness, infrastructure development, good governance and environment protection, among others.
The regional consultation was attended by executives of the Regional Development Council, representatives from regional government agencies, government-owned and controlled corporations, business groups, academe, civil society organizations, and local executive and legislative officials. (Rico Biliran/MindaNews)

Thursday, January 27, 2011

Lopezes mull selling shares in Meralco to Pangilinan group

Manila Bulletin
January 27, 2011, 3:25am
MANILA, Philippines, Jan. 26 (PNA) -- The Lopez family may divest its remaining stake in Manila Electric Co. (Meralco) if the Pangilinan group will offer a more attractive price.
"We might sell it at a certain price [to the Pangilinan group]. It has to be above P300 per share," Oscar M. Lopez, chairman emeritus of First Philippine Holdings Corp. told reporters on the sidelines of the Philippine Business for Social Progress' 40th anniversary on Tuesday night.
Lopez said his company and Manuel V. Pangilinan, the chairman of Philippine Long Distance Telephone Co. (PLDT) and Metro Pacific Investment Corp. (MPIC), has an agreement for the remaining 6 percent shares in Meralco.
"He is always a first priority on this," Lopez said, referring to Pangilinan.
In March, the PLDT group and the Lopezes forged an agreement that assures both camps control of Meralco should either party decides to let go of their interests in the utility.
Share prices of Meralco on Wednesday were down to P272 per share from Tuesday's P276.
He, however, said that at the moment "we want to hold the shares as a legacy from my father. As long as we maintain a seat on the board."
At present, the Pangilinan group's total shares in Meralco stand at 41.1 percent.
San Miguel, on the other hand, owns a 27-percent stake it bought from state-run Government Service Insurance System. Along with its allies, San Miguel is said to control around 43 percent of Meralco.
The Pangilinan group acquired Meralco to generate a number of operational synergies.
Earlier, Meralco, in cooperation with PLDT unit Smart Communications Inc., announced the launch of Meralco Mobile Services, which will have a pilot run in selected areas and will be made available to Meralco customers starting 2010.
Services to be made available for the pilot run are broadcast of pre-determined power interruption schedules, emergency interruptions, typhoon-related safety tips, business center locations and a customer feedback facility.
Once fully operational, other services to be offered include meter reading notification, billing details, bill due date reminders, power outage restoration feedback, among others.

SMC power unit closes $300-million bond issue

By Zinnia B. Dela Peña (The Philippine Star) Updated January 27, 2011 12:00 AM 

MANILA, Philippines - SMC Global Power Holdings Corp., the wholly-owned power unit of diversifying conglomerate San Miguel Corp., successfully closed its maiden bond issue at an optimal size of $300 million.
In a disclosure to the Philippine Stock Exchange, San Miguel said the five-year dollar bond issue was priced at seven percent, which is at the tight end of the pricing guidance of 7.25 percent.
ANZ (Australia and New Zealand Banking Group Ltd.), HSBC and Standard Chartered Bank were the joint lead managers for the issue.
SMC Global Power has applied to list the bonds with the Singapore Exchange Securities Ltd.
Proceeds from the bond issue will be used to finance investments in power-related assets, fund payments or prepayments of obligations to state privatization agency Power Sector Assets & Liabilities Management Corp. (PSALM), as well as for general corporate needs.
SMC Global Power is aiming to double its existing power generating capacity to 6,000 megawatts in the next five years with the addition of 3,000 mw of new capacity.
The company owns three coal mining assets in Mindanao – Daguma, Bonanza and Sultan – which could produce 1,200 MW of electricity.
San Miguel also owns 10.1 percent of Australia’s Indophil Resources NL, which controls a third of the $5.2-billion Tampakan copper-gold project in Mindanao. The much-coveted Tampakan mine is touted as Southeast Asia’s richest untapped copper and gold deposit.Indophil owns 37.5 percent of Sagittarius Mines Inc., the local company working on the Tampakan project in South Cotabato. Sagittarius is controlled by London-based global mining giant Xstrata Plc.
SMC Global Power is also eyeing power generating assets to be auctioned off by PSALM.
Among these assets are the 650-MW Malaya thermal power plant, Caliraya-Botokan-Kalayaan hydropower plants, Sucat thermal power plant and the Agus and Pulangui power plants.
The San Miguel group is already the biggest player in the country’s power generation sector with a production capacity of over 3,300 MW from the 1,200-mw Sual coal-fired plant, 600-MW Limay thermal facility, 340-MW San Roque hydro facility, and the 1,200-MW Ilijan natural gas-fired facility.

Cepalco to put up 30-megawatt plant

By Donnabelle L. Gatdula (The Philippine Star) Updated January 27, 2011 12:00 AM 

MANILA, Philippines - Cagayan de Oro Electric Power Light Co. Inc. (Cepalco) is planning to put up a 30-megawatt (MW) solar power project in Mindanao, a top company official said.
Cepalco president Ramon Abaya said they will initially build a 10-MW facility and expand this by another 10 MW in the near term.
“We have 40 hectares to host this 20-MW (facility) in the next one and a half years. If there would be a definite feed-in tariff (FIT), we may increase this to 30 MW in the next three years,” Abaya said.
He said they would be doing the first phase of the solar project on their own.
For the larger capacity, they may tap partners in the succeeding phases.
Abaya pointed out they are not in talks with potential partners negotiations will not be sealed until the final FIT is determined.
FIT is prescribed under the Renewable Energy Act which gives guaranteed revenue for renewable energy developers based on the technology they would use. Base on initial discussions among the industry players, Abaya said the FIT would likely be at the range of P19 to P10 per kilowatthour but said this cost may go down once more players come in.
“We hope to bring down the costs. We will bid out the contracts so we will have an option to get the most competitive price,” he said.Abaya said they are in the process of bidding out the first phase of their solar project in Cagayan de Oro.
“There are more than 10 that have submitted their bids. But we have shortlisted three.
All are German integrators,” he said. The solar panels, he said, would be sourced in Taiwan and China which offer competitive prices.
He said if the FIT is in place, they would be able to construct the solar project within six months.

Wednesday, January 26, 2011

Recap of renewable energy taxation

Business World Online
Posted on January 26, 2011 10:16:37 PM
Taxwise Or Otherwise -- By Christopher De Guzman

Experience in recent years has shown how much energy production, necessary to support human existence, has weighed not only the global economy but on the environment as well.

We have seen how economies around the world have reeled from the effects, on the one hand, of the constant fluctuation of price and availability of oil, coal, gas and other traditional sources of energy and, on the other hand, the tragedies brought about by floods, droughts and other natural disasters caused by centuries of human abuse of Mother Nature.
It is thus in the midst of such global state of affairs that various sectors have begun to push for the development and use of renewable sources to meet the world’s growing demand for energy.
In the Philippines, the first concrete step towards adherence to such growing advocacy is the promulgation of Republic Act No. 9513, more popularly known as the Renewable Energy Act of 2008 or quite simply, the RE Law.
Through this law, the State has declared its commitment to accelerate the exploration and development, and at the same time increase the utilization, of renewable energy in the Philippines.
To encourage the support and enthusiasm of all prospective investors and project proponents, the RE Law provides certain fiscal and non-fiscal incentives to renewable energy developers and others who will be participating in the renewable energy industry.
Such incentives include the following:
1. Income tax holiday
RE Developers are entitled to an income tax holiday in the first seven years of commercial operation, with the right to apply for additional income tax exemptions to cover any additional investments in their RE projects. At the end of the seven-year period, they shall be subject to corporate income tax at the preferential of 10% based on net taxable income. Entitlement to the 10% rate, however, is subject to the condition that the RE developer would pass on its tax savings to energy end-users in the form of lower power rates.
2. Accelerated depreciation
If an RE project fails to receive an income tax holiday before its full operation, the RE developer may apply for the accelerated depreciation of all plant, machinery and equipment that are reasonably needed and actually used in its RE operations, and use such accelerated depreciation as the basis for computing its corporate income tax liability. The rate of accelerated depreciation shall not be greater than twice the rate that would have been used had the annual allowance been computed in accordance with existing Department of Finance rules and regulations.
3. Net-operating loss carry-over
Net operating losses incurred by RE developers in the first three years from the start of commercial operations may be carried over as deduction to the next seven years immediately following the year of loss.
4. Zero-rated value-added tax (VAT)
Zero-rated VAT shall apply to the RE developer’s sale of fuel or power generated from renewable sources of energy; and purchases of local supply of goods, properties and services needed for the development, construction and installation of plant facilities.
5. Tax exemption of all proceeds from sale of carbon emission credits
6. Duty-free importation/tax credit on local purchase
Within 10 years from the issuance by the Department of Energy of a Certificate of Compliance, RE developers are entitled to duty-free importation of machinery and equipment (including spare parts) used exclusively in their RE operations. In the case of machinery and equipment (including spare parts) purchased locally, RE developers may claim a tax credit equal to 100% of the VAT and custom duties otherwise due had the same been imported.
7. Lower real property tax
Civil works, equipment, machineries and other improvements actually and exclusively used in the RE operations are subject to a lower real property tax equivalent to a maximum of 1.5% of the net book value of real property.
8. Cash incentive
RE developers who provide missionary electrification are granted cash incentive based on per kilowatt-hour generated and equal to 50% of the universal charge for power need to service missionary areas where they operate the same.
There are a lot more fiscal and non-fiscal incentives under the RE Law which have not been touched in this article. But, sans these provisions in the RE Law, the use of renewable energy must be aggressively pursued and promoted since it is indispensable in achieving an effective balance between the goals of economic growth and the protection of health and the environment.
The author is a manager at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of PricewaterhouseCoopers global network. Readers may send feedback
Views or opinions presented in this article are solely those of the author and do not necessarily represent those of Isla Lipana & Co. The firm will not accept any liability arising from such article; the author will be personally liable for any consequent damages or other liabilities.

Cepalco to put up 30-MW solar power plant in Mindanao

business mirror

THE Cagayan de Oro Electric Power Light Co. Inc. (Cepalco) is looking at setting up in Mindanao a 30-megawatt (MW) of generating capacity sourced from the sun.
Ramon Abaya, Cepalco president, said they are planning to put up a total of 20 MW that will be done in two phases in the near term.
“We have 40 hectares of land in Cagayan de Oro where 20 MW of solar farm could be built in the next 18 months. If there would be a definite feed-in tariff [FIT], then we may increase this to 30 MW in the next three years,” Abaya said.
He added they will initially put up the first 10 MW on their own and that they might need to tap partners should they increase the capacity of their initial 10-MW solar power farm project.
Abaya said they have yet to talk with potential partners.
He implied that everybody is still on “wait and see” attitude for the FIT to be put in place.
“Negotiations will not be sealed until the final FIT is determined,” Abaya said.
The feed-in tariff guarantees renewable-energy developers a fixed rate due to them over a period of time.
Initial talks among industry players, according to Abaya, indicate that the FIT would range around P10 to P19 per kilowatt-hour (kWh).
“But this cost may go down once more players come in. We hope to bring down the costs. We will bid out the contracts so we will have an option to get the most competitive price,” he said.
Abaya added that they will be bidding out the first phase of their solar project in Cagayan de Oro.
“There are more than 10 suppliers that have submitted their bids. But we have shortlisted three. All are German integrators,” he said.
The solar panels, according to Abaya, will be sourced from either Taiwan or China, or whoever offers the most competitive price.
If the FIT is in place, Abaya said they would be able to complete their solar project within six months.
In January last year, the Energy Regulatory Commission  renewed Cepalco’s Certificate of Compliance (COC) for its 950-kilowatt Solar Photovoltaic (PV) Power Plant in barangay Indahag, Cagayan de Oro City.
Cepalco’s PV plant started its commercial operations also in September 2004, after securing the first COC. The PV plant displaces barrels of fuel oil and avoids around 24,000 tons of carbon compound emission into the environment.

Energy chief’s appointment OKd

By Maila Ager
First Posted 12:13:00 01/26/2011

Filed Under: Politics, Energy, Government

MANILA, Philippines—Energy Secretary Jose Rene Almendras on Wednesday got the nod of the powerful Commission on Appointments in the committee level.

The commission's committee on energy unanimously approved on Wednesday a motion recommending Almedra's confirmation to the plenary, which is expected to act on the committee's decision later in the day.

Almendras was the second Cabinet member whose appointment was confirmed by the CA at the committee level.

Unlike Almendras, however, Trade Secretary Gregory Domingo's confirmation by the CA's committee on trade and industry was finished in just one hearing Wednesday.

There was no opposition to Almendras's appointment from the CA members but a lot of questions have been raised since the body started deliberating his appointment late last year.

Lopezes may sell remaining stake in Meralco

Business World Online
Posted on January 26, 2011 11:09:42 AM 

LOPEZ-LED First Philippine Holdings Corp. is willing to sell its remaining shares in Manila Electric Co. (Meralco) to the Manuel V. Pangilinan group "at a certain price," according to an official.

Oscar M. Lopez, First Philippine Holdings chairman emeritus and chief strategic officer, told reporters his company would sell the remaining 6% stake if the offer is more than P300.00 per share.

"We might sell it at a certain price. It has to be more than P300 per share," he said at the sidelines of the Philippine Business for Social Progress' 40th anniversary on Tuesday.

"Mr. Pangilinan gave us hints would want to buy the shares," he added.

Mr. Lopez however said that for the meantime the Lopez family would hold on the remaining shares in Meralco, as this was a legacy from the late industrialist Eugenio H. Lopez, Sr.

"As much as possbile we want to hold to the shares as a legacy from my father. As long as we maintain a seat on the board," he said.

Electric coops warn of power crisis in off-grid areas


OFF-GRID utilities that source their electricity from state-owned National Power Corp. (Napocor) are appealing to President Benigno Aquino 3rd to address a power crisis in their service areas because of the government’s inability to secure their fuel requirements. In an open letter to the President, members of the Association of Isolated Electric Cooperatives Inc. (AIEC) said all the islands under Napocor’s Small Power Utilities Group (SPUG) are projected to suffer acute power outages by end-January.

“The present government’s vision and desire to implement economic revolution in the rural areas, particularly in the remotest islands, by mitigating the migration of people to urban centers, will be jeopardized if and when this impending crisis will not be resolved expeditiously,” the group said.

Napocor’s SPUG provides power to islands and missionary areas across the country. Because of the off-grid areas’ limited markets and lack of commercial viability, consumers nationwide subsidize SPUG’s operations.

Napocor has had difficulties in sourcing funds for its SPUG operations after the Department of Justice ruled that the former could only raise additional debt for refinancing activities.

Worse, the Energy Regulatory Commission approved only half of the P5 billion in universal charges that Napocor sought for SPUG’s requirements this year.

A group of 39 electric cooperatives sourcing their power supply from SPUG, the AIEC said a diesel shortage has resulted in power outages in Tablas Island, Romblon and Polilio Island, Quezon.

“If unresolved soon, this could lead to social unrest, losses in economic activities, particularly in local tourism industries and investors’ loss of confidence in rural economies,” the group said.

The group serves 652,879 households or about 3.2 million Filipinos.

The members of AIEC include electric cooperatives in Romblon, Occidental Mindoro, Oriental Mindoro, Quezon, Masbate, Catanduanes, Marinduque, Palawan, Cebu, Antique, Surigao del Norte, Sulu and Tawi-Tawi.

Tuesday, January 25, 2011

Tariff rates seen for one renewable source at a time

By Amy R. Remo
Philippine Daily Inquirer
First Posted 22:48:00 01/25/2011

MANILA, Philippines—The Energy Regulatory Commission is mulling over the approval of feed-in-tariff (FIT) rates of each renewable energy source separately—some earlier than others—to allow developers to move forward with their proposed power projects.
According to ERC executive director Francis Saturnino Juan, it would be possible for the commission to approve FIT rates of each renewable energy source—one at a time—to help investors get financial closing for their projects.
Juan explained that by having a feed-in-tariff rate in place, project proponents would be able to justify to banks, financial institutions and their investors the feasibility of their respective power projects.
This is the reason why the FIT measure is among the most awaited mechanism under the Renewable Energy Law because it will determine the economic and financial viability of the projects.
Under the FIT system, renewable energy developers are assured of future cash flows, as electricity end-users will be charged fixed amounts to cover production of energy from renewable sources. With this in place, utilities can spread the cost of clean power among its customers.
The system is also expected to encourage investors to go into renewable energy development and production as it ensures stable pricing.
Juan clarified, however, that while the FIT rates could be approved, project proponents would have to wait for the ERC’s go signal before the rates can be implemented.
The main purpose of granting FIT rate approvals is to assure investors of adequate returns for their projects, he added.
The FIT mechanism, along with other incentives and schemes provided for under the Renewable Energy Law, should have been put in place last year but was delayed due to a number of factors, most notable of which was the change in the administration.
This meant that the National Renewable Energy Board, the recommendatory body for such incentives, had to be reconstituted.
The NREB, according to Juan, is expected to submit its recommendations by March this year. Under the newly formulated 2011 Renewable Energy Plan, however, the NREB is given a bigger leeway until the second quarter this year to submit its proposals.
Juan earlier assured power consumers that the ERC has put in place the necessary mechanisms to cushion the possible increases in electricity prices, once the FIT rates are implemented.
“The accomplishment of (the country’s) renewable energy objectives will definitely cost the government and consumers. Given the current state of development of most of these renewable energy technologies, it may not come cheap. The challenge, therefore, is to keep the costs at a level that is affordable, if not acceptable,” Juan explained.
The FIT design adopted by the ERC addresses the cost and pricing barrier to developing renewable energy without being too costly for consumers, said Juan.
“First is that (the FIT) mandates the equal burden sharing of all on-grid electricity consumers, regardless of the grid or area where they may be connected to. The result is that everyone pays the same extra cost in support of the (country’s) objectives and with everyone paying it, additional imposition is kept at a minimum,” Juan said.