by Myrna Velasco October
12, 2016
With private investors
and banks flooding the restructured electricity sector with capital for some
years already, the Philippine power sector is seen to be on a five-year
overcapacity.
These have been the
cautionary words sounded off by Aboitiz Power President and Chief Operating
Officer Antonio R. Moraza to reporters in a lunch meeting, wherein he similarly
noted that all grids are already swamped with oversupply at this point in time.
Nevertheless, he noted
that the Aboitiz Group will still pursue all of their projects under
construction and that they are keen on taking ‘market risks’ for all of their
capacities still not covered by bilateral contracts. After that, he indicated
that they might take a “pause” and will review investment plans moving forward.
Among the projects they
have been advancing to implementation phases include the 400-megawatt expansion
of the Pagbilao coal-fired power plant; the 300MW phase one of the RP Energy power
project in Subic; the 300MW Toledo coal-fired power plant in Cebu City; and a
couple of run-of-river hydropower projects with their Hedcor subsidiary plus
their joint venture development projects at SN Aboitiz Power Inc.
The Aboitiz power group
is also buying into the coal-fired power facilities in Mariveles, Bataan with
the Ayala Group and GN Power as partners. At anticipated $1.2 billion deal,
Moraza described their valuation of this merger and acquisition transaction as
“aggressive”.
On the changing
industry landscape, Moraza said “we are looking at five (5) years (of
oversupply)…in all grids,” noting further that oversupply is already happening
“now”.
Mindanao, in
particular, he stressed is already “on oversupply mode” and the same goes with
the interconnected power systems of Luzon and Visayas grids.
Moraza qualified that
this state of overcapacity will eventually benefit consumers with cheaper
electricity rates – the phase in the power industry’s market liberalization
that had been awaited by many since the passage of the Electric Power Industry
Reform Act.
“That’s why you have to
help us tell that EPIRA works for the consumers…that power rates have gone
down,” he stressed. When media raised questions why Philippine power rates are
still higher than the rest of many Asian countries, he retorted,” it’s
down…don’t you guys check your bills? It’s going down, it had gone down
30-percent in the last three years, what have you been talking about?”
Conversely, he
emphasized that it will be the power investors that will be in pain with
“market risks” if their generated capacities will not be soaked up by contracts
or taken up by buyers in the competitive regime of the industry.
Moraza similarly noted
that the Duterte administration is fortunate enough that it will no longer be
saddled with power supply problems, thus, the energy officials can turn their
attention into solving other problems of the energy sector.
To their credit, the
previous administrations focused attention then on enticing private capital to
address the country’s electricity supply dilemmas – and what is left to be done
by the Duterte administration will be to build on the momentum of economic
gains set by its predecessor.
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