Wednesday, June 21, 2017

Alsons eyes new partner for hydropower venture

Posted on May 29, 2017

ALSONS Consolidated Resources is in talks with new partners for its first venture into hydroelectric power, while keeping open its invitation to Japan’s Toyota Tsusho Corp. to put in 25% of the equity component of the project, its president said.

“There’s always an open invitation for our Japanese partners because of the partnership that we have had over the years. There is always an open invitation for them to invest up to 25%,” Tomas I. Alcantara, Alsons chairman and president, told reporters last week.

Toyota Tsusho is Alsons partner in the 210-megawatt (MW) coal-fired power plant with a 25% stake. The plant, which has two 105-MW units, cost at least $600 million to build, with a 70-30 debt-equity ratio.

Alsons is planning to build a 15.1-MW run-of-river hydropower plant in Siguil, Sarangani province. It estimated the cost of the project at P3.9 billion, while targeting to start commercial operations in the second half of 2020. The project is not yet included in the company’s P8.8-billion capital expenditure for this year.

“Toyota (Tsusho) is considering it. In fact, they are bringing in a Japanese grant into the picture. For renewables, the Japanese government has a program that would allow the project company to enjoy a grant,” Mr. Alcantara said.

“Our Japanese partners are still putting things together. They will make their submission to the government on June 15, so we will see it before then,” he added.

In the case of the Siguil project, the loan component would be higher, while the equity portion shouldered by investors is lower than that for a coal power plant, he said, adding that an 80-20 debt-equity ratio is possible.

“Right now, it really depends on the appetite of banks at that time when we say we’re ready to go,” he said.

“We’re not looking at FiT (feed-in-tariff) at any of our projects,” he added, referring to the installation target of 250-MW for small hydro projects that is paid a guaranteed rate of P5.90 for each kilowatt-hour exported to the power grid.

Mr. Alcantara said the allocation for the equity component that is not taken by Toyota Tsusho would be done on a “case-to-case” basis for the hydro project. But he said the company intends to retain majority ownership, as with all its projects.

Asked whether Alsons was keen on taking other investors, Mr. Alcantara said: “There are other parties who are interested but we are covered by a non-disclosure agreements. But in the case of our Japanese partners, we’re free to say that there is always an open invitation for them to join any of our projects.”

Next to Siguil, the company is also considering one more hydro project in Sarangani and another in Negros Occidental.

“I think we are safe to say that it will range from 15 to 25 [MW] because right now we are still in the process of investigating. It is a run-of-river [project] but in hydro you can have several generating plants,” he said.

Aside from hydropower, Alsons was also considering putting up a solar farm with a maximum capacity of 50 MW. The project, which will be in Mindanao where the company has existing landbank, is estimated to cost around $1.2 million per MW. Of the target capacity, the first 20 MW is expected to be running by the second half of 2018.

“The first solar plant is going to be located in our agriculture area,” Mr. Alcantara said. “Aside from the economics of the capital cost versus revenue and production, we are also looking at which is going to give better revenue stream for the group -- maintain agriculture, continue to plant bananas, or go solar?”

Like a number of power developers in the Philippines, Alsons is also looking to expand overseas, possibly in Indonesia, although plans are still in very early stages, he said.

“We are looking at Celebes-Sulawesi area because of its proximity to Mindanao,” he said, adding that the company has learned about plans by Indonesia to encourage infrastructure and economic development in the eastern part of the country.

He said Indonesia’s population is concentrated in Java and Sumatra, similar to the Philippines’ Luzon and leaving other parts less developed.

“Borneo, Sulawesi, New Guinea are all but forgotten. But there is a lot of potential there. It is highly mineralized but it is under-populated and under-developed for infrastructure. So for Indonesia to be able to solve the high density and over-population in the Sumatra-Java area, their strategy is to encourage migration to the Sulawesi-Borneo area,” he said.

Alsons operates three diesel facilities: the 103-MW diesel power plant in Iligan City under Mapalad Power Corp.; the 55-MW facility in Alabel, Sarangani under Southern Philippines Power Corp.; and the 100-MW plant in Zamboanga City under Western Mindanao Power Corp.

The first 105-MW phase of its coal-fired power plant in Sarangani province began operating in April 2016. The second identical unit began construction in January 2017.

Aside from the Siguil plant, Alsons has another project in the pipeline -- the 105-MW coal-fired power plant in Talisayan, Zamboanga City under subsidiary San Ramon Power, Inc.

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