SM group goes into geothermal

Manila Standard Today

By Alens Mae S. Flores  Posted on Dec. 14, 2012 ar 12:02am

SM Investments Corp., the holding company of the SM Group of Companies, acquired a 60-percent stake in a unit owned by Chevron Corp., an executive of SM Investments said Wednesday night.

SM Investments purchased the majority of Philippine Geothermal Production Co., the wholly-owned unit of Chevron Geothermal Inc. that was formed to explore and develop geothermal energy sources in the country.

SMIC chief operating officer Jose Sio told reporters the conglomerate’s investment was coursed through All First Investment, an investment equity company of the SM Group.

Sio said Chevron Geothermal Inc. picked SMIC as partner to comply with the  ownership limit requirement of the Geothermal Law. Chevron will own the balance of 40 percent.

“Chevron is 100 percent owned by US Chevron… There is a law that they have to reduce their ownership from 100 percent to 40,” Sio said.  He declined to provide details on the financial transaction.

Chevron is operating the steam fields of the Tiwi-Makban power geothermal plants in Laguna and Batangas under an agreement with state-owned National Power Corp.

Chevron was in talks with the government on how it could comply with “Filipinization” ruling on companies engaged in exploration of  indigenous and renewable energy resources, including geothermal steam. The government told Chevron to comply with the ruling by 2013.

“The entity that joined them [Chevron] is All First investment, a private company, equity investment company,” Sio said.

Sio said Chevron, although a minority shareholder, would lead negotiations with the Energy Department for a geothermal operating contract.

The SMIC official said the joint venture might eventually surpass the geothermal capacity of Energy Development Corp., the country’s largest geothermal producer controlled by the Lopez Group.

Sio, however, said the SM Group, which controls National Grid Corp. of the Philippines, was constrained to steam field development. The Electric Power Industry Reform Act does not allow cross-ownership in the power generation and transmission sectors.

Sio said he could not say yet whether the joint venture would join the bidding for geothermal contracts and whether SMIC would join the consortium of Chevron, Aragorn Power and Energy Corp., a wholly-owned subsidiary of listed APC Group Inc. and Guidance Management Corp. in the 100-MW integrated geothermal power project in Kalinga province estimated to cost $300 million.

“We’ll see. We’re open,” Sio said.

Aragorn, together with partner Guidance Management, is the holder of a geothermal renewable energy service contract approved by the Energy Department covering 26,000 hectares in the province of Kalinga.

Sio, however, said the joint venture was looking at other potential geothermal areas such as Cebu, Luzon and Mindanao, Samar, Bohol and Palawan.   source