Pure Energy allots P7.2B for 9 projects with Meralco

Posted on February 06, 2017
http://www.bworldonline.com/content.php?section=Corporate&title=pure-energy-allots-p7.2b-for-9-projects-with-meralco&id=140139

PURE ENERGY Holdings Corp. expects to spend P7.2 billion for the nine mini-hydroelectric power projects it is undertaking in partnership with the country’s largest distribution utility Manila Electric Co. (Meralco), company officials said.

“We financially closed already with the first two projects [with Meralco]. We have lenders,” Gary M. Espino, Pure Energy president and chief operating officer, said on Friday.

The funding for the projects will be 75% debt financing and 25% internally generated funds, he added.

Pure Energy owns 50% plus one share of the joint venture, named Pure Meridian Hydropower Corp., while Meralco holds the rest. Equity for the projects will have the same structure, Mr. Espino said.

“[There are a] total of nine projects under our venture. We have broken ground on one in Bukidnon for 10.6 megawatts (MW) and construction will start soon,” he said. “We are breaking ground this month for the second project with Meralco, that’s in Quezon, for 3 MW.”

The run-of-river hydro power plant in Pulanai River, Bukidnon is expected to generate more than 74 gigawatt-hours annually.

“The timeline here is 24 months so we’re looking at mid to last half of 2019, where we expect that to be full commercial operation,” he said. “We’re availing of the feed-in-tariff [for all the projects].”

The Energy department has a set a quota of 250 MW for mini-hydroelectric power projects, of which Mr. Espino estimates around 206 MW have been taken up. Projects that qualify for the feed-in-tariff (FiT) are guaranteed to receive P5.90 for each kilowatt-hour they export to the grid.

“We believe that we will meet those targets. We’re very aggressive with our projects,” he said.

Aside from the Meralco partnership, Pure Energy is also jointly developing a P620-million hydro power plant with the group that owns food and fishing conglomerate Frabelle Corp.

The 3-MW facility -- which will be 60% owned by Pure Energy -- will be built in the upper cascade of the Labayat River, while a power station will be built in Barangay Maragondon, in Real town, Quezon province.

Mr. Espino said Pure Energy’s existing and planned projects, under subsidiary Repower Energy Development Corp., have a total capacity of 153 MW, of which 123-125 MW will come from hydro energy.

The company also owns a “brownfield” geothermal field, or an existing asset that can be upgraded, in Southern Leyte.

Of these projects, only three are already exporting power to consumers -- the three hydro power facilities of Philippine Power and Development Co., which Pure Energy bought in November 2015. The plants in Laguna sell their output to Meralco.

“Those are the Laguna plants -- the 90-year-old plants. Two of them are being rehabilitated at the moment so that we can double the capacity,” said Dexter Y. Tiu, Pure Energy chief executive officer.

“As of now, we have a PSA [power supply agreement] with Meralco. That’s still two more years. [After that] we can negotiate with Meralco if they can give us at least somewhere near the FiT (feed-in-tariff) rate,” he said.

Victor Lee, Pure Energy chief financial officer, said the Laguna plants have a capacity of “slightly over 1 MW but after the upgrade, almost 2 MW.” By the end of March, the plants will be in the commissioning phase. The rehabilitation cost is pegged at P330 million.

Mr. Tiu said that as a “rule of thumb” each megawatt of capacity would cost around $400-$450 million to build.

Pure Energy last week disclosed plans to sell shares via a P1.5-billion initial public offering. The company targets the listing in the first half of 2017 for 930 million common shares, plus an option to sell an additional 46.5 million, at a maximum indicative listing price of P1.62 each share.