Cusi defends ‘negligible’ foreign capital requirement

Published November 16, 2020, 7:00 AM by Myrna M. Velasco
https://mb.com.ph/2020/11/16/cusi-defends-negligible-foreign-capital-requirement/

Energy Secretary Alfonso G. Cusi defended the seemingly ‘negligible’ $50 million capital requirement for foreign firms entering the Philippine geothermal sector saying the figure was the scale determined by the government for prospective investment areas on offer.

The energy chief was reacting to criticisms that the $50 million capitalization is deemed small-scale or a ‘tiangge’ price considering that the investment scope will cover integrated exploration of geothermal resources and power plant development.

“The $50 million, that is the amount we’ve seen to entice investors for investments in geothermal,” Cusi pointed out.

Industry players noted though that such magnitude of capital injection pales in comparison to the values of geothermal power assets previously divested by the government via state-run Power Sector Assets and Liabilities and Management Corporation.

In particular, when the Tiwi and Makiling-Banahaw geothermal facilities were privatized in 2008, the purchase price tendered by buyer AP Renewables Inc. of the Aboitiz group was at $446 million.

When First Gen Corporation of the Lopez group bought the geothermal assets of state-owned Philippine National Oil Company-Energy Development Corporation in 2007, they paid a fortune of $1.2 billion.

For the hydro projects, of which foreign ownership is also being allowed, the Lopez group’s acquisition price for the Pantabangan-Masiway hydropower facility was at $129 million, while the joint venture of SN Aboitiz Power Inc. bought the Magat hydroelectric power facility was at $530 million.

Nevertheless, Cusi explained that they set a lower investment requirement for foreign firms so they can rev up competition with the local players – which in the geothermal sector, is being reigned over by the Lopez and Aboitiz groups; while resource exploration lists the Sy-owned Philippine Geothermal Production Company (PGPC) as a key player.

“We are delayed in our development of geothermal. The local developers have been working – First Gen and Aboitiz are here. But what’s happening is: we have very limited developments, there are no other local companies that really explore and exploit the geothermal resources,” Cusi lamented.

He expounded that by opening up the geothermal sector to foreign investors, this could stimulate more vigorous competition, hence, on the energy chief’s view, more investments could potentially flow in the sector.

“So I said, we open it up and let’s provide competition. Hopefully, this will pressure the present developers to speed up their exploration developments,” Cusi asserted.

The energy chief reiterated that there are projects already delayed for so long – including the proposed expansion of the Mt Apo geothermal power project.

“So probably, with the help of foreign investors, we will be able to have more geothermal being developed, and that will be good for the country. So we need to tap these resources because we want renewables, and we want to expedite developments,” he said.

Cusi added “we are not looking for reasons why we cannot do it. We are looking for reasons why we should do it – and the guidelines are being prepared already. It should be out very soon.”