‘First come, first served’ policy for RE projects

This policy would fall under “Regulatory Risk” in project finance. Power projects are capital intensive projects, thus equity participation of project proponents are limited to about 30 ~ 50%. The other source of capital would be coming from financial institutions. Now banks would limit their risk as well so they ask for guarantees such as bilateral contracts from off-takers and service contracts from DOE. But this policy would not guarantee the banks and therefore increase their risk. Eventually, project proponents will have a hard time securing financing from the banks. In the end, it is the big power companies (with deep pockets) that can finance these projects with 100% equity.I believe this policy go against the DOE’s reform agenda which is “Level Playing Field, Walang Lamangan” because as mentioned earlier it favors few companies positioned to finance RE projects largely by equity. If it is the good secretary’s intention that this policy would hasten RE projects, then he might be wrong. RE projects take time because preparatory studies to acquire data takes years since they are susceptible to climate change. A lot of duration studies are undertaken to assure that energy sources, i.e., wind velocity, sun-hours, river water flow are enough to drive turbines and panels to generate electricity as designed. Aside from these studies which took power companies years to acquire the required data they have also waited long for the DOE to come up with the FIT rates. Now that FIT rates are released, a policy on “First-come-first-served” has been issued. Regulatory risk is now on top of the risk that needs to be addressed in business planning and financial modeling because regime change in the Philippines would also follow a game changing policy change.

nazar_agawin@yahoo.com
power consultant