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Lopez firm builds up P19-B war chest

By: - Reporter / @amyremoINQ
/ 12:10 AM May 04, 2013

Energy Development Corp. has successfully built up an initial war chest of P19 billion following the issuance and listing of P7 billion worth of fixed-rate bonds Friday.

Apart from the bond issuance, the war chest, which will help support the company’s P32-billion budget for capital and operating expenses this year, will also be funded with EDC’s P9 billion in cash on hand, the $80-million loan signed last month and cash to be generated from operations throughout the year.

In a briefing Friday, EDC president Richard B. Tantoco noted the strategic timing of the company’s bond issuance with its average cost of debt now at 6.6 percent from about 8 percent a year ago, while average maturity was now at five and a half years.


The seven-year bonds carry an interest of 4.1583 percent a year while the 10-year bonds carry an interest of 4.7312 percent yearly.

“With the deepening of the capital markets, the cost of debt is going down. We’re able to borrow at tenors that closely match the tenors of infrastructure projects. We really should not be [having a tenor of] three years for projects that last 30 years—we should be borrowing with a tenor of 15 to 20 (years),” Tantoco explained.

Tantoco also noted that EDC was increasing its investment in the rehabilitation of the Bacon-Manito geothermal plants to $100 million due to the additional repairs needed for the three units, which have a total installed capacity of 130 megawatts. Units I and II have an installed capacity of 55 MW each, and Unit III, 20 MW.

“We’ve spent $78 million already. If we have to replace the turbines of unit I and II, that’s another $25 million, so that will add up to roughly $100 million, including the cost of rehabilation for Unit III,” Tantoco explained.

The plan, according to Tantoco, was to operate Unit I in time for the election on May 13. The commercial operation for the 55-MW Unit I is targeted for July this year, when the certificate for commercial operation is expected to be awarded.

At full capacity of 130 MW, the BacMan geothermal facilities could have contributed P4.2 billion in revenues to EDC. Foregone revenues are estimated at P160 million per 55-MW capacity a month. If the BacMan facilities will not run at all this year, the total foregone revenues could reach P2.6 billion, Tantoco said.

EDC resumed commercial operations of the BacMan facilities on Feb. 25 this year, generating a total of 110 MW. This was the first time that the plants were able to run at their installed capacities, after EDC acquired the facility from the government in a bidding held in 2010. Days after it resumed operations, EDC had to shut down the geothermal plants after a turbine blade at Unit 2 was sheared off. Unit 1 was similarly shut down even if it did not experience similar problems.

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