Ayala eyes geothermal, hydro plants

Ayala Corp. is looking at managing the contracted capacities of the 640-megawatt Unified Leyte geothermal facilities and the 150-MW Casecnan hydropower plant as it moves to increase its foothold in the local energy market.

Eric T. Francia, managing director and group head for corporate strategy and development of Ayala, said the company was studying whether it would participate in the bidding for the independent power producer administrator (IPPA) contracts that were supposed to be conducted by state-run Power Sector Assets and Liabilities Management Corp. (PSALM) within the fourth quarter this year.

According to Francia, Ayala has yet to decide if it would pursue its participation in the government bidding with a partner as it previously did when it sought to acquire four diesel-fired power barges.

Ayala earlier formed a partnership with Trans-Asia Oil and Energy Development Corp. when it submitted an offer to acquire Power Barges 101, 102, 103 and 104 during the first round of bidding held in May this year.

An acquisition of a government power asset or contracted capacity is one of the options being considered by Ayala in achieving its target of having a 1,000-MW power portfolio over the next five years. As a new player in the power generation industry, Ayala is working aggressively to at least start moving forward its target portfolio, which is expected to require investments of up to $2.5 billion.

Ayala is also looking at several greenfield power projects that will use traditional fossil fuels like coal as well as renewable energy sources, particularly hydro resource.

PSALM intends to bid out the IPPA contracts for Casecnan and Unified Leyte before the year ends.

The Casecnan facility in Nueva Ecija is a combined irrigation and hydroelectric power project, which is the first multipurpose build-operate-transfer (BOT) project in the Philippines. A previous report by the Department of Energy, however, noted one possible “major hitch” in the privatization of the IPPA contract as the facility’s ownership might still revert to the government through the National Irrigation Administration (NIA) instead of the IPP administrator, unlike in the case of other IPPA contracts.

For the Unified Leyte geothermal complex, PSALM is still working on dividing its contracted capacities to prevent market dominance by a single firm and to make the facility financially viable.

“We are still working on [the Unified Leyte IPPA contract] but we intend to divide [the contracted capacity] into two or three contracts, which, in turn, would allow more bidders to participate and allow PSALM to maximize the proceeds that may be generated from the privatization,” PSALM president Emmanuel R. Ledesma Jr. had said in an earlier interview.

Given the large generating capacity of the Unified Leyte geothermal complex, PSALM explained that there might not be that many companies left to take on the IPPA contract without breaching the so-called market cap on power generation in the Visayas. Meanwhile, those who may be allowed to acquire the Unified IPPA without breaching the cap might not have sufficient financial capacity.

Under the Electric Power Industry Reform Act, a company or group of related companies is barred from owning, operating or controlling more than 30 percent of the installed generating capacity of a grid, or 25 percent of the country’s total installed capacity.