THE Lopez-Led Energy Development Corp. is poised to become the world?s largest producer of geothermal energy?a rare feat for any Filipino company?and it may have the government to thank for it.
EDC, formerly a state-run company, already has 33 years of experience in geothermal energy exploration and production, giving it a hefty edge over its competitors today, said Richard B. Tantoco, company president and COO.
In an interview with the Philippine Daily Inquirer (mother company of the INQUIRER.net), Tantoco pointed out that this experience gave EDC a unique advantage locally, as well as a more stable platform should it pursue projects in the global renewable energy scene in the near future.
?What makes EDC great is not what it has done right, but everything it?s done wrong and learned from and perfected in the past 33 years,? he said.
Tantoco said that the target of becoming a global leader in geothermal power generation has always been the goal of the company?s past presidents.
?It?s just that the stars were not aligned. Now it?s clearer we can achieve that,? he said.
Company thrust
EDC is currently the Philippines? largest producer of geothermal energy, but it is only second to Chevron globally, having a marginal difference of a mere 70 megawatts (MW).
Data from the EDC showed that its installed geothermal steam field capacity stood at 1,119 MW, with its five steam fields in Leyte, Negros Oriental, Sorsogon, North Cotabato and Negros Occidental.
Its four geothermal power generation facilities meanwhile have an installed capacity of 744 MW. These power plants included Unified Leyte, Mindanao 1, Mindanao 2 and Northern Negros.
Recently, EDC had added to its portfolio the 112.5-MW Tongonan 1 and 192.5-MW Palinpinon geothermal power plants, which are being rehabilitated to further maximize their capacities.
EDC, through Green Core Geothermal Inc., had won the bidding conducted by the Power Sector Assets and Liabilities Management Corp. last September with an offer of $220 million for the two facilities.
?The general thrust (now) is obviously to grow the company. We?re at an interesting point in the energy industry where there?s a strong emerging preference towards clean and renewable energy,? he said.
?In the energy industry, putting up a power plant is something that anyone with sufficient capital can do. But actually, if you go back one step into the pure sciences exploration, reservoir engineering, and management, that?s where EDC?s strength lies?because we can do everything.?
New wells
Although EDC has hydro and wind power projects, Tantoco said that the company?s growth would primarily be driven by its geothermal projects.
Tantoco revealed that the company would carry out several crucial projects, including the rehabilitation of its power plants, expansion of facilities, and drilling of new wells, among others. More investments can be expected for projects in the pipeline, he added.
And to improve its current portfolio, EDC is likewise eyeing more government-owned power facilities that will be put on the auction block by PSALM next year.
According to Tantoco, the company?s financial standing is prepared to meet the huge investments needed to pursue these projects.
Internal cash
?Our balance sheet is so healthy we can take on so much more debt if we wanted to, but we?re not at that point right now. I don?t want to pull that trigger,? he said.
?Today, our debt to equity is about 55:45. If we were to increase that to 70:30, the balance sheet could take on an additional P29 billion in loans, but we?re not going to do that ... not yet, unless the growth opportunities are there.?
Even the planned acquisition of the 150-MW BacMan facility in Albay and Sorsogon, which will be auctioned off by PSALM early next year, can already be funded by EDC?s internally generated cash, he said.
?So nothing in the horizon leads me to believe we need to get more,? he added.
Currently, EDC is offering up to P12 billion worth of fixed rate bonds to raise funds for the refinancing of its outstanding loans. So far this year, EDC has raised P9 billion from private placement and is expecting a fairly strong cash flow from its operations of about P8 to P9 billion this year and in 2010.
Tantoco added that shareholders could expect EDC to become a low cost producer of power.
He said a portion of the geothermal power EDC would source from its Palinpinon and Tongonan facilities would be sold to customers through the Visayas supply augmentation auction program (VSAAP).
Under the VSAA program, the Department of Energy plans to tap additional power from customers with generators who are willing to sell excess power through an auction, similar to the Wholesale Electricity Spot Market in Luzon.
Management change
The auction is likewise seen to be the Visayas? only option for stable electricity supply and is expected to address the growing concern over the tight supply in the area.
On top of these planned projects, EDC is also currently implementing several changes at the management level, Tantoco said.
?That?s one of the things we want to do?break the glass tower concept and bring the style of decision making to the power plants,? Tantoco said.
Another thing Tantoco said he was adding to the current management style was the concept of ?business case.?
Simply put, a business case concept means that ?we will not approve anything, we will not give the green light unless the economics are proven to make sense, which is pretty basic,? he explained.
For now, EDC is focusing most of its resources and efforts in building its local generation portfolio, even if the opportunities for growth abroad are already present. It has a small office in Indonesia, but Tantoco said this was meant to facilitate logistics there.
So far, EDC has found one or two sites and is currently conducting a preliminary survey in those areas.
