Ayala boosts power generation portfolio

Ayala Corp. will require a total of $1.6 billion in financing to develop large coal power projects in Luzon and Mindanao that will make the conglomerate one of the country’s top power producers, its officials said in a briefing.

According to chief financial officer Delfin C. Gonzales Jr., the funding will support two coal-fired power projects: A 600-megawatt (MW) project in Lanao del Norte province in Mindanao and a 1,000-MW project in Bataan province.

Asked on the tenor of borrowings, Gonzales said, “For power, they have to be long-term. I guess we’re looking over 10 years, whether it’s domestic or offshore.”

Treasurer Ma. Cecilia T. Cruzabra said export credit agency funding will likely be tapped, but the structure and other specifics —like how much goes to the Lanao del Norte project and how much to the Bataan project— have not been set.

The project in Lanao del Norte may entail a project cost of $1 billion to $1.2 billion with financial closing planned within 2014. GNPower Kauswagan Ltd. Co. (GNPK), the joint venture company between Ayala power unit AC Energy Holdings Inc. and Power Partners Ltd. Co. (PPLC) have tapped Shanghai Electric Power Construction Co. (a subsidiary of Power Construction Corporation of China) for the engineering, procurement and construction of the facility.

The project in Bataan may entail $600 million (with financial closing in mid-2015), of which $300 million will be the Ayala group’s equity share.

When the two projects come online in 2018, the Ayala group will be the Philippines’ fourth largest power producer in terms of share in various projects or “attributable capacity”, said Paolo F. Borromeo, group head for corporate strategy and development.

Power, which is in high demand amid rising consumption and domestic economic expansion, and infrastructure will be the leading drivers of noncore business growth for Ayala Corp. by that time, he said.

According to the Department of Energy’s data, the top three power players in the country are Aboitiz Power Corp., San Miguel Corp. through San Miguel Consolidated Power Corp., and the Lopez group’s First Gen Corp.

Presently, Ayala Corp.’s fully owned energy unit AC Energy Holdings, Inc. (AC Energy) has equity in acquired power projects and partnerships. AC Energy, under its investee company, Northwind Power Development Corp., completed its 19-MW wind expansion project in Bangui, Ilocos Norte, last Oct. 10 and has been endorsed for the feed-in-tariff (FIT) incentive scheme for renewable energy developers.

Another AC Energy affiliate, North Luzon Renewable Energy Corp. (NLREC), completed an 81-MW wind farm in Pagudpud, Ilocos Norte, last Nov. 11. The project is undergoing commissioning and is awaiting FIT endorsement from the DOE.

In addition to its wind projects, the company, in partnership with Trans-Asia Oil and Development Corp., is also reaching the final stages of completion of the first of two 135-MW coal-fired power plant units in Calaca, Batangas. The company expects to begin commercial operations of the plant by the first quarter of 2015. The second 135-MW unit is likewise planned for completion and operation by the end of 2015.

Solar power, meanwhile, is not yet on the horizon since AC Energy shelved last quarter a planned 35-MW solar farm in Davao del Sur due to high project cost. The Mindanao solar farm would have been Ayala’s first foray into solar power development in partnership with Mitsubishi Corp. of Japan.

AC Energy president and CEO Eric Francia has said, “We believe the completion and operation of our two wind projects as well as the completion of our project in Calaca are very timely as these will significantly help meet the country’s immediate demand for power.”

“Ayala has always recognized the need to build both base load power and develop renewable energy sources,” he added. “We continue to work on a pipeline of power projects to meet our goal of assembling around 1,000 MW in generating capacity over the next few years.”