More listed firms going into renewable energy

GOVERNMENT programs to promote locally available, renewable energy (RE) sources are changing the energy investment landscape.

Initiatives like the Feed-in-Tariff (FIT) incentives and an ongoing review of the country’s fuel mix policy in favor of RE may have even started a trend of increasing clean energy investment among locally traded energy companies.

“The Philippine energy industry right now is undergoing a transition, much like the transition the telecommunications industry underwent before—from fixed line telephones to mobile phones. The energy industry is shifting from dirty, 20th century fuels like coal to clean, cutting-edge RE technology,” Solar Philippines Power Project Holdings, Inc. president Leandro L. Leviste said in an interview.

Danny Kennedy, solar power development advocate and founder of the American solar rooftop company Sungevity, said in a recent forum that in the United States, there was a significant shift in investments from coal to RE, particularly solar energy.

“Many people are investing in renewables not really because they are clean or it’s the right thing to do, but because it’s what makes investment sense now. It’s the future,” Kennedy said.

According to the US think tank Institute for Energy Economics and Financial Analysis (IEEFA.org), the combined market value of 13 major publicly traded US coal producers has been shrinking since April 2011.

As of March, their combined value stood at about $4.59 billion, or 4.7 percent less than in November, according to an S&P Global Market Intelligence analysis.

The IEEFA.org report “Market Cap of US Coal Companies Continues to Fall” said that since April 2011, US coal producers had lost more than 92 percent of their value. The companies’ combined market capitalization fell from $62.5 billion to $4.59 billion amid historically weak coal market conditions.

Kennedy said, while coal prices would go up as finite reserves were mined out, which would also make power generated from coal more expensive in the future, renewables would get cheaper or at least maintain stable costs because resources such as the sun, wind, water, steam, biomass, and even ocean waves remained sufficient.

The technology for harnessing renewables was also getting cheaper as more facilities are built and more products sold.

The Philippine situation is different from that of the US. Local companies that used to engage in coal mining and coal-fired power generation are not waiting for tough times but are already diversifying into renewable energy or at least preparing to go in that direction.

“There are some companies that produce both coal and RE, such as Aboitiz Power,” Lexter L. Azurin, AVP-Research Head at Unicapital Securities Inc., said in an e-mail.

Stocks to watch Azurin said, for investors who wanted to study the clean energy and RE trend, these would be some stocks to watch:

Alsons Consolidated Resources Inc. (ACR) has a pipeline of coal and hydroelectric power projects that  include the second phase of Sarangani coal plant (105-MW, target date of operations is 2018); 15-MW Siguil River hydro plant; 105-MW San Ramon coal plant; recently started commercial operations of 105-MW Phase 1 of Sarangani coal plant. It is eyeing 150-MW capacity from solar projects.

Aboitiz Power Corp. (AP) targets 4,000-MW capacity by 2020; recently assumed 100 percent ownership of 50-MW Cebu-based oil-fired power plant through Therma Power. Its  current construction projects include the 68-MW Manolo Fortich, 340-MW coal-fired power plant in Cebu, 420-MW coal-fired Pagbilao III. It is part of the consortium (along with Meralco) that owns the 600-MW Redondo Peninsula project in Zambales. SN Aboitiz will increase capacity to 1,100 MW within seven years  of the 390-MW hydro power plant complex in Ifugao.

Energy Development Corp. (EDC) has higher expenditures this year on retrofitting and refurbishment of its plants. Its increased Wholesale Electricity Spot Market exposure is still at risk.

First Gen Corp. (FGEN) expects higher bottomline from two new gas-fired power plants that will be operational by the end of the year (97-MW Avion and 414-MW San Gabriel). It will invest more in hydro power plants between 2017-2019.

Manila Electric Co. (MER) expects sales volume to grow at 6 percent on the back of a strong PH economy. The construction of power generation projects is still ongoing while the issue as a RES to its distribution areas is still under discussion.

Trans-Asia Oil and Energy Corp. (T.A.) has seen its 54-MW wind plant in Guimaras contribute significantly to its bottomline, along with the start of commercial operations for Power Barges 101 and 102 (32-MW each, bunker-fired diesel plants).

Power Barge 103 (another 32-MW) will commence operations by the second half of 2016.

Semirara Mining Corp.’ s (SCC) latest environmental compliance certificate allows it to increase coal production to 16 million metric tons, as well as to expand the Molave Pit to 400 hectares from 300 hectares, with total reservoir capacity increased to 10 million cubic meters. The company’s newest Calaca power plants, Units 3 & 4, will contribute to better margins. Stripping activities at the Narra mining site (which will contribute 2.5 million metric tons by end of 2016) have been completed. The company is set to build a 700-MW “clean coal” (more efficient, less emissions) power plant in Calaca, Batangas, with Meralco units Meralco Powergen Corp.

RE advocates

Clean energy in general, and RE in particular, does not lack champions in the Philippines. Various local and foreign chambers of commerce and business councils are bringing trade missions on renewables to the Philippines.

Seminars are being conducted by such institutions as the German federal enterprise Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH. Multilaterals like the Asian Development Bank have funded clean energy or alternative fuel projects and are committed to provide more funds.

Local banks are also paying more attention to RE. BDO Unibank, for one, has an exposure of about P33 billion to RE projects. Senior executive vice president Walter Wassmer said that BDO Unibank  decided long ago that it needed to educate its officials on lending opportunities presented by the emergence of RE and climate change.

The bank partnered with the International Finance Corp. for advisory services while BDO provides funding to clients. “We follow the cue from developers,” Wassmer said. “Right now a great portion of investments is still in coal-fired power plants … We would have to look into the issues through the eyes of the developers and the sponsors of the project.”

The Bank of the Philippine Islands has financed the RE project of RASLAG Corp. to expand its existing 10 megawatt (MW) solar power plant (RASLAG 1) to 23.14MW in Mexico, Pampanga. The original and expansion projects got FIT incentives after evaluation by the Department of Energy.

BPI’s Sustainable Energy Finance team, in partnership with the International Finance Corp. (IFC), supported the agreement by conducting the technical evaluation of the project, while BPI/MS Insurance Corp. provided the insurance coverage of RASLAG 1.

The Philippines’ current RE capacity is 5,400MW, according to Department of Energy (DOE) data, and authorities say the country is on track to triple this to at least 15,000MW of installed capacity by 2030.

One way the DOE is fast-tracking projects is by giving guaranteed rates under FIT, which was initially set in July 2012.