AC Energy hopes for early sale of Lanao coal-fired power plant

By Lenie Lectura – November 19, 2018
from Business Mirror

AC Energy Inc. is eyeing to close in the next few months a deal with an investor for the sale of the 4×135-megawatt (MW) coal-fired power plant in Kauswagan, Lanao del Norte, in Mindanao.

AC Energy President Eric Francia said the power arm of conglomerate Ayala Corp. is in “active discussions with parties.”

“I can’t comment because we have a nondisclosure agreement with our potential partners/investors. Of course, we can’t say who these parties are,” said Francia. “But I would probably make a decision in the next couple of months. It’s fluid because we started this process earlier this year and we always said it’s actually flexible.”

There is no decision yet if AC Energy will opt for a partnership or sell the power asset.

“Some of the investors have expressed interest to partner with us still at a platform level but some investors expressed interest to have a path to control, ultimately buy out everything,” Francia said.

The group of businessman Manuel V. Pangilinan earlier expressed interest.

“We heard about that. We’re trying to get data. What I am told, it is a coal project. It seems to be almost finished so it’s ready for operation. It looks interesting because we don’t have to wait for all sorts of approval.  We will probably take a look at it,” said Pangilinan, chairman of the Manila Electric Co. whose unit is involved in power generation business.

For now, AC Energy’s focus is to finish construction of the Kauswagan plant by 2019. “Again, our top priority at this point is to finish the Kauswagan project by 2019. We don’t want to lose focus. First quarter is our target for the start-up of unit 1 and thereafter every couple of months for the other units.”

The project proponent is GN Power Kauswagan Ltd. Co.

Francia said AC Energy’s committed equity is around 70 percent with a value of about $250 million.

Francia said the capacity of the three of the fours units are already contracted.  AC Energy is on the lookout for off-takers for the remaining 135 MW amid oversupply of power in Mindanao.

“We will continue to look for customers. But there’s oversupply in Mindanao so it’s not easy. But the good news with having an extra unit is that we will be able to serve our customers almost to close to 100 percent of availability, because if one unit is down we have a back up reserve,” he said.

He is also confident that demand for power in Mindanao will grow as the Department of Energy (DOE) expects demand to hit 2,100 MW peak next year. This and the Mindanao-Visayas Interconnection Project of the National Grid Corp. of the Philippines (NGCP), which will be completed by 2021, “will open up a new department for Kauswagan.”

Francia said the power plant’s large capacity and strategic location will surely attract investors. “There’s quite a bit of interest in Kauswagan because it’s a sizeable plant. It’s the most competitive in Mindanao. It’s strategically located because it will be the major substation that will ultimately be connected to Cebu because the Mindanao-Visayas interconnection typically needs two major substations to balance the frequency.”

Francia explained, “That’s why…if you look at the NGCP plan, while [the subsea cable] terminates in Zamboanga, there’s an overhead line that connects directly from the cable landing to Kauswagan. So that forms an integral part of the backbone to connect Mindanao and Visayas.”

Aboitiz Power Corp. earlier acquired a 49-percent voting stake and 60-percent economic interest in AA Thermal, AC Energy’s thermal business, for $579.2 million.

The assets initially consist of AC Energy’s limited partnership interests in GNPower Mariveles Coal Plant Ltd. Co., the owner and operator of an operating 2×316-MW coal plant in Mariveles, Bataan, and in GNPower Dinginin Ltd. Co., the developer and owner of a 2×668-MW supercritical coal plant project in Dinginin, Bataan.

The transaction forms part of the company’s goal to achieve 5 gigawatts from a balanced mix of renewables and thermal assets by 2025.

“We’re close to 50-50. We’re in a nice position. This is our objective for 2025 to be at least 50 percent renewables. We are trimming down to achieve this balance. So, this selldown of AA Thermal to Aboitiz helps balance our portfolio and allows us to raise capital for our growth. We can maintain the balance we have now in 2018 all the way to 2025,” said Francia.