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Aboitiz Power Corporation

AboitizPower takes P3.7-B hit with permanent closure of biomass plant

ABOITIZ POWER Corp. (AboitizPower) is taking a hit of P3.7 billion as it permanently stopped the operations of a biomass power plant because of the lack of organic materials to produce electricity.

“Our top consideration now is to balance the interests of all our stakeholders, including that of Aseagas’ employees,” said AboitizPower President and Chief Operating Officer Antonio R. Moraza in a statement on Monday.

AboitizPower in November temporarily halted operations of its 8.8-megawatt (MW) power plant in Lian, Batangas under its unit Aseagas Corp. because of the unavailability of organic effluent wastewater from its supplier, Absolut Distillers, Inc. 

“Total value affected as a result of the closure is estimated to be at P3.7 billion, which represents Aseagas’ invested equity of P3.45 billion and the company’s estimated remaining obligations of around P250 million,” AboitizPower said.

Mr. Moraza warned last month that a write-off was a possibility.

“The company also took the opportunity to assess the plant’s other issues, and after a full assessment decided to make the plant shutdown permanent,” the company said yesterday.

Ahead of the permanent closure, Aseagas had prepaid an outstanding P2.368-billion loan with the Development Bank of the Philippines (DBP). The company had invested equity of around P950 million for the biomass plant and has around P460 million in outstanding liabilities aside from the DBP loan, AboitizPower had said.

Mr. Moraza gave his assurance that AboitizPower remained on track to add around 500 MW, mainly from baseload and hydropower plants in 2018, moving the company closer to its 2020 target of 4,000-MW net attributable capacity.

AboitizPower acquired the biomass plant in July 2016, as it expanded its renewable energy footprint, which covers large hydro, run-of-river hydro, geothermal and solar.

The deal was through Aboitiz Renewables, Inc., the listed company’s holding firm that houses its investments in renewable energy. AboitizPower acquired the Aseagas facility from parent firm Aboitiz Equity Ventures, Inc.

The acquisition, which marked AboitizPower’s entry into biomass technology, followed the company’s foray into solar power with the inauguration in April 2016 of San Carlos Sun Power, Inc.’s 59-MW peak solar power plant in Negros Occidental.

The biomass plant was expected to start operating and delivering power to the Luzon grid before October 2016.

The facility was meant to use and convert the organic effluent of Absolut Distillery into clean and renewable energy. It was supposed to power about 22,000 households while producing 33 tons per day of liquid carbon dioxide for the industrial and beverage industries.

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Aboitiz Power backs temporary ERC appointments

ABOITIZ POWER Corp. has joined calls from industry stakeholders for the President to resolve the impasse at the Energy Regulatory Commission (ERC) after the suspension of the agency’s four commissioners for a year.

The listed company, one of the biggest energy groups in the country, said a “fair and functioning ERC is critical for the energy sector to work.”

“A working regulatory body balances the welfare of the paying consumers, interests of the private investors, and the government’s desire for reliable and ample power,” said Antonio R. Moraza, AboitizPower president and chief operating officer, in a statement on Wednesday.

“We are appealing to the national leadership to resolve the ERC issue as soon as possible so the commission can get back to work and act on many pending issues awaiting their decision,” he added.

The four ERC commissioners, along with the previous ERC chairman, were ordered suspended for one year by the Office of the Ombudsman in connection with the revised implementation date of the competitive selection process, which it said favored a few power supply contracts.

As a collegial body, the ERC needs the presence of at least three members of the commission to constitute a quorum. The majority vote of two members is needed during meetings that require regulatory approval. But for the approval of electricity rates, the unanimous vote of the three is required.

The earliest that the regulator can have a quorum is if the Office of the President immediately appoints temporary commissioners when two of the suspended officials retire in July.

Earlier this month, Manila Electric Co. President Oscar S. Reyes said he wanted to be able to assure consumers in the utility’s franchise areas “that we will have adequate, reliable, least cost power.”

“That’s why ERC approval of our PSAs [power supply agreements] is critical,” he said, referring to seven Meralco supply contracts that are pending with the regulator.

Meralco, the country’s biggest power distribution utility, was hoping to see the approval of the contracts by the end of last year but the Ombudsman’s suspension order was served on Dec. 22, 2017.

“It may put at risk the capability of the industry to assure not only supply to customers but security of supply moving forward,” Mr. Reyes said.

“The industry is probably neutral as to the composition of the commission. What is important is it is adequately staffed [with people] who can properly play their roles as regulators,” he added.

ERC Chair Agnes T. Devanadera has said that the suspension of the commissioners would put on hold funding for P1.588 trillion worth of energy-related projects and capital outlays.

Sherwin T. Gatchalian, who chairs the Senate committee on energy, said in a legislative hearing last week that the “most practical” way forward for the ERC is for the Office of the President to appoint temporary commissioners. He said the move has legal basis under the administrative code.

For its part, the Department of Energy (DoE) agreed with the Philippine Electricity Market Corp. to allow power generation companies with expired certificates of compliance (CoC) — including those with pending applications — to continue operating and trading at the wholesale electricity spot market.

The agreement with the operator of the spot market is in line with DoE Secretary Alfonso G. Cusi’s pronouncement that he would not allow any disruption in the country’s power supply.

The CoC, which is issued by the ERC, is proof that a power plant complies with the applicable regulations, making it safe to switch on and operate.

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Aboitiz expects improvement in power demand, sales

Aboitiz Power Corp. is expecting an improvement in electricity demand and sales under its power distribution business this year, hinged on the continued economic growth in its franchise areas, its top official said.

AboitizPower president and chief operating officer Antonio Moraza said the group is seeing overall growth rate to hit five percent this year.

“I think we’re projecting five percent. As for the drivers, one is obviously the economy… Some areas are growing faster than others,” he said.

The company’s power distribution business experienced a slower growth rate last year compared to the previous year, which was an election year, Moraza said.

“Last year was a slow year, about four percent,” he said. “2016 was big, it was an election year… about eight percent.”

The company chief said the growth rate was the average across the distribution utilities (DU) under the company.

But among its largest DU, Moraza said Davao Light and Power Company had a better growth rate than that of Visayan Electric Co. Inc. (VECO).

“I think Davao Light last year grew more than VECO… These were projects that were in line in Davao before President Duterte became president. There were malls, apartment buildings, hotels… there were a lot of activities in Davao,” he said.

AboitizPower is one of the largest electricity distributors in the Philippines with ownership interests in seven distribution utilities including the second and third largest in the country.

VECO, owned by Aboitiz Power and Vivant Corp., is the second largest distribution utility in the Philippines, providing the electricity needs of the cities of Cebu, Mandaue, Talisay, Naga and four municipalities of the greater part of Metro Cebu.

Davao Light and Power Co. is the third largest privately-owned electric utility in the country, which holds the franchise for distributing electric power to Davao City, Panabo City and the municipalities of Carmen, Dujali, and Sto. Tomas in Davao del Norte.

Cotabato Light and Power Co., meanwhile covers the city of Cotabato, and part of the municipalities of Datu Odin Sinsuat and Sultan Kudarat, both in Maguindanao.

It also owns San Fernando Electric Light and Power Co. Inc. (SFELAPCO), a franchise in the City of San Fernando, Pampanga and the municipalities of San Isidro and Cabalantian in Bacolor, Pampanga.

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AboitizPower sees power demand growing by 5%

ABOITIZ POWER Corp. (AboitizPower) expects power demand within the franchise areas of its distribution utilities to grow by 5% in 2018, or better than the growth posted in the previous year, its president said.

“For 2018, I think we’re projecting 5[%],” said Antonio R. Moraza, who is also AboitizPower chief operating officer.

“Last year was a slow year, about 4%,” he told reporters, adding that 2017 followed a “strong election year” when power demand grew by about 8%.

Mr. Moraza attributed the higher growth projection this year to the country’s economic performance, with government economic managers expecting sustained growth after 2017’s 6.7% rise in gross domestic product.

“Some areas are growing faster than others,” he said.

AboitizPower has ownership interests in eight distribution utilities, making it one of the largest electricity distributors in the Philippines.

Based on its annual report, the company supplies power to franchise areas covering a total of 18 cities and municipalities in Luzon, Visayas and Mindanao.

Among these distribution utilities is Visayan Electric Co., Inc. (VECO), the country’s second-largest electric utility in terms of customer base. It serves the cities of Cebu, Mandaue, Talisay and Naga. Its coverage also includes four municipalities of the greater part of metropolitan Cebu, namely: Liloan, Consolacion, Minglanilla and San Fernando.

AboitizPower also owns Davao Light & Power Co., Inc., the third-largest privately owned electric distribution utility in the country.

Asked about which of the company’s distribution utilities posted the biggest growth, Mr. Moraza said: “I think Davao last year grew more than VECO.”

However, he noted the growth in power demand within Davao Light’s franchise was already seen before President Rodrigo R. Duterte, who hails from Davao City, was elected.

“These were projects that were already in line in Davao before Pres. [Rodrigo] Duterte became president,” Mr. Moraza said.

“There were malls, apartment buildings, there were hotels, there were a lot of activities in Davao. Some [were] completed [in] 2017, some [are] coming this year. There’s a pipeline,” he added.

The AboitizPower official said distribution utilities account for about 20% of the company’s bottom line, a contribution which has stayed steady from the previous years.

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AboitizPower wants binding contract for big ‘captive’ customers

ABOITIZ POWER Corp. (AboitizPower) wants big electricity users who opt to stay as captive customers of distribution utilities to also be required to enter into a binding contract for a definite period similar to what is imposed on those who switch to retail electricity suppliers (RES).

“If you are a potential contestable customer, you then decide whether you want to be contestable or you want to be captive. Either way, if you go contestable there are contracts — two years, three years, five years, whatever it is,” Antonio R. Moraza, AboitizPower president and chief operating officer, told reporters.

“The same should apply [to] captive [customers]. You have to commit to the utility that you will stay with them for so long so that they can also commit that requirement to the generator. I think that’s just fair,” he added.

At present, an electricity user whose consumption for the past year has reached an average of at least 1 megawatt (MW) a month are required to buy power from licensed retail electricity suppliers.

Regulations that make the switch from being a captive customer of a distribution utility (DU) are meant to foster greater participation from new players, thus spurring competition and lowering power costs.

These rules covering retail competition and open access (RCOA) are meant to apply first to the 1-MW users, although the threshold will be gradually lowered until they reach the consumption of a regular household.

However, the lowering of the threshold has since been put on hold after the Supreme Court issued a temporary restraining order (TRO) in response to a complaint by some sectors pointing, among others, to RCOA’s mandatory provisions.

Although the Department of Energy (DoE) has issued new regulation that makes the switch voluntary, Mr. Moraza said customers that had contracted with licensed RES remain confined to those using 1-MW and above.

The Energy Regulatory Commission (ERC) earlier said it would wait for the lifting of the TRO before taking any action as called for by the new DoE circular.

“What we want to suggest is that on the DU side, it also has to be contracted. In other words, you can’t say: ‘No, I want to stay with the DU’ and then next week change your mind because the DU is also going backward and contracting capacity in your behalf then all of the sudden you just change your mind,” Mr. Moraza said.

Mr. Moraza said he was speaking on behalf of AboitizPower’s distribution utilities. The company also has licensed retail electricity supplier units, either on its own or under subsidiaries or affiliates.

Asked if the proposal has been formally presented to regulators, Mr. Moraza replied: “We’re always talking. Us, the industry, we’re always in dialogue with DoE, ERC.”

Towards the end of last year, the DoE signed a new circular that will reverse contentious provisions of a previous circular as well as resolutions from the ERC requiring contestable customers to move away from being part of the captive market of a distribution utility.

The new circular will also allow the ERC to continue issuing licenses to retail electricity suppliers, which was among the provisions placed on TRO as sought by a number of educational institutions and a business group. The order was issued by the high court in February 2017.

RCOA is called for under Republic Act No. 9136 or the Electric Power Industry Reform Act of 2001 (EPIRA), the law that restructured the power sector, as well as its implementing rules and regulation.

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