Eastern Petroleum to start $60-M biomass plant in Q3

MANILA, Philippines - Eastern Petroleum Corp. will start construction of its $60-million, 20-megawatt biomass power plant in the third quarter of the year, its top official said in an interview.

The plant, which marks the independent oil firm’s entry into the biomass sector, would be operational in 2015, said Eastern Petroleum chief executive officer Fernando Martinez.

He said the 20-MW biomass plant, to rise in Agusan del Sur, would source its feedstock requirements from a 10,000-hectare industrial tree plantation.

The oil company has signed an agreement with a Manobo Tribal council for the cultivation of an industrial tree plantation to secure the feedstock requirements of the plant.

“Eastern Petroleum, through subsidiary Eastern Renewables Fuels Corp., has entered into a joint venture with the Manobo tribal council in Agusan del Sur for the cultivation of a 10,000-hectare industrial tree plantation to secure the feedstock requirements of its proposed 20-MW biomass power plant,” he said in a separate statement.

He expects the project to assure the livelihood of the community without the slash and burn or kaingin practice.

“With each hectare needing at least 1,000 seedlings to be planted and harvested within five years, estimated job generation and income for the indigenous community will provide substantial economic impact to their Manobo tribe which was earlier awarded a 50,000 hectare Tenural Title under Ancestral land domain,” Martinez said.

For its petroleum business, Eastern Petroleum is setting aside P2 billion for its capital expenditures (capex) this year, a marked increase from the programmed P500 million in 2012.

The P2 billion, to be raised through a combination of bank financing and internally generated funds, will be used to increase Eastern Petroleum’s retail stations to 100 outlets this year from 40 as of end-2012.

The company is in talks with local banks to handle a planned bond sale or notes issuance to raise roughly 70 percent of the capex.

The additional 60 stations will be evenly divided in the three islands: Luzon, Visayas and Mindanao.

Eastern Petroleum is now combining other retail franchises such as drug stores and fastfoods to attract and offer more services to its clients.

Martinez said it would be good to further grow the business this year on the back of strong economic fundamentals.

Aside from retail stations, the P2 billion capex will also be used to build a four-hectare oil depot in Davao, Mindanao with a capacity of 35 million liters, Martinez also said.

Of the P2 billion, Eastern Petroleum plans to spend P800 million for the depot and P1.2 billion for the retail stations.

Eastern expects the depot to be operational in the first quarter of 2014.

Martinez said that with the programmed expansion, Eastern expects sales revenue of P5-to P6-billion this year from P3 billion last year.

Eastern expects to post a net income of between P30 million to P40 million for 2012 and expects to generate P150 million to P200 million this year.