Ayala shelves solar power project

MANILA, Philippines - Conglomerate Ayala Corp. has gone cold for its supposed maiden solar power venture, but remains fired up with its other energy projects.

John Eric Francia, group head for corporate strategy and development of Ayala Corp. and chief executive of AC Energy Holdings Inc. said the country’s oldest conglomerate has shelved a planned 35-megawatt (MW) solar farm in Davao del Sur.

The Mindanao solar farm, Ayala’s foray into solar development, was supposed to be developed by Ayala’s power unit AC Energy Holdings Inc. and Mitsubishi Corp.

“We did have plans for solar, but it is in the freezer right now. The economics of solar is difficult. We can’t justify the economics so we’re just focusing on other technologies like hydro and wind,” Francia said.

Francia said that even the declining cost of solar panels these days and the earlier approved feed-in tariff (FIT) for solar projects were not enough to heat up Ayala’s interest in pursuing the solar farm.

“The large part of your cost is still your civil works. Maintenance (cost) that’s only small, but it’s the civil works and other electro-mechanical costs. Panel prices have been dropping, but that’s only 30 percent of your total investment cost. Frankly speaking, I don’t know how others are able to make it,” Francia said.

“At P9.68 per kilowatt-hour (FIT rate for solar), it is not viable, at least from our point of view. That could have been justified in the P13-range, but at that range I guess it did not clear with the policy makers, but we understand and respect that,” he added.

The FIT rate serves as the government’s incentives for renewable energy players by way of a guaranteed fixed price for a given period for their supply of energy.

It is also seen as a way to attract more developers to invest in renewable energy.

Despite shutting off its solar project for the meantime, Francia said Ayala would continue to build and strengthen its energy portfolio through traditional energy sources such as coal, and renewable energy technologies like wind and hydro.

“We will just focus on other renewable energies like wind and hydro because we think that there is a good balance between the economics and overall impact. We want to be supportive of the whole renewable energy technology so that there will be a mix, but we truly believe that coal still has a large role because it remains the most cost-competitive,” Francia said.

Ayala has already earmarked $1 billion in investments in power and infrastructure from 2012 to 2016.

The conglomerate through AC Energy hopes to develop over 1,000 MW of attributable capacity both in conventional and renewable technologies by 2016.

Francia said Ayala has so far committed equity of over $400 million in its ongoing power projects.

He said a total of five power projects—two coal-fired power plants, two wind farms, and one mini-hydro facility— are expected to be “in steady state” by late 2016 or early 2017.

Among the projects which would be completed by the fourth quarter of the year are the first 135-MW unit of South Luzon Thermal Energy Corp. (a joint venture of Trans-Asia Oil and Energy Development Corp.) power plant in Batangas , the 81-MW project of North Luzon Renewable Energy Corp. (a joint venture with North Luzon UPC Asia Corp.) in Ilocos Norte, and the 18-MW expansion of the 33-megawatt Bangui Bay wind farm in Ilocos Norte.

“We’re hopeful that this (power) will be the next core business of Ayala Corp. Undoubtedly, AC Energy will come ahead,” Francia said.

“In power, once you spend on equity investments, you spend it on a period of three to four years when you’re building the plant. Once those are operational, a company is already in a steady state,” he added.

Ayala Corp.’s net income stood at P9.8 billion in the first half of the year, up 34 percent from a year ago on the back of a solid performance of its core businesses, particularly Ayala Land Inc. (ALI), Globe Telecom Inc. and Manila Water Co. Inc.