MANILA, Philippines – With the Philippines experiencing an oversupply in power generation that could last up to 7 years, Aboitiz Power Corporation has set its sights on hydropower projects in Myanmar and Indonesia to continue growing its business.
AboitizPower, the country's second largest power producer by capacity, said there are only two ways for local utilities to grow their businesses: expand overseas, and merge with or buy out competitors.
"If you look at it, there is definitely no need to put up plants here for at least 5 to 7 years – given what is being built right now. What you do, you can either go outside or buy [another firm]," AboitizPower president and chief operating officer Antonio Moraza said in a media briefing in Taguig City on Wednesday, March 15.
"Adding new capacity here is probably not the right solution," he added.
While consumers are taking advantage of the situation due to declining power rates, Moraza said profit margins of utility firms like AboitizPower are narrowing.
"Margins are tightening in distribution and generation, so we have to rely on growth," the chief of AboitizPower said.
The power distribution group's earnings share in Aboitiz Equity Ventures Incorporated decreased by 4% in 2016, from P3.8 billion to P3.7 billion. This is equivalent to 18% of earnings contributions from AboitizPower's earnings.
To continue growing, Moraza said his company is doing feasibility studies in Myanmar and Indonesia for possible hydropower projects.
He said AboitizPower, in partnership with SN Power, will pursue these exploration projects despite its decision to withdraw plans to develop a greenfield geothermal plant in Indonesia.
AboitizPower Pres and COO Antonio Moraza briefs media on the firm's outlook for 2017 @rapplerdotcom pic.twitter.com/mgPlXQWVGy — Chrisee V. Dela Paz (@chriseedelapaz) March 15, 2017
Win some, lose some
"You win some, you lose some. We are looking at permits. It is progressing, but hydro development is long gestation. It takes 7 to 9 years, so that is definitely patience and money," Moraza said.
It was in September 2015 when AboitizPower entered into an agreement with PT Medco Power Indonesia to participate in the exploration and development of a geothermal power plant.
Moraza said that with AboitizPower's experience with geothermal, it has "realized that it is riskier" than initially expected.
Asked why hydropower, he replied: "Frankly speaking, it is because our partners have the expertise. They have over 15,000 hydro megawatts in Norway. So these guys really know what they are doing."
"Myanmar is large and bountiful – with several hundred megawatts (MW). Indonesia is good. It has the potential of 400 MW to 500 MW," he added.
But Moraza clarified that the size of AboitizPower's possible hydropower projects have yet to be determined. "Ongoing feasibility study for both. We talk to the local community. Then we can start with the design. It is long. It takes a while," he said.
AboitizPower is the power arm of Aboitiz Equity Ventures Incorporated – the listed holding firm of Aboitiz-owned businesses, which also include real estate, food, infrastructure, and banking. – Rappler.com