Friday, 29 January 2010

Ayala, Metro Pacific team up for Angat plant auction

Miguel R. Camus
Business Mirror

LISTED firms Ayala Corp. and Metro Pacific Investments Corp. (MPIC) have teamed up to bid for the government’s Angat hydropower plant. The move also marks the companies' entry into the power generation business.

In separate filings to the local stock exchange on Thursday, both firms announced that they have submitted a letter of interest to bid to the government-run Power Sector Assets and Liabilities Management Corp. (Psalm) for the 246-megawatt (MW) power plant in Bulacan.

Ayala Corp. and MPIC—which hold water concessions to Metro Manila’s east and west zones, respectively—will bid through Ayala subsidiary Michigan Power Inc. Both companies will share equal ownership over the contract, an MPIC spokesman said.

Ayala Corp. said the move “is in line with Ayala’s desire to participate in the power sector, especially in the realm of clean and renewable energy.”

This will also pit the Ayala-MPIC joint venture against other parties interested in the power plant. Companies that have already expressed interest to join the auction include Lopez-led First Gen Corp., which is the country’s largest power producer, Aboitiz Power Corp. and diversifying San Miguel Corp.

“They are all competing for Angat because it’s a very good project. Hydro energy, in general, is the first to be dispatched….Because it’s cheap, it is what gets bought first,” said BDO Capital and Investment Inc. president Eduardo Francisco.

Francisco explained that hydropower plants are generally more expensive to build. However, power generated in these facilities often cost less due to lower input and maintenance costs relative to coal-fired plants.

“This will provide another source of [energy] for Meralco…and it can bring down the cost of Meralco’s power purchases,” he added.

Commissioned between 1967 and 1968, the Angat hydropower plant consists of four main units, each with a 50-MW capacity. The plant draws from the Angat Dam, which supplies up to 97 percent of Metro Manila’s water supply.

Francisco added the latest move will also lead to synergies, in particular, with MPIC’s power distribution business through Manila Electric Co. (Meralco).

At present MPIC owns 14.7 percent of Meralco while affiliate Philippine Long Distance Telephone Co.—through unit Pilipino Telephone Corp.—owns another 20 percent.

MPIC is engaged in talks with the Lopez family that may increase the entire group’s stake to 41.4 percent.

“Right now, Meralco has a long-term contract with the Lopezes [through] the Santa Rita and San Lorenzo combined cycle gas turbine plants [in Batangas City],” noted Francisco. He said the acquisition of Angat will be beneficial for Michigan Power as it will have a ready buyer in Meralco which can avail of the lower water rates from Angat.

Michigan Power was formed by the Ayala group to serve as its vehicle to explore opportunities in the power industry.

Market observers said this will eventually give both firms more influence over operations of the dam itself. Ayala Corp., through unit Manila Water Co. Inc., supplies the capital’s east zone, while west zone concessionaire Maynilad Water Services Inc. is controlled by MPIC and DMCI Holdings Inc.

Both Ayala and MPIC said the auction for Angat will be subject to the bidding process of Psalm.

Psalm has set the pre-bid conference for the plant on February 17, while the bid submission deadline has been scheduled on April 28.

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