BDO Capital & Investment Corp. said it will continue to lend to power projects, particularly renewable energy, as it expressed concern over the looming power shortfall during the next dry months.
BDO Capital president Ed Francisco said during the recent Department of Energy’s 2021 Energy Investment Forum that RE projects are easier to finance specifically wind, solar, geothermal and run-of-river “because we are very comfortable” with them.
BDO Capital is an investment house whose functions include securities underwriting and trading, loan syndication, financial advisory and private placement of debt and equity.
Wind and solar are considered intermittent source of power unlike coal which provides baseload capacity due to its 24/7 availability.
“Just recognizing of course the availability factors, we’d love to lend more to that…We really need [capacity]… We’ve heard that there will really be a shortfall,” Francisco said.
Francisco said he was constantly in talks with Manila Electric Co. president Ray Espinosa who informed him of the forecasted increase in demand during the dry months as the economy reopens.
“He [Espinosa] foresees problems this coming summer because if all the businesses are opened and if the economy re-opens, then we will have a shortage in power,” the bank executive said.
“Therefore, what will what happen? Will we go back to coal? I really rely on DOE for that,” Francisco said.
Francisco said he would rather have power and use coal “rather than have brownout because that will destroy the catchup we need.”
Meralco is seeking approval from the DOE to procure 170 megawatts of capacity in preparation for the anticipated increase in demand during the dry months and the election period.
Meralco officials bared in October the need to secure an additional 170 MW of supply in preparation for increased demand next year, election period and declining gas supply from the Malampaya project in northwest Palawan.
The decline in gas supply from Malampaya forced the country’s natural gas plants to run on the more expensive liquid fuel or shut down some of their operations, leading to lower generation capacity in the Luzon grid.
A power industry player also warned that Luzon would have a tight power supply next year. “I think it’s going to be a very difficult summer. I think only one new power station has come into the energy mix in Luzon, up north, a 660-megawatt super critical coal power plant. Aside from that, there are no new power stations coming into the market,” said Frank Thiel, managing director of Quezon Power (Philippines) Ltd. Co. and general manager of San Buenaventura Power Ltd. Co.
“This can be a very tight situation. I think we will have barely enough provided all the plants are there at the same time, and we will don’t have any surprises,” Thiel said, in response to questions about supply forecast for 2022.
Thiel said that as demand continued to rise, some power plant projects were put on hold while others were not able to conduct most of their scheduled maintenance last year because of the pandemic.
“Pre-pandemic, we had a certain demand. During the pandemic, the demand dropped and I think a lot of projects were put on a lull because of that situation,” he said.
“In Luzon, the economy started taking off again. Demand has increased and was back to pre-pandemic levels and increasing. Next year is going to be very tough,” Thiel said.
