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Philippine Resources - January 21, 2021

The Philippines and China Agree to Advance Oil and Gas Cooperation

Both the Philippines and China have agreed to advance Oil and Gas cooperation. This was according to Chinese Foreign Minister Wang Yi “the South China Sea issue is just a lone pebble in the broad avenue of bilateral relations,” Chinese Foreign Ministry Spokesperson Hua Chunying said. “The two sides should by no means allow the dispute, which only accounts for one per cent of overall relations, to affect the rest 99 per cent,” she added. “Both agreed to advance oil and gas cooperation and to look for a solution in keeping with the times to address the difficulties left over from history,” Hua said. The Department of Foreign Affairs (DFA) said, “Secretary Locsin and Minister Wang Yi confirmed that differences on contentious maritime issues do not represent the entirety of the Philippines-China bilateral relationship,” it said. “Both sides renewed their commitment to mutual respect, managing issues peacefully and in accordance with international law, and exploring areas for possible cooperation.”

Industry

Philippine Resources - January 15, 2021

DOE excludes expansion projects in coal moratorium

In a moratorium, effective October 27, 2020, in which advisory was dated December 22, 20202 but was only released January 11, 2021, the Department of Energy (DOE) firmed up the exclusion of the existing generating facilities with definitive expansion plans from the coverage of the coal moratorium policy. Besides expansion projects, also exempted from the prohibited coal plant investments are the following: a) indicative power projects with substantial accomplishments on permitting and b) committed power projects. For those that could still be implemented: with approved permits or resolutions from local government units (LGUs) and the Regional Development Council where the power plants will be located; and with signed and notarized acquisition of land or lease agreement for the project. According to the Philippine Energy Plan (PEP), in the next 20 years, it is still expecting 9,550 megawatts of capacity addition from coal plants to support the country’s need for baseload power. Energy Secretary Alfonso Cusi said that the policy is being enforced so that the Philippines could expand the share of renewables in energy. Aside from that, the chief would also like to give space for the promotion of more novelty technologies - and raise the flexibility of technology utilisation in the power system. The goal of the shift to cleaner sources of energy is to help alleviate the effect of global warming. For the past ten years, the DOE said that 66 per cent of the power capacity of the country comes from coal plants - with solar capacity at 10 per cent for 920MW; diesel plants at 7 per cent for 657MW; natural gas at 6 per cent for 582MW; and wind plants at 4 per cent for 394MW. During the pandemic, the DOE said that there have been challenges “with the sudden electricity demand reduction and the affected sustained operation of the baseload power plants, and that “there is a need to shift to a more flexible power supply mix to have a more sustainable power system that will be resilient in any structural changes in demand and will be flexible enough to accommodate the entry of new and cleaner technologies.”

Industry

Philippine Resources - January 12, 2021

Dept. of Energy: Moratorium on New Coal Power Plants

By Marcelle P. Villegas A moratorium on the endorsements of greenfield coal power plants was issued by the Department of Energy (DoE). This announcement was made while allowing foreign investors to now have full ownership of geothermal plant projects in the Philippines. DoE’s decision to stop the endorsements of coal power plants is the result of an assessment that showed the importance of focusing on a “more flexible” power supply mix. According to Energy Secretary Alfonso G. Cusi while at a virtual conference with world leaders held in Singapore, “This would help build a more sustainable power system that will be resilient in the face of structural changes in demand and will be flexible enough to accommodate the entry of new, cleaner and indigenous technological innovations.” DoE is currently updating their Philippine Energy Plan for the next 20 years. Mr Cusi mentioned that DoE is committed to accelerating the development of the Philippines’ resources while “pushing for the transition from fossil fuel-based technology utilization to cleaner energy sources to ensure more sustainable growth for the country.” [1] According to Undersecretary Felix William B. Fuentebella of DoE, the ban on endorsing new coal-fired power plants will not affect those power plants that have received endorsements in the past. He said, “We need to prepare for the influx of RE (renewable energy) under the recent policies issued by the DoE. Hence, the need for more flexibility.” [1] On note, 3,436 MV of committed coal-fired power projects in Luzon are ongoing as of August 2020. This includes the Meralco Powergen Corporation and GNPower Dinginin Ltd. Co. which is a joing venture of the Ayala and Aboitiz groups. Additionally, a 135 MW coal-run power projects in Visayas and 420 MV in Mindanao have been endorsed by DoE. Overall, there are around 10,000 MV indicative coal-fired power plant projects in the Philippines which may receive government endorsements. Mr Fuentebella said these will need to be sorted out. The ban will continue until the country will require additional baseload power, according to DoE official. [1] In relation to the ban, Center of Energy, Ecology and Development (CEED) pointed out that there are still environmental concerns about the existing coal-run power plants in the Philippines. CEED Director Gerard C. Arances said, “That is still concerning and alarming vis-à-vis pollution, climate imperative, and costly electricity in the country.” Another important announcement made by DoE is the upcoming open bidding round of renewable energy service contracts that will now allow foreign companies to own large-scale geothermal projects. This includes exploration, development and utilization. Last 20 October 2020, DoE released a circular providing the guidelines for the third Open and Competitive Selection Process (OCSP3) in the awarding of renewable project contracts. Cusi said, “From an investment perspective, OCSP3 allows for 100% foreign ownership in large-scale geothermal exploration, development and utilization projects.” DoE clarified that big geothermal projects are those with an initial investment cost of about $50 million and are under Financial and Technical Assistance Agreements, signed and approved by the Philippine President. Reference: [1] Ang, Adam J. (27 October 2020). Business World. “DoE bans new coal-run power plants”. Retrieved from - https://www.bworldonline.com/doe-bans-new-coal-run-power-plants/

Industry

Philippine Resources - December 21, 2020

PH now allows foreign ownership of geothermal projects

By Marcelle P. Villegas Department of Energy (DoE) announced that the Philippines now allows foreign companies to fully own large-scale geothermal projects in the Philippines. This decision was made to further promote renewable energy and to shift away from coal as an energy source. [1] DoE signed the circular on the guidelines for the third Open and Competitive Selection Process (OCSP3) in the granting of renewable energy service contracts. DoE Secretary, Alfonso Cusi signed it on 20 October 2020. He stated, “From an investment perspective, OCSP3 allows for 100% foreign ownership in large-scale geothermal exploration, development and utilization projects.” Geothermal projects are considered large-scale if it has an initial investment cost of about $50 million and approved through a financial and technical assistance agreement. From CNN PH report, “The project is entered into between the Philippine government and the foreign contractors.” [1] This requires the signature of the President. The Philippine Constitution requires 60% of a public utility to be Filipino-owned. However, DoE said that 100% foreign ownership is now allowed in the renewable energy sector. In 2019, DoE also reportedly allowed foreign companies to fully operate and own biomass power plants. DoE also released a moratorium on endorsement for greenfield coal power plants for sites that have not been used for commercial development or exploration. DoE’s objective it “to further brighten the prospects of our Renewable Energy landscape”. Secretary Cusi also aims for faster implementation of the Philippines’ national renewable energy program, hopefully generating 20,000 megawatts of renewable energy by 2040. Is geothermal energy the best energy source option we have to prevent an energy crisis from happening in the future? How about solar energy? According to a recent article published by Popular Mechanics Magazine, "It's Official: Solar Is the Cheapest Electricity in History" by writer and researcher Caroline Delbert, “Solar is now the cheapest form of electricity for utility companies to build.” This is based on the report of the International Energy Agency (IEA). Although the report mentioned that the reduction in cost of solar energy is based on the risk-reducing financial policies around the world, “it applies to locations with both the most favorable policies and the easiest to access to financing.” “IEA’s recommendations include similar projections and calculations for all renewables as well as nuclear.” Moreover, IEA forecasts that solar energy is well positioned to blow up in the next 10 years, “because right now it is in the sweet spot to lower cost and increasing availability… And while the news is very good for solar [power], it is still pretty good for all the other renewables as well as nuclear, the IEA says.” Why is solar power lower in cost of capital? According to Delbert, it depends on many factors. For renewable energy, she wrote, “There are a few low-hanging factors… As people and companies see more successful projects like Elon Musk’s South Australia solar battery farm, their investment confidence grows.” How did this year’s COVID-19 pandemic affect the global development of renewable energy? Last May 2020, IEA gave a market update and analysis on the impact of COVID-19 on renewable energy deployment in 2020 and 2021. They reported that “COVID-19 crisis is hurting but not halting global renewable energy growth.” “Half a year later, the pandemic continues to affect the global economy and daily life. However, renewable markets, especially electricity-generating technologies, have already shown their resilience to the crisis.” As a review of IEA’s analysis for 2020, they reported that global geothermal capacity additions are projected to amount to 0.3 GW in 2020, which is one-third of 2019’s level, which was the highest ever recorded. [3] “This year, Indonesia is again expected to lead new development, with 145 MV of capacity added (90 MV from the Rantau Dedap plant and 45 MW at the Sorik Marapi plant), followed by Turkey (+70 MV). These two countries are expected to account for more than two-thirds of new capacity additions in 2020, while the Philippines, the United States and Bolivia are responsible for most of the rest.” IEA also noted that this year, due to the COVID-19 crisis, a number of projects have been delayed by disruptions to the global supply chain for machinery and materials and by deferrals of strategic decisions, such as decisions in financing. In effect, several small and medium-sized projects originally scheduled to come online in 2020 are expected to be commissioned in 2021 instead. [3] In Turkey, the 10-year FiT scheme for new plants (originally scheduled to end at the end of 2020) has been extended until mid-2021 in order to cover projects affected by delays caused by the pandemic. (FiT or FIT refers to feed-in tariff. It is a policy mechanism designed to encourage and speed up investment in renewable energy technologies by offering long-term contracts to the producers of renewable energy.) “Global cumulative geothermal capacity is forecast to increase 7% to 16.5 GW by 2022, with Indonesia, Kenya, Turkey and the Philippines responsible for two-thirds of this growth.” IEA also reported that in Indonesia, the state-owned company PT Geo Dipa Energi (GDE) has received a USD 300-million loan from the Asian Development Bank for the 110-MW expansion of the Dieng and Patuha plants, expected to be carried out during 2020 – 2023. “Beyond 2022, Indonesia, Kenya and Turkey continue to lead capacity additions, which are projected to exceed 0.8 GW per year globally on average.” “The Indonesian government recently prepared a roadmap for geothermal energy, with the goal of having 8 GW of installed capacity by 2030 (up from 2.1 GW in 2019). However, wider exploitation of the country’s considerable geothermal potential will require the resolution of a number of challenges, including low energy prices, limited local electricity demand, a lack of capital investments, and environmental and social issues.” [3] In relation to this, the Indonesian government plans to conduct exploration and drilling in 20 geothermal areas during 2020 until 2024. Their view is to reduce development risks for future auction plans. They are also focusing on coming up with policies with the objective of providing better economic incentives to geothermal projects. If Indonesia overcomes the obstacles, they could match up with the accumulated installed capacity of the United States by 2025. In conclusion, IEA said that geothermal power is also receiving greater interest from oil companies. Most oil companies are open to opportunities to diversify their activities while capitalizing on their drilling expertise. [3] The International Energy Agency is an autonomous intergovernmental organization that is based in Paris, France. It was established in the framework of the Organization for Economic Co-operation and Development (OECD) in 1974 in the wake of the 1973 oil crisis. IEA is a reliable source of information and statistics about the international oil market and other energy sectors. IEA also acts as a policy adviser to its member countries and also with non-member countries like China, India and Russia. IEA’s mandate is focused on effective energy policies related with energy security, economic development and environmental protection. The Agency also promotes alternate energy sources such as renewable energy. Reference: [1] CNN Philippines Staff (27 October 2020). CNN Philippines. “PH now allows 100% foreign ownership in large-scale geothermal projects”. Retrieved from - https://www.cnnphilippines.com/news/2020/10/27/renewable-energy-philippines-foreign-ownership.html?fbclid#.X5jn8RFncGQ.linkedin [2] Delbert, Caroline (22 October 2020). Popular Mechanics. "It's Official: Solar Is the Cheapest Electricity in History". Retrieved from - https://www.popularmechanics.com/science/a34372005/solar-cheapest-energy-ever/?fbclid=IwAR2SZ1K5JZH6XHDqztP8-DfnY7X2lURKK4OCDxtSf0UFzKA59sC2XgBaLUg [3] International Energy Agency website. Retrieved from - https://www.iea.org/reports/renewables-2020 and Geothermal abstract Photo source: Philippine Geothermal Production Company, Inc. - https://www.pgpc.com.ph/

Industry

Philippine Resources - November 30, 2020

AC Energy to Build New Power Plants

AC Energy Inc., the power unit of Ayala Corporation, may soon build new power plants in Luzon - with a combined capacity of 550 megawatts. Documents submitted to the Department of Environment and Natural Resources stated that the power unit would develop a 150-MW diesel power plant in Mariveles, Bataan through Ingrid 2 Power Corp. A unit of AC Energy, Ingrid 3 Power, is also constructing a 400-MW diesel power plant project in Calaca, Batangas. The Mariveles plant is estimated to cost P10 billion while Batangas at P17 billion, based on the documents. Aside from these, AC Energy is also developing a 150-MW diesel power plant project in Pililla, Rizal, expected to be operational in 2021. According to AC Energy president and chief executive Eric Francia earlier, they were considering an investment in technologies to complement renewable energy. “We believe the country will need more peaking and reserve, ancillary capacity…especially in a world where you inject more renewables,” he said. Last November 27, AC Energy issued US dollar-denominated senior perpetual fixed-for-life (non-deferrable) green bonds totalling $300 million. In a statement, Francia said, “We are very pleased to see the high level of investor confidence in AC Energy and the strong market response to our perpetual green bond, following our maiden green bond in 2019. We believe that this will power AC Energy in its pursuit to scale up renewable investments in the region as we continue the transition to a low carbon portfolio.” AC Energy remarked it would use the net proceeds from the bonds to fund a tender offer and $400-million senior perpetual fixed-for-life notes callable in December 2022, and the balance to fund eligible green energy projects. The bonds have a fixed coupon of 5.1 per cent. The issue represents the first Philippine fixed-for-life perpetual bond offering since November 2019. This is also the first public green bond out of the Philippines in 2020. AC Energy Finance International Ltd, a wholly-owned subsidiary under a 2 billion dollar medium-term note program, issued the company-generated bonds, which the Philippine Securities and Exchange Commission has certified as ASEAN Green Bonds. “We are grateful to have been met with such a positive reception among bond investors especially given the pandemic. This underscores the continued confidence investors have in AC Energy’s ability to execute in this challenging environment,” said AC Energy chief finance officer Cora Dizon. AC Energy said the Green Bond Framework puts in place well-defined guidelines for the use of proceeds for renewable energy projects - with reporting commitments and comprehensive monitoring.

Industry

Philippine Resources - November 10, 2020

DOE Issues Certifications to Energy Projects

The Department of Energy (DOE) has issued P37.553 billion Batangas Clean Energy Inc. project of billionaire Lucio Tan and its American firm partner Gen X Energy certifications as “energy project of national significance” or EPNS that entitles them to the streamlined process of permitting. As an EPNS venture, the qualified projects are afforded a 30-day approval process on their permits as sanctioned under Executive Order No. 30 issued by President Rodrigo Duterte in 2017. In addition, DOE specified that the EPNS certifications for the Batangas Clean Energy LNG import facility and the proposed combined cycle power plant projects had been given separately. The 3.0 mtpa onshore LNG import terminal will be sited close to the distilleries of the Tan group — Tanduay and Asia Brewery — at Pinamucan Ibaba in Batangas City. Once this project finishes in 2025, the LNG facility provides fuel to 1,100 megawatts of gas-fired power generating facilities that cater to the future energy needs of the distilleries, and the JG Summit petrochemical complex of the Gokongwei group in Batangas. The company also eyes selling the capacity to Manila Electric Company (Meralco), the country’s biggest power distribution firm – and that could be concretized if the Tan-led LNG firm is joining the competitive selection process (CSP). The floating storage regasification unit (FSRU) import facility of Texas-headquartered firm Excelerate Energy is another EPNS-certified LNG project, which is targeted to be the first player to bring LNG into the Philippines in the second quarter of 2022. Furthermore, the project design of Excelerate Energy permits third party access (TPA) on its LNG import facility and caters to multiple buyers of gas. Aside from these LNG facilities, the DOE also gave CEPNS to the Bacon-Manito geothermal expansion project of Energy Development Corporation (EDC) that has additional 49MW into its portfolio. Energy Secretary Alfonso G. Cusi said, “We need to think of how we can ride this LNG wave, to ensure that we can safeguard our energy security. “We’ve started doing just that in the Philippines. We’ve started with the rollout of the Batangas LNG terminal by 2020 to safeguard against the anticipated depletion of the Malampaya gas facility by 2024.”

Industry

Philippine Resources - November 03, 2020

SMC Plans to Build LNG Plant

San Miguel Corporation (SMC) has plans to build 2,550 megawatts of power facilities using imported liquefied natural gas to hit commercial operations in 2022. According to SMC President and Chief Operating Officer Ramon S. Ang, the project will be done in three stages at 850MW capacity each. The site is in Batangas, proximate to the existing 1,200MW Ilijan gas-fired power facility, and SMC Global Power Holdings Corporation is the subsidiary that advances this project to implementation. The plan is to offer its capacity in an exercise that power utility giant Manila Electric Company (Meralco) undertakes on its competitive selection process (CSP) for new power supply agreements. “The power generation group of San Miguel, we are now switching to LNG. We intend to build three lines of 850MW, so that’s 2,550MW,” Ang said. He added that the development blueprint is set for the targeted commercial operation date of the initial 850MW by 2022 - the timeframe when imported LNG begins to flow into the country. Ang said that SMC will have its own floating storage regasification unit (FSRU) to supply LNG to its own gas plants – and exploratory discussions with Batangas-headquartered engineering and gas firm AG&P are now being conducted. “All of that can be up and running in two years,” Ang said. “In 24 months, that plant will be up and running. Whether we win the Meralco bid or not, we will construct the first line of 850MW.” Ang said that the alternative off-takers could be the electric cooperatives, specifically those operating in the grids of Luzon and Visayas. According to him, the longer-term goal will double their capacity to 5,000MW, which can depend on the electricity demand gains. Ang also indicated that SMC is eyeing to replace their old coal plants with LNG-fed generating facilities, so that forced outages could be minimized.

Industry

Philippine Resources - October 17, 2020

PNOC Inks Partnership With NFE

State-run Philippine National Oil Company (PNOC) has forged a deal with American firm New Fortress Energy LLC (NFE) for the establishment of liquefied natural gas (LNG) installation in the country. According to the Department of Energy (DOE), the agreement between the parties are non-binding and the terms for the agreement have yet to be firmed up - no specific part of the LNG supply chain and no timelines. In the initial agreement, PNOC and Nasdaq-listed NFE “will work together to identify potential opportunities to accelerate the development of important LNG and power infrastructure in the country.” It continues that this shall be leveraged on“future investments to build a new and durable LNG value chain in the Philippines capable of generating jobs, revenue and opportunity far beyond prospective terminal or power plant sites.” Energy Secretary Alfonso G. Cus said that this is a step in the development in strengthening the country’s energy security. “The Philippines has grand ambitions of positioning itself as a hub for LNG investments in the Asian region,” he said. New Fortress Chairman and CEO Wes Edens, also the co-owner of NBA basketball team Milwaukee Bucks, stated, “The MOU will enable cleaner, more affordable and more reliable energy for the people of the Philippines. Increasing access to power across the islands at a rapid pace will create significant growth opportunities. We look forward to working closely with our partners at PNOC and the government to bring more reliable power and help accelerate the clean energy transition.”

Industry

Philippine Resources - November 06, 2019

Harnessing hydropower potential in the Philippines

Together with its client, Cordillera Hydro Electric Power Company’s (COHECO), GHD’s renewable energy capabilities were in the spotlight at the Asian Power Awards, recently announced in Malaysia. Dubbed as the “Oscars of the power industry,” the awards recognize cutting-edge innovation and sustainable development with COHECO’s 60 MW run-of-river hydro project named Hydropower Project of the Year. GHD is the owner’s engineer for the project, which will generate reliable, low-cost electricity and boost socioeconomic growth in the communities of Kapangan and Kibungan in Benguet province, Philippines. Run-of-river hydro schemes do not require reservoirs, reducing cost and complexity and minimizing social and environmental impacts. “It’s a proud moment for GHD and COHECO to be recognized by an esteemed jury of leaders from the energy industry,” shares Darren Shrives, GHD’s General Manager, Philippines. “This award reflects our commitment to create value for our clients, our employees, and the communities that benefit from our work.” “We thank GHD for the nomination and we are one with them in bringing development opportunities and uplifting the living conditions of local communities to propel economic growth,” states Jose Xavier Gonzales, President and Chief Executive Officer, COHECO. “This international recognition affirms the way GHD leverages its global expertise to support us in achieving our business goals.” The project, in development since 2015, involves the construction of a 22-km access road, about 8 km of tunnel, powerhouse, switchyard, surge tank and 24 km of 69 kV transmission lines. In the early stages of the project, GHD undertook an extensive hydrology study to estimate the potential annual energy output for the consideration of potential lenders. The construction of the hydroelectric power plant is estimated to take three years with GHD as owner’s engineer providing technical advisory, project management, construction monitoring and supervision services. This project is a cornerstone in increasing the region’s competitiveness and reinforcing the country’s commitment to increase the share of renewables in its total energy mix, with energy consumption expected to nearly double by 2040.

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