Alternergy charts ‘triple play’ investment strategy in RE ventures
December 1, 2022 | Manila Bulletin
More than a decade ago, the contours of renewable energy (RE) investments in the Philippines had been framed and are being re-shaped through the years – and the nuances of project developments had always been complicated and tricky.
Through it all, there’s one company that had witnessed from day one how the country was being transformed into its aspiration as a ‘mecca of green energy’ – that’s Alternergy, a company founded by former Energy Secretary Vincent S. Perez, and is now largely touted as a pioneer project-sponsor of the Bangui wind farm project in Ilocos Norte, the first commercial-scale RE venture in the country that reached commercial development even prior to the passage of the Renewable Energy Act in 2008.
To the ordinary Filipinos, the Bangui wind farm project is what they’d gotten familiar with as an enthralling tourist attraction in northern Luzon; and it is also the most-showcased RE project in the speeches of President Ferdinand Marcos Jr. especially when he is courting investors to inject more capital in the country’s RE sector or when he is discussing the policy directions of the energy sector.
The company’s investment experience had not been easy and seamless – but the bold steps it had taken offers wealthy narrative on how investor-counterparts could navigate the terrain of RE developments in the Philippines – especially to the ‘uninitiated’ and the starting players who can’t lean on the deep-pockets of ultra rich parent-firms.
‘Triple play’ strategy on RE investments
“At Alternergy, in the next five years, we expect to build a total of 1.4 gigawatts (1,400 megawatts) of renewable energy. Essentially, we have a strategy and that is what we call ‘triple play’ – we are going to focus on three technologies: wind, solar and run-of-river hydro,” Gerry P. Magbanua, co-founder and president of Alternergy Holdings Corporation enthused.
On the wind investment space, he highlighted that blueprinted projects are both for onshore and offshore wind farm developments; while solar will cover both ground-mounted utility scale solar projects as well as rooftop installations.
For run-of-river hydropower ventures, the awarded service contracts to the company comprise of medium-sized projects that are now being advanced into commercial development stages – including the 4.6-megawatt Dupinga hydropower project in Gabaldon, Nueva Ecija; the 17.5MW Kiangan project; as well as the 6.8MW Lamut-Asipulo hydropower venture in Ifugao province.
In the solar development terrain, currently being pushed to construction phase is the company’s 10MW Solana solar farm project in Hermosa, Bataan; plus its continuing installations of solar photovoltaic (PV) solutions in the rooftops of City Malls, a portfolio of community malls of DoubleDragon Corporation which is a joint venture of billionaires Injap Sia and Tony Tan Caktiong (of famed food chain Jollibee).
Wind power development is another flourishing investment sphere for Alternergy; and currently taking off from its drawing boards are its Pililla 2 wind farm project in Rizal province; the 10MW Alabat Island wind farm prospect in Quezon province; and the Calavite offshore wind project in Mindoro, which is being pursued in partnership with a subsidiary of multinational energy giant Royal Dutch Shell – and once advanced into commercial fruition, that will yield capacity generation of about 1,000MW.
The 72MW Pililla 2 wind farm project, in particular, will be an expansion of its operating 54MW Pililla wind power facility, which has been awarded with feed-in-tariff (FIT) incentives by the government and it is now its partnership with Singapore-headquartered Vena Energy.
“At the moment, we already have 70MW of operating assets – consisting of 10 projects; and we have five under construction, that’s a total of 72MW and there’s another one under development, a total of 1.2GW (1,200MW),” Magbanua conveyed.
He said the current batch of shovel-ready projects are already underpinned with bilateral power supply agreements (PSAs), hence, that will guarantee stream of revenues from these investments upon reaching commercial operation date (COD) phases.
Navigating the ‘stress’ and ‘pressure’ of project developments
From the depths of the sea to the crest of the mountains on their project siting, Alternergy is a company that serves as ‘testament of hard work, patience and perseverance’ when it comes to going through the entire chain of project developments – from drawing up project concepts and engineering designs, securing project sites, wading through the Gordian knot of permitting processes, taking the mare’s nest and pressure of securing project financing; then to construction, grid integration as well as bringing the projects to full commercial operations.
Manifestly, what sets Alternergy apart versus peers in the RE sector is that: it develops the projects from concept to reality; while some players often flip projects once they are awarded with service contracts or after getting through the permitting phase; while other companies with conglomerate-backing typically acquire projects just to build up their portfolio.
“We have long track record already in terms of development – and we take pride in the fact that we are pioneers in the industry. And being pioneers, we know how to navigate through difficult, challenging terrain of project developments – particularly for renewable energy in this country. So that’s key for us — we are pioneers; we are patient and we persevere, those are the traits that we embody,” Magbanua stressed.
One project development that had given the company its toughest ‘stress test’ had been its 54MW first phase Pililla wind farm venture – especially on the realm of cornering project financing.
Lacking a parent-firm that it can depend on for financial support, Magbanua shared that “we had struggle – because of the six companies who did the initial batch of wind projects in the country – we’ve been the only one that was not backed up by a corporate balance sheet, so we needed to innovatively create a paradigm for financing that did not require corporate backing.”
He added “at the time, there were no banks who were willing to lend on a ‘project finance’ basis – and while some banks were willing to lend, their standard requirement was: give me a corporate guarantee. And we didn’t have that because we don’t have a parent company.”
In overcoming that project financing drawback, the Alternergy executive noted that “we were able to convince the banks – our lenders like BDO, RCBC and China Bank – because we have done comprehensive due diligence and we extensively vetted the potential of the resource in our Pililla wind farm project – and our own data had also been vetted eventually by world renowned experts; so those were the measurable metrics that we’ve presented to convince the banks. We have had a solid plan, backed by tangible data and numbers that also became our anchors when we executed the project.”
Moving forward on their fresh batch of investments, Magbanua sounded off confidence that with the scale of experience and track record they’ve already carved as a niche in the industry, “we are at this point that we can already ramp up our development – and the next focus of the group is to really go on construction mode for our next projects.”
The learnings the company had taken from previous project developments, according to Magbanua, is “don’t give up just because of a particular difficulty in project execution. What we’re trying to say is: expect that there will be issues that will come up along the way – no matter how great or how detailed your plans are, there will always be something that will crop up; and when you overcome it, that will separate the good developers from the others.”
The Alternergy president further stated “the project development work may not have been getting easy, but because we are now experienced, it has become a little bit lighter doing things because we can now anticipate problems, so we would be able to strategize ahead in our next projects.”
Supporting PH’s ‘energy transition’ pathway
In all corners of the Philippine archipelago, it is already clear that the government’s policy push will be for the country to sail into its ‘energy transition’ pathway – that entails ticking up the share of renewables in the power mix to 35-percent by 2030; and escalating it further to 50-percent by 2040.
And from being a pioneer in RE project developments, Alternergy is also a front runner in supporting the government’s drive for decarbonization – primarily in revolutionizing new wave of project-developments into green energy technologies and to calculatedly shift away from fossil fuels that had reigned in the country’s power mix for decades.
Given the worsening dilemma of climate change risks, Magbanua opined that the whole world – and for the Philippines being very vulnerable to the wrath of extreme weather events; “we are at a crossroad where we don’t have any choice anymore but opt for adaptation. In energy, that will be greening our power grids not just for the planet’s preservation but more importantly, for humanity’s survival and well-being.”
The other important facet of the energy transition holy grail being championed by the Department of Energy (DOE) is for the country to finally gain traction on fixing our long running predicament of energy insecurity.
Magbanua qualified that if there is a well-meaning lesson we should get clued up from the disruptive energy crunch in Europe, “it is for us to achieve our energy independence and energy security by harnessing our own resources – and that can be addressed by the vast RE resources we can tap in the country to address our long-term energy needs.”
Prescriptively, Alternergy is a thriving proof that big things still come from “small packages” – and these ‘David like’ players can surprisingly match or even surpass the stronghold of the cash-swamped corporate giants in the country’s gigantic journey into a green energy future.