Private operators with a powerful presence
WITH DEMAND EXPECTED TO SURPASS SUPPLY WITHIN THREE YEARS, THE TIME IS RIPE FOR A SURGE IN FOREIGN INVESTMENT IN THE LUCRATIVE PHILIPPINE ENERGY SECTOR. COMPANIES SUCH AS MIRANT AND AEV ARE SET TO TAKE FULL ADVANTAGE OF THE DIVESTMENT LEGISLATION CURRENTLY IN THE WORKS

POWER TO THE PEOPLE Mirant Philippines is the archipelago’s largest private producer of electric power.

In a bid to keep the cost of development low in the Philippines, the government aims to move away from the country’s dependence on imported oil and is pushing to increase the private sector’s involvement in the geo-thermal, hydropower, coal and natural gas production of electric power. Legislation that would eventually lead to the sale of generating plants belonging to the state-owned utility Napocor is currently in the works with implementation expected late next year.
The idea is to create a system in which privatized generators would sell to private distributors who would in turn push for market rates. It would also leave the door open to more foreign investment in the sector as demand is expected to surpass supply within three years at the current pace.

The country’s largest private producer of electric power is Mirant Philippines, a subsidiary of Atlanta-based Mirant Corporation, which is one of the world’s leading power producers with investments in electricity generation in more than a dozen countries. Formerly Southern Energy, Mirant Philippines owns and operates more than 2,500 megawatts (MW) of installed capacity, which it supplies entirely to Napocor. The subsidiary handles the parent company’s divisions in Australia, China and India.

Edgardo Bautista President of Mirant Philippines

“If you look at Mirant Philippines today, you will see the blending of East and West, the best of both worlds converging to create one of the country’s most successful companies. Nowadays in the Philippines it’s hard to find a company that has that kind of mixture,” notes Edgardo Bautista, president of Mirant Philippines.
Over the past four years Mirant Corporation has poured $2.8 billion into Mirant Philippines, making it the single largest U.S. investment in the archipelago. Mirant Philippines is also one of the country’s most successful companies with profits running about $150 million, and is the most profitable foreign operation of the NYSE-listed Mirant Corporation.
“The Philippines remains a very important market for Mirant,” Mr. Bautista explains. “We want to remain a significant business unit of our global company by continuing the excellent performance of our people and assets as well as meeting the overall goals of Mirant worldwide.”

NATURAL POWER The Philippines is exploring renewable sources of energy to reduce oil dependency.

With electricity demand expected to grow by about 9% annually until the end of the current decade, nearly 10,000MW of new installed capacity will be needed, meaning that there is plenty of room in the sector for the likes of foreign companies and local firms like the giant Aboitiz Equity Ventures (AEV), the holding company of the Aboitiz group.
For many years Aboitiz concentrated its business in the high growth areas of central and southern Philippines before taking steps to expand northwards throughout the archipelago. The group is now concentrating on its core business in the electric power sector while divesting from other non-performing areas.
AEV is listed on the Philippine Stock Exchange and reported profits last year of $21 million on revenues of $200 million, with 68% of that coming from its energy operations and 25% coming from its major stakes in the Union Bank of the Philippines, one of the country’s top five, and City Savings.

AEV, which is strongly committed to investing in the Philippines, is the owner of several electricity distribution companies, including one of the largest in the nation, Davao Light & Power, as well as several electricity generating companies.