Jose Silvestre Natividad, President, Sunwest Water and Electric Co., Philippines
Jose Silvestre Natividad, President of Sunwest Water and Electric Co., Philippines, talks about his belief in the business of renewable energy, commenting that hydro has a competitive advantage in the Philippines and incredible potential. He also emphasizes that Suweco endeavors to accelerate renewable energy development and strives to make a difference through the implementation of its projects.
In this critical time of high energy demand, which roadmap do you believe the Philippines should follow? What is the ideal energy mix?
Considering the challenges the country is currently facing, particularly on the existing capacities, I believe that the most feasible roadmap for the Philippines should be the one that focuses on full capacities. And these challenges are the direct consequences of the implementation of the privatization of the power assets. However, with the advent of the EPIRA law in 2001, from the monopoly of the two major power providers the Aboitiz Group and the Lopez group, many other player came into the sector.
There is currently a huge potential for the power industry in the Philippines. Having said that, the ideal energy mix is the one that combines conventional energy and renewables. The Philippines is extremely blessed with natural resources. All the different types of renewable energy sources can be found and produced here in the Philippines. The government needs to stay focused on prioritizing the development for renewable energy. Developing renewable energy not only provides local communities the opportunity to experience development, but it is also a catalyst for the economical activities throughout the entire archipelago.
In Sunwest Water and Electric Company (Suweco), after three years of development, we have experienced immigration. Typically, in some areas where there is no development, emigration is a natural step taken by people in the communities where there is no work. Lack of development translates to no jobs. Hence, the development of indigenous sources of power, such as renewable energy mostly found in rural areas, is a win-win strategy as this will spur economic activities in these areas and generate jobs. Even the environment is protected.
After your two hydro-plants became operational in Catanduanes, the region became the first Green Province in the country and also one of the few in the world to be almost 100 percent dependent on renewable energy. What has the process been and what have been the main challenges you experienced?
The main challenges in developing hydropower plants are both technical and political: technical in the sense that at the end of the day, we are playing games with nature. For example, we have an average of 25 typhoons a year in the Philippines that normally devastate areas where there are plants.
On the political side, we have a lot of room for the improvement in terms of bureaucracy. At least with the current administration we are finally starting to focus on important matters. It is so simple: we basically need continuity in the policies implemented by the government. Where there is a law, we will implement it, but there are many policies and procedures that are not yet being implemented, or worse, that are conflicting with each other.
Today in the Philippines it is easier to build a new coal plant than to develop renewable energy sources. But as I have mentioned, we see hope and we are starting to see more positive steps being taken by the government when it comes to renewable energy.
What were Suweco’s reasons for the initial entry into the hydro arena?
Because we believe 100 percent in the business of renewable energy! Hydro has a competitive advantage: given the country’s vast hydropower potentials, more than 10 percent of electricity requirements will be supplied by hydropower generation.
Water is a national resource, however, foreign companies are allowed to invest and develop hydro in the Philippines. As the President of Suweco, a Filipino company, what is your perspective and do you believe this fosters healthy competition?
Competition is essential for the benefit of the country. There is a new generation of businessmen where competition is accepted as a method of improvement, which enables the industry to expand, so we consider it as a healthy competition.
Suweco currently has a portfolio of 59 projects in different stages of development. These projects are expected to generate a total capacity of around 280MW in the next decade. Where do those projects stand today?
Our business model employs a programmatic approach. Suweco can do a project from A to Z. We conceptualize, develop and operate. Four of these projects will be operational very soon and one is under construction. We also do feasibility studies and detailed engineering of the other projects in the pipeline. By year 2020 we foresee the full development will be completed.
What are Suweco’s overall market ambitions?
Our market ambition is to move forward and keep on moving forward, building small plants one after the other. We don’t put all our eggs in one basket, because in the Philippines there are so many different weather conditions that it is simply too risky to operate in only one location. We have 2MW to 10MW power plants on many different islands, but we manage those multiple small projects through a central and lean organization.
Regarding developers following different investment strategies, how do you rate the financial muscle of Suweco?
Suweco is very flexible in terms of financing. We are composed of 20 companies, or rather 20 different joint ventures in the Sunwest Group, so we all have a balance sheet. At this scale our operating plan will finance all the activities of those 20 different companies. Being part of the group, Suweco gains competitive advantage from the synergies within the group. For example, each year we see that some companies within our group end up compensating the low earnings of the other companies. Last but not least, we all work and receive a lot of support from the BDO, a Filipino bank that is very committed to renewable energy.
What is Suweco’s direction in terms of performance indicators?
We are not so far away from our industry benchmark. Actually, I do feel that we are going to reach our energy industry standards in three years time. Moreover, in five years Suweco will also be an important player in solar and wind.
As an investor, you seem to favor capitalizing on “brown field” opportunities existing in the Philippines, having recently said that Suweco needs to maximize on the existing infrastructure facilities. Why have you taken this strategic choice? What impact do you expect to have on your portfolio?
In the Philippines we divide the capacity in two ways: connected to the grid or not connected. Not connected are the SPUG (Small Power Utilities Group) areas that require the highest need of development, particularly renewable energy development. These areas are subsidized by the government and need a lot of help; they are the last assets yet to be privatized by the government. Suweco therefore, identifies attractive “brown field” opportunities that are in line with the company’s vision. Suweco endeavors to accelerate renewable energy development and strives to make a difference through the implementation of its projects with the most impact. Lastly, we focus on promoting inclusive growth by bringing electricity in the SPUG areas or other rural areas that are not currently being well serviced by the national grid.
What is Suweco’s competitive edge? What do you see as your key success factors?
One of our main advantages is that we have been in the remote areas since seven years ago; we were the first ones. In regard to our competitive edge, as compared to others developers we do a project from A to Z. Suweco has management and technical teams composed of professional with over 90 years of combined experience. We gain expertise in managing individual political climates in the areas in which we operate. Also, given the in-house design team coupled with its in-group constructions experience and the capability to secure all the necessary permits, we have an edge within the power industry, which results in valuable speed-to-market. We have also a fully integrated operation, which allows a good level of flexibility that enables it to act promptly and address the demand. With our operational plants, I believe we have shown the world that we are indeed serious. And Suweco has achieved its current stature as the leading purely renewable energy player in the industry in the span of seven years.
What are your ambitions for Suweco in the Philippines? Where would you like to see the company in five years from now?
Suweco aims to complete all of the projects in our portfolio. Slowly but surely, we are going to reach the dream of having 300MW capacity. We are not aiming to have a large presence in the mega cities where the big players are already dominating; rather, we want to be leaders in the more rural areas that we are serving, in partnership with those communities that are less developed today. We really envision ourselves to be the preferred and responsible provider of water and energy, catalyzing socio economic and environmental development in the countryside. Also, a forerunner in renewable energy development that creates the enabling conditions to accelerate the wider utilization of the country’s water, wind, and solar resources for power generation as a sustainable and reliable source of clean energy for every Filipino.
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