Oliver Carsi Cruz, Managing Director, TBG Renewables Inc. (TBGR), Philippines
Oliver Carsi Cruz, Managing Director of TBG Renewables Inc. (TBGR), Philippines, explains why the company has aligned itself with reputable industry advocates to further add tools to properly and expeditiously evaluate potential investments, and that it helps that the group’s existing manufacturing operation in the country has built a solid business reputation that translates to favorable relationships with banking institutions.
When exactly did TBGR enter the renewable energy sector and what was the company’s main focus before doing so?
TBG Renewables Inc. (TBGR) is part of Trierenberg Holding AG, a diversified enterprise based in Austria whose roots are centered on the manufacturing of specialized papers. TBGR is the exclusive distributor of Global Hydro Energy GHE hydro turbines in the Philippines.
The group currently owns and operates TANN Philippines Inc. (TPI), a paper converting facility located in an export processing zone south of Manila. TPI is often used by the group as a platform to identify investment opportunities in the country and the rest of the Asia region.
The group’s foray into renewable energy started two years ago following a casual discussion with the chairman on the merits of geothermal power (which incidentally was being generated in close proximity to the factory). The emphasis of TBG however, eventually converged on the mini-hydro market owing primarily to its familiarity to the sector which hinges on its connections to leading turbine manufacturers in Austria. This meant TBG had access to high specification technology close at hand.
What factors drive investments in hydro systems for TBG here in the Philippines?
The investments are predominantly driven by Christian Trierenberg, our company Chairman. He realized early on that he could leverage existing management resources to explore the mini-hydro market. At the end of the day, Mr. Trierenberg and the management team at TBG are entrepreneurs that seek to engage opportunities where they are found. In this case, despite historically being in the printing business, TBG was confident it found concrete opportunities in the renewable energy sector in the Philippines.
Interest in small hydro projects have picked up in recent months following the promulgation of the Renewable Energy Law and the release of the Feed-in-tariffs. For an investor, these milestones were significant in reducing risks thereby improving the palatability of the projects.
TBG Energy Corp. (TBGE), the group’s investment arm is tasked to identify and engage mini-hydro developers for possible partnerships. Typically, TBGE buys into a project company intended to develop a specific power project, or to a holding that owns multiple service contracts and power projects. As a foreign company, we are restricted to a maximum shareholding of 40 percent. While many investors see this as a hurdle, we view this as an opportunity, an opening to find like-minded local partners equally determined to see projects through. Simply put, we partner with serious players invested to develop and operate mini-hydro power plants that would run efficiently through the course of the service contract.
At this point we are in various stages of negotiations with developers of run-of-the-river hydro power projects. The estimated generation capacity from all these projects total to around 40MW.
The key partner for TBG is Global Hydro Energy (GHE) because both companies have a shared vision and remarkably common interests. An originally opportunistic connection with GHE has developed into a strong and strategic partnership. The relationship works because when project developers begin looking for quotations for equipment, such as turbines, they are also at the ideal stage to receive offers of capital investment. GHE and TBG Energy’s business models are a perfect fit and GHE have proved an excellent partner.
Prior to both companies entering the Filipino market, marketing of small turbines was generally sporadic and opportunistic, advocated by individual consultants for one-off projects. While established turbine manufacturers have been represented here for some time, TBG and GHE seeks to introduce further professionalism and value to the industry by customizing offers that would maximize plant efficiency as well as uniquely meet specific project needs. Our task is to allow developers to have accurate expectations in terms of turbine performance and project costs and of course, deliver the best quality the market has come to expect from an Austrian turbine manufacturer.
You mentioned your key partner is GHE. What were the qualities that brought GHE and TBG together?
GHE received more quotation requests from the Philippines following the implementation of the Renewable Energy Act, a pioneering law that set a benchmark for South East Asia. As mentioned, the law represents a milestone in promoting investments in energy production from renewable sources. Demand too, is pulling companies such as GHE to the Philippines since the market is highly attractive. The relationship started when GHE recognised TBG’s efforts here in the Philippines and the importance of moving from a role as an opportunistic supplier to one which strategically seeks to increase demand for high-performance, quality turbines.
GHE is focussed on the small hydro sector allowing them to be more responsive to the specific needs of mini-hydro developers. They offer complete solutions from “water to wire”. Aside from turbine systems, they also developed proprietary control systems that allow developers to optimize power generation and effectively operate and maintain the entire hydro-electric plant. The “Heros” system can in fact be sold separately and be used for other hydro-electric plants.
GHE’s Austrian heritage is certainly a marketable quality but what clearly differentiates them from the rest is their commitment to tailor-fit solutions that aims to maximize the returns for the developer. Aside from closely engaging the developers at early stages of the project, they likewise go out of their way to offer technical solutions to improve plant efficiencies. The GHE team had likewise been very flexible in accommodating unique project requirements, which by far, seems to be appreciated by our customers.
Both TBG and GHE agree that the engagement with the customer doesn’t end with the sale. To be successful in the market, we believe that equal emphasis need to be given to ‘after-sales service’. To this end, we have allocated resources to ensure that our customers would have ready access to after-sales care when required.
To what extent does the partnership with GHE attract customers to TBG and vice versa?
It helps that GHE is supporting us 100 percent. They offer competitive prices for high quality turbines, a fact that will continue to help support our projects.
The alliance works because both our companies’ interests and activities are complementary. As a representative of GHE, we are exposed to projects which may require financial investment. On the other hand, as an investor to the sector, we get to review projects that would as well require quality turbines.
This morning, TBG received confirmation that GHE’s first reference project in the Philippines will be built in the near future. This is of particular note because GHE have a significant presence in Europe, but have as of yet, a limited footprint in Asia.
Environmental concerns have slowed development of many large scale hydropower proposals and as such, small scale developments are increasingly attractive. How have you seen the market evolve over the last two years, and how do you seek to position yourselves in the market?
Despite lingering challenges, the Philippine government has done its fair share in creating interest in the sector. It is hoped that the rules that were put in place would continue to encourage development of the renewable energy sector.
In small hydro, we do see accelerated growth as most service contracts previously issued are nearing gestation. I believe, the team at TBG has done its homework and is geared to continue investing time and effort in further understanding the industry. This knowledge is vital in selecting quality projects worth pursuing and identifying serious and capable partners. TBG’s portfolio at present, contains only projects representing real opportunity and value. More importantly, our business partners along the value chain are all established and credible players.
We have additionally taken development of mini-hydro facilities in the country as an advocacy, hence the teams do provide free consultancy services to indigenous communities looking to develop local water resources. This service ensures that ‘would-be’ developers are exposed to industry ‘best practices’ and are properly guided on development procedures.
The quality of TBG’s industry alliances and the funds we can mobilise for any project continue to add to our credibility and reputation. We seek to position ourselves as a leading investor/turbine supplier/sector advocate in mini-hydro in the years ahead.
What is your competitive edge?
As a foreign investor, TBG is quite unique as it has a strong local presence that is adequately equipped to sift through project proposals and conduct initial due diligence on project proponents. TBG has likewise aligned itself with reputable industry advocates to further add tools to properly and expeditiously evaluate potential investments. It also helps that the group’s existing manufacturing operation in the country has built a solid business reputation that translates to favourable relationships with banking institutions.
Most importantly, TBG’s partnership with GHE strengthens the commercial viability of projects we choose as it provides additional security to local partners and loan institutions. It further assures them that the selected projects would be getting high performance turbines that are competitively priced and tailor-made to maximize power plant efficiencies.
Unlike your typical financial investor, the team at TBG undertakes to visit each potential site and works to validate data that are indicated in feasibility studies. This on the ground presence helps TBG and the company’s partners ascertain if investments risks are worth taking.
How do you find your partners, and what do you do to attract them?
It is important to do ones’ homework. TBG actually started with a list provided by the Department of Energy (DoE) two years ago. The process of choosing partners is not rocket science, it merely requires a meticulous eye and patience. We have winnowed potential developers from this list to a trusted handful because it is important to align oneself with like-minded advocates. As advocates of clean energy we have a positive influence on the market, therefore it is the commitment to this market and the Philippines that is a big driver of our success. It is a good market to invest in and TBG’s work provides social, economic and environmental benefits. For this reason, pursuing the goal of generating power renewably is a tremendously enjoyable task.
Where would you like to see TBG in five years time?
We had been fortunate to have had remarkable progress in this sector so far. We could only strive to sustain our efforts and continue to diligently follow established methodologies and avoid temptations to do short-cuts. We will have a strategy review in November of this year that will decide how to advance the company’s vision to develop the resources to start generating power.
It is our primary intent to realize the potential in current projects at the soonest possible and perhaps, continue to build on our RE portfolio by directly applying for service contracts on our own. We hope to sign partnership contracts this year and commence with civil works as early as Q2 2014. We do hope to ride the wave of developments in the small hydro sector in the Philippines and emerge as a key player championing the use of clean energy coming from run-of-the-river hydro-electric power plants.
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