Armando de Rossi, Chairman & CEO, and Nicanor Villasenor III, COO, PHESI, Philippines
Armando de Rossi, Chairman & CEO, and Nicanor Villasenor III, COO of PHESI, discuss the future of oil & gas vs. renewable energy, why they see a future in the latter, and what the impact will be on local communities.
Government support is a defining factor for the success of renewable energy projects in the Philippines. Do you believe that Filipino government policies encourage the growth of renewable energy and are providing significant support to small businesses and entrepreneurs? What can be done better?
Overall, the support of the government has been good, although there is more room for improvement. Nevertheless, on the regulatory side, it is important to mention that right now any developer that would start a new project has to deal with bureaucracy, which is a very difficult task, as we have to deal with different government agencies that are not aligned with each other. Apart from that, in off-grid areas there is also the issue of the electric cooperatives: different legislators with different structures that create different questions, especially when it comes to dealing with them.
Moreover, we would also like to see a change to the policy from the government of not allowing more than 40 percent foreign ownership; which is a huge problem as there are no Filipino technology companies to cover what we are doing here.
CMC-Asia, Inc. pioneered renewable energy in the Philippines back in 1979 and are now partners with Berkeley Energy, who manage a Renewable Energy Asia Fund (REAF). What are the reasons behind your strong focus and commitment to renewable energy?
We always believed that the future of power generation lies in renewable energy and not in oil and gas, especially in countries like the Philippines in which the majority of the energy players are only focused on gas and coal. Our archipelago, and others like it, has huge potential for hydro, wind and solar power generation. The opportunity came when a true pioneer, Nicanor S. Villaseñor III, came to join forces with us taking over Philippine Hybrid Energy Systems, Inc. (PHESI).
PHESI is a company of CMC-Asia, Inc. in partnership with Berkeley Energy. CMC-Asia, Inc. has been operating renewable energy projects since 1979.
What do you consider have been the main milestones and achievements of PHESI since you founded the company?
The main achievement has been the construction and the development of major hydro power plants in the Philippines, for which we were both the EPC contractor and the project developers. This capability to manage every aspect of a project has not just been shown in the Philippines, but also in other Southeast Asian countries.
What were the main challenges that you faced at that time?
The number one challenge has always been bureaucracy. Still today, after 30 years in the Country, we have plenty of problems when it comes to any kind of documentation. The second challenge is the location of our projects, all of which are in remote areas, where as a company you must deal, associate and identify yourself with the local community, which is not a simple process.
The Aquino Government has recently awarded PHESI the Country’s first off-grid Wind Service Contract: a 48 MW wind project with a total cost of approximately US$116 million, in the resort town of Puerto Galera, Mindoro. What are your expectations for this project?
Based on the project brief, each component of the three-phase energy project is worth PhP2 billion and is capable of generating 16 MW each or 48 MW for a total project cost PhP6 billion. Construction for the first phase, which is estimated to take 18 months for completion, will be finished early 2015, 10 months ahead of the previous December 2015 target.
We believe that the impact of the Puerto Galera project will be a major boom, not only for the local power supply, but for tourism too. The site is located about 1000m above sea level, just 7 km away from the most beautiful diving spot and beaches of the Luzon region, which on top of that is very close to Manila, just two and a half hours by car.
What impact will it have on the local community?
Our projects are mostly located on land belonging to indigenous communities, which have never had access to electricity before. These remote communities will have access to the main city located nearby. On top of that, a new industry will be open to them: tourism. As a final consequence and probably the one with most important impact, these people from the remote areas will be able to have access to jobs, mainly in the power sector. PHESI is trying to become a partner to these communities by giving attention to schools, and by giving medical assistance and support to agricultural developments.
The Country’s wind capital is in Ilocos Norte in Luzon. Why did PHESI choose a site in Mindoro?
PHESI has always been focused on island communities. One of the reasons why CMC-Asia, Inc. and PHESI complemented each other so well in the first place is because both are so focused on helping the development of these island communities. Why did we choose Mindoro? We were ahead of many of our competitors in advancing this strategy at first: most of the other power generation companies were working on developing the main grid, while we saw the impact that renewable energy could have on the development of the island communities, where there was a clear lack of power. Mindoro has very good wind resources, and so the choice was a natural one.
The Philippine Government hopes to have over 500 MW of installed wind power capacity in seven years. What are PHESI’s market ambitions? What projects are in your pipeline?
Our market ambition, taking as a consideration our 48 MW plant, is primarily the development of Mindoro. Mindoro is the seventh largest island in the Philippines. It is located southwest of Luzon, and northeast of Palawan. The economy of Mindoro is largely based on agro-industry, fisheries, and agriculture, and tourism is a lucrative business as well. The land has great potential to be developed and we will try to encourage that as much as possible.
At the same time, there is a great potential in Luzon, as everyone is expecting a shortage situation in the coming years. We are envisioning a potential solution to this through the interconnection of a submarine cable from Mindoro to Batangas.
There are numbers of MNC and local companies that are investing in wind energy that have successfully infiltrated the Philippines power market. What is PHESI’s competitive edge?
We are the only company focusing on off-grid. The rest of our colleagues are in the main grid, therefore we are a showcase of potential in the off-grid area. Moreover, we are developing our wind outside of the feed in tariff, under a bilateral agreement.
What are the ambitions of CMC-Asia, Inc. for the coming years? Where would you like to see your company in five years?
CMC-Asia, Inc. will continue to focus on the island communities. As I mentioned before, there is huge potential to tap in the off-grid rather than on the main grid. We are already starting to develop some mini hydro plants in Mindoro. As a matter of fact, we were awarded with a Service Contract for 10 MW mini hydro project in Mindoro by the Department of Energy on December 9, 2013. We will definitely keep our strong CSR component an integral part of our strategy as well.
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