MANILA, Philippines - Ayala Corp. and the diversified unit of Hong Kong's First Pacific Co. Ltd. have agreed to jointly bid for the government's 246-megawatt Angat hydroelectric power plant in Bulacan.

The two have executed a letter-agreement confirming their interest to participate in the auction of the plant, they told the Philippine Stock Exchange in separate disclosures.

Ayala and Metro Pacific Investments Corp. (MPIC) will bid for Angat through Michigan Power Inc., a subsidiary of Ayala that submitted a letter of interest to state privatization agency Power Sector and Assets Liablities Management Corp. (PSALM).

Michigan Power will be owned by Ayala, MPIC and a technical partner who will be allocated an equity, as required in the bidding procedures.

The pre bidding conference is scheduled on February 17 while the submission of bids is slated on April 28.

Under the bidding guidelines, interested companies in Angat will be required to make a payment of the $2,500 non-refundable participation fee, which will entitle a party to receive the bidding package. Qualified bidders will also be required to post a $4-million bid security.

Located in Norzagaray, Bulacan, the Angat hydropower plant was commissioned between 1967 and 1968. It consists of 4 main units, each with a 50-MW capacity. The plant draws from the Angat Dam, which supplies up to 97% of Metro Manila’s water supply.

Investment for Ayala

"This initiative is in line with Ayala's desire to participate in the power sector, especially in the realm of clean and renewable energy," Ayala said in its disclosure.

This is the first foray of the country's oldest conglomerate into power generation, which is generally considered as a potentially high-growth sector. Ayala Corp. officials had previously said the passage of the Philippine Renewable Energy Act, which gives fiscal incentives and priority at the grid to operators of renewable energy power plants, has encouraged them to venture into power generation. 

BDO Capital and Investment  Inc. president Eduardo Francisco told Business Mirror that “Angat [is] a very good project." He explained that hydropower plants are generally more expensive to build but power generated in these facilities often cost less due to lower input and maintenance costs relative to coal-fired plants.

Currently, the Ayala conglomerate has a water utility unit, Manila Water Company, which holds the right to operate water and wastewater services in eastern Manila until 2037.

Strategic for MPIC

MPIC, on the other hand, has a stake Maynilad Water Services Inc., which has the right to operate water and wastewater services in the western part of Metro Manila.

Maynilad was acquired by DMCI-Metro Pacific Water Co., a joint venture between DMCI and MPIC, and is chaired by businessman Manuel Pangilinan. 

Francisco told Business Mirror that the Angat project is strategic to MPIC, the holding company for First Pacific's foray into infrastructure and utilities, since the group has a stake in the country's biggest power distributor, Manila Electric Company (Meralco).

“This will provide another source of [energy] for Meralco…and it can bring down the cost of Meralco’s power purchases,” Francisco added.

MPIC owns 14.7% of Meralco while affiliate  Philippine Long Distance Telephone Co.—through  unit Pilipino Telephone Corp.—owns another 20%.

He said the acquisition of Angat will be beneficial for Michigan Power as it will have a ready buyer in Meralco which can avail of the lower water rates from Angat.

Laiban dam

Another conglomerate, San Miguel Corporation, has also been pursuing the power generation business. It also wanted to pursue a controversial  dam project.

In 2009, San Miguel, through its unit San Miguel Bulk Water Co. Inc., and the water regulator, Metropolitan Waterworks and Sewerage System (MWSS), have agreed to develop the P50-billion Laiban Dam project.

Previously, Pangilinan, the chair of Maynilad and MPIC, expressed opposition to the project because of its take or pay scheme.

Located in Tanay, Rizal, the Laiban Dam project is intended to address the long-tem water requirements of Meto Manila by providing an average yield of 21 cubic meters per second or 1,830 million liters per day of water supply.

San Miguel has already 2 power plants in its diversifying portfolio. Last August, it won the right to sell the output of the country's largest coal-fired power plant, with a capacity of 1,000-megawatts, in Sual and bought a 620-megawatt compressed natural gas power plant on Manila Bay for a combined $1.085 billion. - with Miguel R. Camus of Business Mirror