MANILA, Philippines - Listed Oriental Peninsula Resources Group, Inc. will spend P2.4 billion to put up a mini-hydropower plant in Western Visayas, as the company turns its focus into the power generation sector.

"[Oriental Peninsula] will invest P2.4 billion for the project," Ferdinand M. Pallera, vice-president for the administration of Oriental Peninsula, told BusinessWorld.

Mr. Pallera said 70% of the funds would be sourced from debt financing and 30% would come from the equities market.

Last week, Oriental Peninsula said it would buy a 40% stake in affiliate Oriental Energy Power Generation Corp., which has a service contract with the Energy department to build an 18-megawatt mini-hydropower plant in Timbalan River in Aklan.

"Right now, all the permits have been secured from national and local government units and the [environmental compliance certificate] is almost done. Our target would be the construction of access roads in 2010," Mr. Pallera said.

Commercial operations of the hydropower plant will start in 2012. "There is a substantial potential for power contribution in the Panay Island," he added.

Since last year, the Visayas power grid has been experiencing tight power supply given the lack of power plants, resulting in a 100-150 megawatt shortage.

Oriental Peninsula ventured into renewable energy given perks under the Renewable Energy Act of 2008.

Among the fiscal incentives offered by the law are income tax holidays for the first seven years of operation, tax-free carbon credits from renewable energy projects, and tariff exemption and duty-free importation of machinery and equipment for the first 10 years of operation.
Power from renewable energy sources is also exempted from the value-added tax.

Meanwhile, Mr. Pallera said the company expects to start nickel mining operations in Palawan next year. "It is not very encouraging to sell low-grade nickel ores right now. We do not see it as very profitable," he said.

Commercial production in the Pulot mine in Palawan has been on hold since June last year given low metal prices.

Nickel prices have already risen to $8.45 per pound late last week, up from the average price of $5.64 and $4.75 per lb. in the second and first quarters, respectively, data from the London Metal Exchange showed.

Oriental Peninsula increased last week its authorized capital stock to P2 billion from P1.5 billion. -- Neil Jerome C. Morales