TIRSO G. SANTILLAN JR. Chief Executive Officer

ALSONS POWER GROUP

Familiarity breeds contempt? Hmm, maybe not! In the energy world where bravado and “wishful thinking of making it big nationwide” bubbles up the investment aspirations of many players, the Alsons Power Group of the Alcantara Group revels in “serving first the needs of home base.”

Ground truth sets out that Mindanao had already been through series of economic malaise – hurt by either armed conflicts or lethargic investment flows. But to Alsons Power, this region is “home” – a domain where it had wholeheartedly jostled organic business growth since it started its venture into the power industry in 1993.

The Alcantara Group initially had its foray into the power sector as among the first batch of independent power producers (IPPs) that helped solve the country’s worst power crisis of the 1990s – via its installation then of several thermal power facilities.

Almost two decades later, Mindanao’s power supply had been on precarious condition once again – and unwaveringly, Alsons Power is still much rooted to where it began – and had all been too willing once more to become part of the solution. Those were “make-or-break points” for any investor betting on a predicamentladen enclave, yet truly, Mindanao is where Alsons Power’s “investment heart is” – the area where it devotes its deepest affection on the business realm, whether in times of crisis or sufficiency.

Past the second episode of supply scarcity that Mindanao had experienced, Alsons Power now promises to soar higher on its business goals – and on blueprinted investment steps forward,.

Alsons Power Group Chief Executive Officer Tirso G. Santillan Jr. steers the guardrail that shall bring the company to its tour de force.

Investment enabler

“The Alsons Power Group sees itself as an enabler – providing safe, reliable and affordable energy to fuel Mindanao’s dynamically expanding economy and growing population,” Santillan enthused.

And don’t ever discount this executive’s profound appreciation of community involvement and moving people forward to prosperity. It could be a trivia of sorts – but before confronting his battles in corporate boardrooms, Santillan at some point in his personal and professional life had also fanned the flames of activism in the country – that phase of hand-wringing to bring about political and societal change, all in the goal of making this country a better dwelling place for all Filipinos.

Not that he had lost that fight or had a change of heart though, the calling may just have shifted – in a sphere where he can do more in terms of drumming up economic success for wider base of constituency.

As he quips, “our power facilities – particularly the baseload power plants we are building in strategic economic zones in Sarangani and Zamboanga City, will act as ‘magnets for investments’ and anchor the economic development of our host communities.”

To date, the company’s Sarangani Energy Corporation’s coal-fired power facility (at 210-megawatt capacity) and its 105MW San Ramon power plant (another coal-fired project) are the single biggest infrastructure investments in their respective sites.

The Sarangani plant, in particular, which is equipped with circulating fluidized bed (CFB) boiler technology had its first 105MW unit on stream in April 2016 – and it now provides electricity supply to more than 3.0 million people in key cities and provinces in Mindanao, including Sarangani province, Compostela Valley, Davao del Norte, Agusan del Norte, Agusan del Sur and the cities of General Santos, Iligan, Butuan, Samal and Tagum. For that venture, the total capital outlay had been pegged at $570 million – bankrolled by a merchant mode of financing or the typical 70:30 debt-to-equity project funding ratio.

For the facility’s second unit, construction phase started in the first quarter of 2017 and is due for completion in 2019. At its commercial fruition, the plant will in parallel be delivering power to additional 3.0 million people – this time in the provinces of Davao del Sur, South Cotabato, Zamboanga del Norte, Zamboanga del Sur and the cities of Cagayan de Oro, Koronadal, Dapitan, Dipolog and Pagadian.

The company’s next investment salvo is the San Ramon coal-fired power project in Zamboanga City, this is targeted to commence full implementation phase this year – along with its 15MW run-of-river Siguil hydropower project in Sarangani province. Forthcoming also on its expansion trajectory will include other renewable energy developments, such as solar and most possibly wind projects, depending on where prospect will eventually bring the Alcantara firm.

These would be valuable addition to the initial power generation portfolio of the group – comprising of operating oil-fired plants, namely: The 103MW Mapalad Power Corporation diesel plant in Iligan City; 55MW Southern Philippines Power Corporation diesel facility in Alabel, Sarangani; and the 100MW Western Mindanao Power Corporation diesel plant in Zamboanga City.

Business journey beyond comfort zone

With Mindanao grid now on “safe haven” when it comes to its power supply, Alsons Power has likewise been re-casting investment plans beyond its “comfort zone.”

“While we are anchored in Mindanao, we are also expanding outside the island with our initial foray into Negros Occidental with the Bago River hydroelectric project,” Santillan conveyed.

In terms of technology, coal-fired had been the preference of the company on its recent solution-yielding projects in the southernmost power grid, with Santillan asserting that “in our experience in Mindanao, we came to the conclusion that coal is the most viable and economical source of baseload power for the island.”

Post the grid’s crisis patch and with the whole policy apparatus coming to fore, a sensible balancing act emerges – not that anyone wants to validate or bust the incessant “coal versus renewables” debate, but it is a necessity in the changing landscape of energy investments in the Philippines and the world.

Santillan asserted “Alsons Power is very much open to renewables or clean energy technologies,” stressing that the next space to watch out for on this company is on its plan “to embark on several run-of-river hydro power projects.”

The Alsons Power chief executive, nevertheless, qualified that “the remaining untapped hydropower sources in the island will not be able to provide baseload power in the same scale as the Agus and Pulangi rivers – which had traditionally been the source of more than half of Mindanao’s power supply.”

Moving headway, he noted that the Alcantara group is keen on refocusing its investment radar on “developing solar power projects,” although this is seen as “only ideal as supplemental power source during its periods of availability.”

“So in a nutshell, our take is we should take advantage of renewable sources for environmental reasons. However, with their availability being subject to the whims of nature and their cost currently still being more expensive, renewables should only be used as a source of supplemental power to the grid,” Santillan explained.

Investment challenges From supply shortfalls, Mindanao is now on overcapacity mode – and that stature too brings new challenges to investors in the grid – particularly in managing market risks.

“Assuming rational business logic (of oversupply situation) will prevail, projects without live power supply agreements should be deferred for later years when the demand catches up. If not, the power generators will face extended famine that may put their financial resources to a severe test,” Santillan opined.

In Alsons Power’s case, he professed that “being an early mover, we believe we have covered ourselves well with power supply contracts duly approved by the Energy Regulatory Commission.”

Investment hurdles still extend beyond the power-supply demand outlook of a power grid though. It is worth noting that there are other factors contorting business continuity – and often, these are policy shifts.

Mindanao primarily has some unique concerns to deal with – including the propounded Bangsamoro Basic Law (BBL), a policy tool that is being advanced to promote “irreversible harmony” in the region.

“Any agreement that brings a just and lasting peace to Mindanao would be welcome,” he contended, albeit noting that they have yet to study the specific provisions of the proposed BBL framework “to see if this will indeed provide the people of Muslim Mindanao and nearby areas with the stability and peace that they have been longing for.”

He portends that “if this agreement succeeds, then Mindanao will be able to benefit from the expected increase in investments from sectors that had previously avoided the island due to its association with rebellion and instability.”

Santillan thus surmised “the success of this agreement would of course be good for the power industry as power consumption is expected to grow and the forecasted oversupply situation may become short-lived.”

On a broader policy level, he reckoned that “a review of other segments of the industry (like distribution and transmission) could further address the high cost of power prevailing in the industry.”

For instance, he noted that “having small electric cooperatives that are politically run does not lend to efficient and cost-effective management.” And on this, he postulated that the Department of Energy “should commission a comprehensive study of the power industry for the purpose of addressing the high cost of power in the country.”

Corporate swagger

For this executive who has farreaching links with the financial sector, he sees the capital-intensive power sector as a perfect fit to his career swing up the corporate ladder.

“My background is that of an investment banker – both in the Philippines and internationally. This fits well with the power industry, it being very capital intensive. Thus, our success will depend a lot on our ability to raise both debt and equity capital,” he narrated.

To where he is now at the flourishing Alcantara’s group of businesses, he points out some differences primarily in approaching specific decisions that shall propel the company to its targets and desired outcomes.

“I have worked for local and foreign corporate organizations, including major multinationals. The present set-up I am working in is quite different from a multinational corporation as our organization is still pretty much a family corporation. There are plus and minuses for each type of structure – and if I have learned anything, it is the need to have everyone to buy in into a project or any decision.”

To him, there are no critical decisions that can’t be sorted out efficiently if “team work” is the linchpin of business. “That’s how one can maximize the reach of the organization,” he shared, while emphasizing that in handling tough decisions, “I try to understand all points of view – and I assess them by asking: What are the consequences of each approach? Then, I take a position and expound on it and try to get buy-in from all sides.” And the trick that always works is: “I look for win-win solutions,” he stressed.

And while Alsons Power flings bold goals on the sphere of project expansions, the development milieu it has not been forgetting is: To integrate the community being beneficiaries of valuable part of their business successes – hinging that primarily on the thrust of their corporate social responsibility (CSR) initiatives on providing academic scholarships and preserving ecosystems.

Indubitably, for this company that is still pushing the envelope when it comes to further investment prospects, the rest has yet to be written.