THE Institute for Energy Economics and Financial Analysis (IEEFA) cited ACEN Corporation, Citicore Energy REIT Corp. (CREIT), and Solar Philippines as among the power firms that have demonstrated “impressive innovativeness” in their renewable energy (RE) journey.
In its latest report, the IEEFA said investors put a demonstrably higher value on firms that have a greater share of renewables in their business than on traditional utilities.
“In terms of how investors view asset values, pure play renewables companies command a valuation premium over utilities having lower levels of renewables in their mix,” said Ramnath Iyer, report author and IEEFA’s Climate and Renewable Energy Finance Lead, Asia.
“Valuation premiums for pure play renewables companies – as seen in their higher price-to-book ratios, stronger market valuation of installed capacity, and stock performance over the past five years – suggest that this focus on renewables as a concentrated strategy has paid off,” he added.
Investors value each megawatt (MW) of installed capacity at ACEN at P137 million based on the market capitalization and power generation capacity in operation as of August 4 this year, and CREIT’s renewable arm, CITICORE Renewable Energy Corp. (CREC), at P102 million per MW.
First Gen Corporation and Aboitiz Power are valued at only P26.7 million/MW and P73.7 million/MW, respectively.
IEEFA said ACEN’s valuations are likely boosted by the fact that it has taken the most initiatives to focus on renewables and to grow in both size and geography in the RE space.
ACEN has about 4,400 MW of attributable capacity from owned facilities in the Philippines, Australia, Vietnam, Indonesia and India, with a renewable share of 98 percent, which is among the highest in the region.
“Attracting financial and investor interest is also evidently easier for renewables-focused companies, particularly those that are able to execute their plans. This may explain the valuations for ACEN, which has taken the most initiatives to develop renewables and to grow in both size and geographic presence,” the report stated.
Solar Philippines, operator of 183 MW of solar generating capacity, has rapidly moved from being a start-up in renewables in 2013 to possibly joining a global conglomerate. Its listed entity, SP New Energy Corporation, raised more than $425 million in the second quarter by selling a 43-percent stake to Metro Pacific Investments Corporation (MPIC).
First Gen, the Philippines’ third-largest independent power producer, owns the biggest renewables company, Energy Development Corporation (EDC). It owns and operates 30 power plants across the country with 2,721 MW of attributable capacity. The report noted that First Gen’s purportedly clean energy portfolio is dominated by gas, which makes the firm an ongoing case study in the energy transition as it continues to hold on to fossil fuel assets.
Aboitiz Power has the Philippines’s second-largest net attributable capacity of 3,495 MW in coal, oil, geothermal and hydropower. While it has a long history of hydropower projects, its non-hydro renewables portfolio is primarily limited to geothermal power and a relatively small 59 MW solar facility. It plans to add 1GW of renewables, primarily solar energy, by end-2026.
In the near term, though, Aboitiz Power remains more heavily geared to coal, which makes up more than 60 percent of its mix, and also has a debt-to-equity ratio of 1.1 (net) and 1.5 (gross), according to the report.
“Examples of successful renewables investments and other innovative mechanisms, such as REITs (real estate investment trust) and privately financed coal phaseouts and retirements, can guide regional fossil-dependent utilities to invest aggressively in renewables to stay relevant and capitalize on opportunities offered by the energy transition,” said Iyer.
“On the other hand, laggards, who stick with fossil fuel assets as their main line of business, will likely continue to see ebbing interest among investors and financial markets unless they can change and adopt some of the more successful strategies,” he added.
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