AC Energy is the Ayala conglomerate’s energy investment arm – which has been continuously advancing its investment expansion pitch not just in the Philippine market, but also offshore – with it already having its kick-off markets for renewable energy ventures in Indonesia, Vietnam and Australia.
“First of all, we aspire for goals that seem impossible to achieve…but it will first take some serious phase of believing that we can do things. Because if you don’t aspire and you don’t believe, you will not reach any target and you will not be able to deliver anything,” Eric T. Francia, president and chief executive officer of AC Energy has professed in a sit-down interview.
In that assertion, he takes credence on the fact that when AC Energy started in 2011, the four-man team whom he started with in the company actually charted a power capacity pathway that seemed to be in a “no win” situation.
From a zero capacity, “we put a stick in the ground and we said, we want to be relevant and we want to have a thousand megawatts in five years,” he narrated. True enough that those 1,600 megawatts of attributable capacity now stand as witness to that seemingly impossible dream.
Francia confessed though that “there had always been doubts”, but it was in those times that their grit and determination had been tested – and their desire to seize the impossible breakthroughs likewise strengthened.
The “C” in the Ayala strategy is collaboration – or the acquisitions and partnerships that they had sealed over the years as part of their capacity scale-up odyssey.
“This collaboration thing, it’s almost natural for us to partner. Other groups would prefer doing things by themselves because they care about control, simplifying things and making the call. But our culture is very different, we’re more on the partnership model – it’s not easy and it’s not for everyone,” he said.
Headlining partners to AC Energy are PHINMA Energy, GNPower, Aboitiz Power Corporation, UPC Renewables, BIM Group of Vietnam; and Indonesia’s Star Energy Group Holdings as well as Thailand’s Electricity Generating Public Company Ltd. in the Chevron geothermal asset buy.
The Ayala group wasn’t among the first-movers in the energy investments terrain. However, from the time that the company had its first acquisition in 2011 – starting at a modest capacity via the Northwind farm in Ilocos Norte, “we grew fast and we were able to scale that up around 20 times to where we are now,” Francia reckoned.
Amid their principals’ initial hesitation to invest in coal – since their initial acquisitions were in the RE development space, he considers the eventual spread of technology choice as a valuable part of the company’s “fascinating journey” into portfolio shoring up.
At first, he ruefully admitted that it wasn’t a very ‘comforting’ prospect for them to immediately plunge into coal-fired power investments, but realization came when the Philippine economy was literally screaming for capacity additions – back when supply shortfalls have been triggering consumer mayhem. “Once you’re already in the industry, you begin to appreciate it better. We quickly realized that the country needs reliable and affordable power — and that’s being provided by coal since gas was not actionable then; and renewables were not at competitive price, they still needed de facto subsidy, so we thought we had to do something about it,” he stressed.
Despite the shoddy tag thrown against coal technology, the AC Energy chief executive defended “there is such thing as responsible coal generation – there’s clean coal technology that can address the carbon emission issues.”
On a more personal level, he admitted that coming from a seemingly different discipline of management consulting – and hurriedly cast in the very technical and complex world of energy, it wasn’t exactly a seamless career transformation for him.
“I was this corporate strategy guy who knew there was this opportunity in power, but I don’t really know the nuances. But the insight there is, once you’re in, you begin to live, breath and dream about power every night – so we quickly realized: we should challenge our old assumptions that thou shall not touch coal.”
And true enough that “dream” flourished – not just in the company’s power capacity build-up in the Philippines, but also the tempting offshore market opportunities that smashingly knocked at AC Energy’s doors.
First was what Francia considers an “opportunistic acquisition” in Indonesia when multinational energy giant Chevron Corporation divested its Asian geothermal assets. Then that overseas portfolio had grown further with wind power investment (also in Indonesia); next came the solar partnership venture in Vietnam and recently the varied RE technology prospects with that merger and acquisition deal in Australia.
Simultaneously, the company’s “shift in strategy” had also prompted the conglomerate’s sell-down of at least 50-percent of its thermal capacity in the Philippines. As of this writing, its chosen partner has yet to be announced.
Further, the company just recently unveiled also its newly designed “Vision 2025”, the RE-thermal power development milieu that will be balancing its technology preferences. That so far, had likewise driven AC Energy to modify and broaden its investment platforms – that from a purely holding company, AC Energy branched out into having its split investment vehicles for RE and thermal power projects; and parallel subsidiaries were also established for its domestic and international ventures.
“We are now looking at our 2025 vision, which is to exceed 5.0-gigawatt capacity,” Francia said. That basically entails capacity addition of 3,000 megawatts from the 2,000MW that the company has been targeting until year 2020.
He indicated that “the gap where we are today and that more than 5,000 megawatts is going to require over US$2.0 billion equity investments until 2025…my gut feel is that more than 50-percent will be international because we have more options and leverage in choosing which market to invest in,” as he contended that the Philippine power industry might remain a saturated market until years 2020-2022.
“Strategy does not necessarily come from big ideas. Sometimes, or a lot of times, it comes from what is happening in reality. You have to be sensitive to changes around; and adjust really, really fast. You have to be nimble and just don’t stick to your old assumptions,” he qualified.
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