Real estate players fret over ‘thinning’ PH power reserve

BUSINESS industry leaders made up of  manufacturers and real estate developers recently expressed concern over delays being encountered by several power projects that will ensure the country’s supply in the coming years. 

Property and construction players, in particular, are perturbed that large-scale mixed-use projects which are  being explored by more and more industry players, could face rough sailing ahead should the lack of sustainable power supply threaten these “townships” that have been sprouting across the country. 

“Despite a slowdown in the residential condominium market in Metro Manila, developers will continue to pursue township developments in and outside of the capital,” acknowledged Andy Manalac, former chairman of the National Real Estate Association (NREA) and head of Havitas Developments Corp. 

“For any infrastructure, you need power, that is, reliable and affordable electricity.  But how can you build the necessary infrastructure to support these township developments, and grow the communities where they are put up, if there is no reliable power to sustain them?,” he told the Manila Standard

“These developments will remain glorified office parks with condos if development progress is slow,” he warned. “If power is not assured, decent jobs won’t be created, and these townships will not be able to attract highly skilled labor nor businesses to sustain their developments.”

Housing backlog

David Leechui, CEO of Leechiu Property Consultants Inc., agreed, stressing that adequate, and affordable power supply  will help industries to to generate jobs “which is the most viable solution  for us who build crucial infrastructure in the  low-cost housing industry.” 

“The more jobs created by businesses, the more affordable the houses become for their workers,” he explained. 

Leechiu and others in the low-cost housing business believe their sector faces  one of the biggest challenges, together with the Philippine government.  According to The Philippine Housing Industry Roadmap: 2012-2030, presented by the Subdivision & Housing Developers Association Inc. (SHDA) to the Bureau of Investments (BOI), if nothing is done or no special housing program is created, the country’s housing backlog will reach 6.5 million by 2030. 

A power crisis as envisioned by industry observers, could exacerbate these numbers:  recent reports revealed that the country’s housing backlog is already estimated at 5.7 million.

‘Build, build, build’ sustainable without power?

From Alabang to Balintawak, from Pasig to Laguna, from Pampanga to the Visayas, construction cranes and earth movers  crisscross the country in an unprecedented 13-year construction boom. With thousands of new office buildings, commercial and condominium developments and housing projects flooding the market, property pundits wonder—can this growth momentum be sustained by the energy needed to power the speed of infrastructure  building  unfolding over the Philippine business landscape?

One popular urban-rural fringe area is Calabarzon—comprising the provinces of Cavite, Laguna, Batangas, Rizal and Quezon. It boasts the country’s second largest gross regional product at P1.644 trillion and a buoyant real estate market. 

Major property developers like Ayala and Megaworld have been investing heavily and creating portfolio growth forecasts well beyond a 20-year cycle. Last year, a joint venture was entered into by and among leading conglomerates Ayala Land Inc. (ALI), SM Prime Holdings Inc., Megaworld Corp. and Aboitiz Equity Ventures Inc. They have joined forces to develop the P123.8-billion Laguna Lakeshore Expressway Dike.”

ALI is also investing P170 billion to develop a 700-hectare mixed-use estate in Cavite similar to other Ayala projects in Makati, Bonifacio Global City and Nuvali.

 Dark clouds on the horizon

The building boom has seen an unprecedented surge in “business parks”, with BPO firms as the  largest consumers of office spaces taking up 37% of available inventories in Metro Manila. From now until 2022, the industry is seen to expand by 9% a year, and along with it, a corresponding increase in office space take-up is expected.

The possible thinning of power supply in the coming years, and the resulting energy security threat this poses on the Philippine economy, looms as a dark cloud over the prospects of the BPO industry.

Manalac noted that the BPO industry employs some 1.3 million people most of whom have adopted skill sets that have made them globally competitive. They generate $24 billion in export revenues that help balance our current account. BPOs are present in 26 cities nationwide, and have proven to be the most potent instrument for community development and inclusive growth. 

“In the last  15 years, the BPO industry has spawned a new middle class while igniting the retail, education, transport, and housing sectors in the cities it operates in. All these are put at risk under the cloud of weak energy security,” he said.

Giving investors cold feet

Quezon congressman Danilo Suarez recently warned that  delays by the Energy Regulatory Commission (ERC) in approving contracts of power supply generators could result in these investors backing out, thus robbing the country of the opportunity to address the alarmingly thinning power reserve.

In an interview with a morning radio show, the House minority leader pointed to the recent spate of yellow alerts by the National Grid Corp. of the Philippines (NGCP), a situation when reserve power falls below the required level.

Fast-tracking development

“The ERC must  fast-track the approval of the  application for a power plant that would help generate much-needed baseload in the country,” Suarez said. “In fact, I find it puzzling why the ERC has not yet approved contracts of power supply generators even if it has already taken them at least five years to study their applications.”

“Remember the dark days when we had to buy and commission gas-powered barges? It is crucial for the energy body to give the green light to applicants that complied with the regulatory requirements the authority to construct their power plants,” the congressman said.

“The construction of new coal-fired power plants is necessary because the existing coal-fired power plants are outdated and insufficient, rendering them vulnerable to transmission failures,” Suarez explained. “Power plants are not off-the-shelf items: it  takes seven to eight years to construct these before they become fully operational.” 

Suarez cited in particular Atimonan One, a coal-fired power plant in Atimonan, Quezon that has not been cleared by the ERC until now, even if the generation company submitted its application in 2012. It is one of the seven (Power Supply Agreements) PSAs that entered into a contract with the Manila Electric Co. but which is still being evaluated by ERC.

Zero budget for ERC next year?

“We cannot keep delaying these projects as we need the stability of energy supply. If there are shutdowns by these old plants, that will mean a spike in prices. We need to stop pointing fingers, and already start these new projects,” he said.

Suarez warned the  ERC that if it continues in its foot-dragging with regards to power plant applications, he will propose next year that it gets a zero budget from Congress.”We are hopeful that the ERC can approve at least three out of the seven PSAs before the year ends,” he opined.

“Paid” opposition to new power plants

Suarez likewise lamented the delaying tactics by “fake” stakeholders and “paid” cause-oriented groups who he claimed are  funded by natural gas investors to take advantage of loopholes in the ERC’s procedures in studying power plant applications. 

 “These groups have been doing nothing but block the applications for new power plants, particuarly coal-fired plants, because these are in direct competition with their clients, the LNG players,” he said.