Razon challenges tycoons’ energy play

MANILA, Philippines – Enrique Razon’s Prime Infrastructure Capital Inc. could end up the leading natural gas producer in the country, giving three tycoons—who earlier formed a $3.3-billion alliance—a run for their money, according to analysts.

Juan Paolo Colet, managing director at investment bank China Bank Capital Corp., told Inquirer that Prime Infra’s decision to acquire a 60-percent stake in First Gen’s gas assets was “a game changer” and “very strategic” given its investment in the Malampaya gas field, where it already has a 45-percent stake.

READ: Lopez sells 60% of gas business to Razon for at least P50B

Peter Garnace, equity research analyst at Unicapital Securities Inc., added the company’s expansion in the liquefied natural gas (LNG) sector was just a “forward integration” that could make it a “key player” in the energy industry. He noted LNG was a transition fuel to renewables, where Prime was already making a play amid the country’s goal to make its power mix greener and cleaner.

Prime Infra also has operations in water and waste management, primarily through Manila Water and Prime Energy.

Lopez-led First Gen bared over the weekend its move to unload a big chunk of its gas business for at least P50 billion. The deal covered the following Batangas facilities: 1,000-megawatt (MW) Santa Rita power plant, 500-MW San Lorenzo power plant, 450-MW San Gabriel power plant, 97-MW Avion power plant, the proposed 1,200-MW Santa Maria power plant, and the interim offshore LNG terminal.

“This will be a major competitor to the LNG partnership of Aboitiz, Meralco and San Miguel,” Colet added.

The three energy giants previously struck a $3.3-billion deal to launch the “most expansive” LNG facility in Batangas. The Philippine Competition Commission had already given the pact its go signal, but energy regulators said they would conduct another review to check its impact on market share limitations.

‘Close regulatory oversight’

With Prime Infra’s increasing presence in the sector, competition was expected to heighten while market concentration of incumbent players would weaken, Garnace added.

“However, with only few players in the LNG industry specifically, close regulatory oversight is necessary to prevent collusion among market players,” he added.

The deal is also a win for the Lopezes as it would allow them to refocus efforts toward renewables, according to the analysts.

“The windfall gives the company tremendous financial muscle to make bold renewable energy investments. It’s also possible for them to return some of that cash to shareholders,” Colet noted.

Seemingly a foreshadowing of the group’s deal with Prime Infra, First Gen president and chief operating officer Francis Giles Puno earlier said they were targeting to go big in the renewables arena.

“In our balance sheet, our [renewable energy] is bigger. And moving forward, that’s the trend that we will continue to pursue as we build out … more geothermal, hydro, solar, wind,” he told reporters last week. INQ