NICKEL Asia Corp.’s venture into the renewable power business will generate a stream of steady income for the company amid the volatile prices of minerals, according to a market analyst.
Nickel Asia, the Philippines’ biggest producer of lateritic nickel ore and one of the largest in the world, has jumped on the renewable energy bandwagon by taking a majority stake in Emerging Power Incorporated (EPI).
Astro del Castillo, managing director of First Grade Finance Inc., said Nickel Asia’s stake in EPI could bring revenues for the company because of growing demand for power.
“It’s a good move for them, and as prices of metals in the global market remain volatile, it’s best to shift to renewable energy,” Del Castillo said.
“This is a good investment strategy for Nickel Asia. It’s really a pioneer among mining companies venturing into renewable energy,” Del Castillo said.
EPI is planning to start geothermal drilling in July for its 40-megawatt (MW), $185-million Montelago geothermal project in Naujan, Oriental Mindoro.
EPI has tapped Iceland Drilling Corp., one of Iceland’s leading drilling companies, to undertaking the drilling works.
Nickel Asia earlier announced it converted the P446 million loan it extended to EPI into equity or a controlling stake of 55 percent in the renewable energy firm.
Nickel Asia is also infusing an additional investment of P474 million, which will be made in stages, to increase its stake in EPI to 66 percent.
“It will give them a predictable revenue stream that is guaranteed for the next 20 years so it’s a wise decision,” Del Castillo said.
In diversifying its portfolio, Nickel Asia said volatile markets and unpredictable economies make metal prices fluctuate and become inconsistent.
In renewable energy, prices are fixed for a 20-year period as guaranteed by the feed-in tariff (FIT) scheme under the Renewable Energy Act.
The analyst said there has been a global trend among mining companies venturing into renewable energy as a long-term investment strategy.
He cited a report by Pike Research stating that many mining companies have gone into renewable energy as the realization grew that technologies and strategies are emerging to better manage energy consumption, costs, supply and risks.
The Pike Research report also forecasts a substantial industry-wide investment in energy conservation measures and renewable energy technologies in the next decade.