Power seen as potential high-growth industry

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With the flow of power investments getting more active than before, the country’s energy sector is now seen as a promising growth area for foreign and local investors.

Ismael Guerrero Cruz, president of IGC Securities Inc., told The Manila Times that the Philippine’s power industry is definitely a potential growth area, if not necessarily booming, given the increasing local and foreign investments in the industry.

“Power is definitely a high-growth area, because if you look around the world, usually, there’s a surplus capacity of 20 to 30 percent in developmental. So if they need 110,000 megawatts (MW), the capacity is 120,000 to 130,000 MW. In our case, our demand is 15,000 MW and our capacity is already 15,000 MW, so you can see,” Cruz said, adding that the power supply in the country years back was usually not enough.

Cruz also described the energy sector in the previous years as “very bad,” since investments in the sector were very few.

“They [government and investors]have overlooked the needs. There wasn’t enough power supply. There was only very expensive power,” he said.

While it may not seem evident yet, Cruz further said that given current overflowing investors’ commitment in the sector, soon it will be obvious that the Philippine power sector is indeed a potential growth area.

“In five years [people may already see the outcome of power investments]because it takes about three years to put up a new plant and it is only now that we are adding new power plants. So ideally, there’s a bright future for energy sector,” Cruz said.

Growth driven
For his part, Energy Secretary Jericho Petilla explained in a text message that the growth of the power sector depends on demand forecast, as well as the current economic status of the country.

“The demand for power in turn is heavily dependent on the growth of the economy. Since the economy is expected to grow between 6 [percent]and 8 percent per annum in the next few years, demand for power is also expected to increase at an elasticity of 0.8 percent of GDP [gross domestic product]growth,” Petilla said.

“The power sector is a capital intensive sector with an estimated investment of around $2 million per megawatt. Hence, for as long as there is demand and off-takers, the power sector is very attractive investment,” he further said.

Meanwhile, another potential growth area that Cruz is looking at is the holding firms sector in the Philippine Stock Exchange, where certain blue chip firms own or hold more than one subsidiary under diversified sectors.

“The ones that are outperforming other companies are the holding companies],” he said.

In general, Cruz explained that investments in the country are still bullish given firm economic fundamentals.

“These are the new major investors coming in, major funds coming in. Before, they could not invest in our country because the Charter did not allow them to invest, so now they can invest,” he added.

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