While the coronavirus pandemic dragged down the domestic economy to its worst recession in history last year, hurting profitability of many companies, there was one company that defied gravity in the stock market. The main-share Philippine Stock Exchange index (PSEi) shed 8.64 percent last year, but the stock price of this company soared by 304 percent in the same period.
We’re talking about AC Energy Corp. (ACEN), the renewable energy (RE) platform of the Ayala group. Because of its stellar performance in the stock market, ACEN was recently added to the main-share PSEi.
“We believe that the green energy narrative and the support from government policies have drawn the attention of the market toward ACEN, which led to the stock’s upsurge,” said a research note issued early this year by local stock brokerage Abacus Securities.
Tracking fund flows
By the time ACEN was handpicked (along with fiber optic provider Converge) to join the PSEi effective April 20, its market capitalization had surged to P324.15 billion. Its entry to the PSEi didn’t come as a surprise to the market, given the massive interest generated by the stock since last year.
April Lee-Tan, head of research at leading online stock brokerage COL Financial, said that as the local market was still heavily influenced by foreign investors, even for those local retail investors who didn’t care about environment, social and governance metrics, they would be forced to consider these when they track fund flows.
ACEN’s attributable energy output rose by 16 percent in the first half of 2021 to 2,224 gigawatt-hours, driven by increased operational capacity from acquisitions and new power plants, as well as recovery in Luzon power demand in May and June. This output exceeded its prepandemic levels.
Renewable resources accounted for 52 percent of ACEN’s total energy output in the first half. ACEN’s renewables portfolio doubled to 2,070 MW as of endJune, from 1,041 MW at the same time last year. With the infusion of international assets, renewables now account for 80 percent of its capacity. Furthermore, it has more than 1,000 MW in attributable capacity under construction, with about half of the projects expected to be operational within the next six to 12 months.
ACEN’s attributable capacity at end-June expanded by 56 percent to 2,589 megawatt from 1,659 MW in the first half of 2020, with the start of construction of new projects in the Philippines and in Vietnam, and the company’s first projects in India and in Australia.
With the inclusion of ACEN, there are now two RE plays in the main stock barometer. The other is Lopez-led First Gen Corp. (FGEN), which has been part of the PSEi for a long time. FGEN is into both clean (low-carbon) and RE, with the first seen as a transition energy while it is working toward an all-RE portfolio in the future.
As early as 2016, parent firm First Philippine Holdings chair and chief executive officer Federico Lopez has made a bold declaration that the group would not invest, develop or manage any coal-fired power plants. This raised a lot of eyebrows then as coal, after all, was generally considered the least expensive and most convenient way to meet the needs of a growing economy.
Clean energy mandate
First Gen pioneered the use of low-carbon natural gas as a fuel for power plants. It also purchased the government’s portfolio of geothermal power plants in 2007, making it one of the world’s largest producers of renewable geothermal power. It is also the owner and operator of the largest wind farm in the country.
First Gen owns and operates 30 power plants and projects across Luzon, Visayas and Mindanao with 3,495.2 MW of installed capacity. It has the largest portfolio of power plants that use clean, renewable and indigenous fuels such as steam, water, wind, solar and natural gas. Its 65 percent-controlled Energy Development Corp. is the largest vertically-integrated geothermal company in the world.
The Lopez group sees its commitment to developing clean sources of energy isn’t only about caring for the environment; it was also an astute reading of trends in the energy sector. As the cost of renewable energy sources like solar and wind became cheaper and more reliable, and as the negative impacts of climate change became more severe, communities, governments and consumers began to demand more clean energy and less dirty energy.
Over the long haul, the group is also planning for the eventual phaseout of its liquefied natural gas businesses to complement a pathway to carbon neutrality by 2050.
Over the years, as rising greenhouse gases became more of a concern globally, public opinion has turned sharply against coal and fossil fuels as a source of energy. More communities around the world have refused to host coal plants, governments have begun to actively encourage clean energy and discourage coal, and consumers have pushed business to divest from coal.
In its research note, Abacus Securities noted that the global movement to lessen carbon emissions was prompting many countries to slowly transition from fossil fuels to RE in generating energy. This has been accompanied by a steep decline in the cost of renewables in the past decade.
Most notably, Abacus cited studies showing a 89 percent drop in the cost of producing solar energy, which used to be the most expensive energy source 10 years ago. Onshore wind costs also dropped by 70 percent over the same period. On the other hand, it noted that the cost of using coal energy barely improved in the same period. On the other hand, Abacus said the fuel costs of coal and natural gas were serving as the floor price for these technologies.
In the Philippines, government regulations favoring RE—particularly the mandatory increase in distribution utilities’ use of RE to 35 percent by 2030 and the moratorium on new coal plants—are also seen to facilitate the transition.
Because renewables do not make use of fuel, its cost is merely the technology, which is seen leading to a virtuous cycle.
“Put simply more production leads to lower prices, which leads back to more production ad so forth.”
This story was first published in the August 27, 2021 issue of the Philippine Daily Inquirer’s Road to Clean Energy special report.