Ayala axing gas project amid offtake woes

MANILA, Philippines — The Ayala Group is scrapping its planned 1,100-megawatt combined-cycle gas turbine project in Batangas amid challenges in securing long-term buyers for its power output.

This comes after Enex Energy Corp.’s executive committee approved the cancellation of the proposed Batangas Clean Energy (BCE) project, which was in its pre-development stage.

Enex, a subsidiary of Ayala-led ACEN Corp., is also moving to mutually terminate its joint venture agreement with GenX Energy LP, a portfolio company of US-based Blackstone Inc.

“This decision was driven primarily by the difficulty in securing an offtake contract to ensure the BCE project’s viability, coupled with challenges in securing a third investor,” Enex said in a stock exchange filing yesterday.

The exit, the company added, also aligns with ACEN’s strategic shift toward becoming a 100-percent renewable energy developer.

In April, Enex chairman Gerardo Ablaza Jr. said the BCE project was awaiting the launch of a competitive bidding to secure a long-term offtake deal.

An offtake agreement is a contract in which a buyer commits to purchasing all or a portion of a company’s production. Such deals ensure a ready market for facilities like power plants.

Sought for insights, market analyst Alfred Garcia said the discontinuation of the BCE project was a “smart move” for Enex.

“It’s understandable that the company is having trouble securing a supply contract that would make the project commercially viable, with energy prices being as low as they are now and LNG (liquefied natural gas) imports being more expensive due to the weak peso,” Garcia told The STAR.

The local currency tumbled to a new record low on Wednesday, closing at 59.17 against the US dollar.

Average prices in the power spot market, meanwhile, fell to a seven-month low of P3.04 per kilowatt-hour in September.

“Power plants like this (BCE) need to be constantly supplying power and can’t rely on small-scale supply contracts or spot market sales, so if there’s no offtaker, it won’t be viable,” Garcia said.

Last month, the Philippine Movement for Climate Justice (PMCJ), together with several communities in Batangas City, called on Ayala Corp. to withdraw from the BCE project and focus instead on renewables.

Elle Bartolome, PMCJ senior executive officer on policy, campaigns and communications, welcomed the Ayala Group’s exit from the project, saying it sends a clear message about the future of fossil fuels.