It will be a tightrope walk for sponsors of new power projects, as three new major stumbling blocks are assessed as deterring factor to capital flow for much-needed electric capacity additions in the country.

From the lens of the American Chamber of Commerce of the Philippines (AmCham), Energy Committee Chairman Frank Thiel, who is also the Managing Director of Quezon Power Philippines indicated in a television interview that the difficult challenges tread around off-take (capacity purchase) or power supply agreements (PSAs), permitting as well as warranted transmission capacity expansions.

He cited that in securing power supply contracts to guarantee revenue stream that could make the projects financeable, the toughest hurdle is having only one major offtaker that can give high comfort level to the banks and other lenders.

“There’s one thing here that is unique. Most of the developers are running after one and the same off-take agreement. We’re trying to get a contract for a few of us putting project on the ground, but at the same time, we have to chase only one key off-taker, one of the major distribution utilities in the country,” he stressed.

Another tight spot in project developments that has been keeping investors awake at night, Thiel said, is the very intricate web of permitting for energy projects in the Philippines.

“Developments of power plants in the Philippines can be very significantly challenging – especially on the permitting side. Just to give you an idea, it takes 147 permits to get plants get on the ground,” he noted.

As his company already gained experience on power project developments in the Philippine energy market, Thiel asserted that that he can already convey narratives based on their actual experience.

“I can speak from experience because we developed a power station and we put it into commercial operations in 2019; and it took nearly 147 permits - and a lot of the agencies will have permits that are overlapping. So there are challenges, nonetheless these are things that can be done,” he stated.

Another grueling dilemma for investors would be grid integration or capacity wheeling of their generated electricity once their plants reach commercial operations phase.

“We don’t have enough transmission in the system. We have capacities that are already in place, but if we were to build new power stations and follow the demand growth of 4-5% per year, we’re going to need a lot more transmission – that’s a bottleneck,” Thiel pointed out.

Nevertheless, he qualified that the targeted influx of new power plant investments is not entirely bleak, as long as the government policymakers, regulators and relevant industry stakeholders would willingly work together to buck these odds of capital formation for greenfield or power plant expansions.

“There are challenges, nonetheless, these are things that can be done,” Thiel asserted; while adding that having skilled workforce and government support are among the ‘sweet spots’ that could help smoothen out power investment risks.

“We believe that the Philippines is an amazing destination for power development projects. We have a highly skilled workforce in the Philippines, so that is a plus,” he said.

Thiel expounded that in their host-communities in Quezon province, the local government units (LGUs) have so far been very supportive of their project-installations, “because we bring a lot of benefits to the local community.”