Philippines: Billionaire Ayala siblings seek to retire coal power plant 25 years earlier, to hit 100% green power
Ayala brothers, among Manila's top business heavyweights, push renewable power
Manila: A coal-fired power plant in Batangas province, about 2 hours by car south of the capital, first came online in 2015. It has an expected service life of 50 years.
The Ayala brothers, the Filipino business titans behind the energy company ACEN — Fernando Zobel de Ayala (FZA, Chairman) and Jaime Augusto Zobel de Ayala (JAZA, Vice-Chairman) — want to retire the plant, located in Calaca town, 25 years earlier. In 2040, instead of 2065.
It's a long way off, and it's only one of 28 coal plants operating in the country that depends on fossil fuel for nearly half of its electricity. The deal, however, the first of its kind in the world, is a game-changer.
Energy transition, less disruption
It's a pioneering move known as "energy transition mechanism" (ETM), a potential multi-billion-dollar drive backed by eco-driven funds that allow incumbents to shift from grey to green power.
They now want to share at the on-going COP28 how they did it, and help cut carbon emissions from smokestacks.
Public and private investments — from governments, multilateral banks, private sector investors, philanthropies, and long-term investors — finance country-specific ETM funds to "retire" coal power assets on an earlier schedule than if they remained with their current owners.
SLTEC, which operates the 246-megawatt coal power plant, 97km south of Manila, is a wholly-owned subsidiary of ACEN, Ayala Group's power generation arm. The plant has two units.
The Ayala brothers and their managers now want both units shut sooner, instead of later.
Listed Ayala Corp (currently chaired by JAZA), founded in 1834, is one of the country’s biggest conglomerates, with interests spread across real estate, banking, telecommunications, manufacturing, education, health, retail and power generation.
30GW
There's a backstory to this: Over the last decade or so, the Ayalas had been scaling up wind and solar power.
Under the duo, Ayala Corp started investing in green power in 2011, when it began building its renewable energy portfolio with a joint venture with Mitsubishi for solar power and Sta. Clara Power for run-of-the-river hydro power, and the purchase of the iconic Northwind farm for wind power.
Under the direction of the forward-thinking billionaires, ACEN has emerged as one of the region's top renewable power generators with operations in multiple countries — it currently has over 4,500 MW of attributable capacity in the Philippines, Vietnam, Indonesia, Myanmar, India, and Australia in 2022.
The siblings have an ambitious target: source 100 per cent of the electrons they generate from renewables. The influential Spanish-Filipino Ayala family had an estimated net worth of $2.8 billion (Php156 billion, 2022), as per Esquire magazine.
ACEN, for its part, seeks to be the largest listed renewables platform in Southeast Asia, aiming to hit 20 GW of renewables capacity by 2030. The company is sharing its transition story from coal to green in Dubai at COP28.
Its pursuit of this target is relentless, with a 100 per cent power generation portfolio target by 2025 and a "Net Zero” company by 2050.
ACEN, Ayala's arm behind some of the biggest wind farms in the Asian country, already has a power generation portfolio currently stands at 98 per cent renewables, among the highest in the region.
Pioneering move
The tycoons' ETM move, with support from institutional investors such as the Government Service Insurance System and the Asian Development Bank (ADB), shows what's possible and practical in a market-driven drive to eventually curb coal-fired power generation, which is choking the planet as it accounts for about 25 per cent annual global greenhouse gas emissions.
Innovators
Listed Ayala Corp (currently chaired by JAZA), founded in 1834, is one of the country’s biggest conglomerates.
The group had 60,150 people on its payroll in 2021, making it one of the Philippines' biggest employers.
Jaime Augusto and Fernando, both Harvard-educated, are renowned business innovators. In the late 1990s, Globe, Ayala Corp’s telecom arm, became the first to offer digital mobile services in the country. Globe is the same company behind Gcash, which leads the country's $43-billion fintech industry.
The group has dozens of manufacturing concerns, including ACI Solar Holdings North America and listed IMI, an electronics services and manufacturing firm with facilities in Asia, Europe, and North America and headquartered in Biñan, Laguna, south of Manila.They’re chips off the old block.
More than a century ago, in December 1885, their great-great grandfather Jacobo Zóbel y Zangroniz (originally from Navarra, Spain), rolled out the Philippines' first tram system, the Manila-Tondo line which extended to Malabon — powered by steam.
Today, Ayala Corp's push for newer, greener power is being driven by the younger generation.
We really got the benefits of being able to look at investment decisions in the long term. It's also an incredibly proud moment that we are sharing ACEN’s ETM (Energy Transition Mechanism) success with the world. In addition to sharing, we are here to learn as well."
Jaime Zobel Urquijo, Chief Sustainability and Risk Officer of Ayala Corp., is who is currently in Dubai for COP28, said: "We've been very fortunate that we've had visionary leaders throughout history including Fernando Zobel de Ayala who was the President and CEO of Ayala Corp at that time who've been able to look at the long term.
"We really got the benefits of being able to look at investment decisions in the long term. It's also an incredibly proud moment that we are sharing ACEN’s ETM success with the world. In addition to sharing, we are here to learn as well," Zobel Urquijo said in a statement.
It’s been said that the battle against climate change will be won or lost in Asia and the Pacific. If emissions from existing coal power plants — responsible for generating 25 per cent of the global greenhouse gas emissions — are not addressed, the region will fail to meet the Paris Agreement targets, according to the Asian Development Bank (ADB) said.
Ayala Corp started investing in green power in 2011, with it began building its renewable energy portfolio with a joint venture with Mitsubishi for solar power and Sta. Clara Power for run-of-the-river hydro power, and the purchase of the iconic Northwind farm for wind power.
Under the duo, Ayala Corp started (in 2011) building its renewable energy portfolio with a joint venture with Mitsubishi for solar power and Sta. Clara Power for run-of-the-river hydro power, and the purchase of the iconic Northwind farm for wind power.
ACEN’s move to retire SLTEC 25 years earlier, by 2040 (instead of 2065), is the first such scheme in the world. It runs under the so-called Energy Transition Mechanism (ETM), pioneered by the Manila-based ADB. The move could help the Philippines cut 50 million metric tonnes of carbon emissions.
Cutting emissions
Globally, more than 50 per cent of greenhouse gas emissions originate in Asia and the Pacific region. And about 90 per cent of coal plants that are 20 years or “younger” are operating in Asia.
The Philippines has 28 of them — out of the estimated 2,400 coal-fired generators with a capacity of 2,000 gigawatts (2 terrawatts) globally. The Filipino titans' move could provide a roadmap for the early retirement of coal plants, and scale up green power, in the Asian country and beyond.
FACT FILE: The Challenge
It's been said that the battle against climate change will be won or lost in Asia and the Pacific. If emissions from existing coal power plants are not addressed, the region will fail to meet the Paris Agreement targets.
- 50% of global greenhouse gas emissions originate in Asia and the Pacific
- 25% of annual global emissions come from coal-fired power plants
- 90% of young (≤ 20 years) coal-fired power plants are in Asia
Source: ADB
Win-win
The pioneering energy transition deal is seen as a "win-win" solution: a balanced approach for moving away from coal. It was not without its challenges.
• A power plant with a capacity of 1GW could power approximately 876,000 households for one year if they collectively consume 10,000 kWh each.
• This assumes the plant operates continuously throughout the year.
What the Ayala brothers, however, pulled off through ACEN could be a blueprint for other companies and institutional investors to emulate. blaze the trail for energy transition in the Asia Pacific.
Eric Francia, ACEN president and chief executive, said about the ETM deal “As the company has successfully divested its coal asset, ACEN commits to a just energy transition. We have established mechanisms to ensure that stakeholder interests, especially those of the people and communities of SLTEC, are effectively addressed.”
The move demonstrates how business could play a key role in solving the climate challenge. It shows their capacity to blaze the trail for energy transition in the region.
STORY AT A GLANCE
- The Philippines is setting a new path by retiring a coal power plant 25 years earlier than its planned service life.
- Landmark deal will enable early retirement of the 246 MW coal plant in Batangas, south of Manila.
- Commercial transaction was made possible due to completion of world’s first market-based Energy Transition Mechanism (ETM) transaction, enabling transition to cleaner power generation.
- ETM, a financing scheme offered by the Asian Development Bank (ADB), aims to leverage low-cost and long-term funding geared towards early coal retirement and the reinvestment of proceeds to enable renewable energy projects.
- As part of the ETM structure, the coal plant’s operating life of up to 50 years will be cut in half — by 2040, instead of 2065.
- 50 million metric tons of carbon emissions (est) will be avoided because of this move.
- ACEN's divestment of its equity stake in SLTEC will bring the company closer to its commitment of 100% renewables generation by 2025.