PROJECT INVESTMENT BRIEF

Project Title
Location
Project Proponent

:
:
:

TANDIK MINI-HYDROPOWER PLANT (MHP)

Brgy. Tandawan, New Bataan, Compostela Valley
Asian NaturEnergy Corporation
Door 10 2nd Floor MGU Building
Lanang, Davao City

A. POWER INDUSTRY
A.1. Situation
The advent of EPIRA Law in 2001 has spurred faster growth in the Power Generation Sector at a
rate of 5.8 percent in 2002 year-on-year as compared to only .08 percent in prior years. The
implementation of the Wholesale Electricity Spot Market (WESM) in the second half of 2006
likewise contributed to its continued growth, rising at an average growth rate of 7.2 percent from
2006 to 2008. Although contracted by 3.5 percent in 2009 as a result of the global financial crises,
the sector bounced back in 2010, growing by 8.8 percent year-on-year valued at P45.10 billion.
With the Feed-In-Tariff (FIT) in place, the Renewable Energy (RE) sources is expected to increase by
160% to reach P72 billion by 2020.
A.2. Trends
According to the Institute for Development and Economic Analysis (IDEA), renewable energy
sources, which include hydroelectric, geothermal, natural gas, solar, wind, among others, remain
to be dominant sources of energy in the country accounting for an average of 58.3 percent of all
sources from 2001 to 2012, indicating growing energy self-sufficiency as the Philippines starts to
move away from imported energy and use of pricey fossil fuels.
Despite the additional capacity and potential investments in the coming years, Mindanao is still
susceptible to power outages as a result of environmental changes, specifically extended periods
of drought and high temperatures, which increases demand for electricity. DOE has determined
that the Mindanao grid requires additional capacity of about 2,500 MW, of which 2,000 MW is for
base-load plant and 500 MW for peaking plant, starting 2012 with peak power demand forecast to
grow by 4.6 percent per year.
As of present, available capacity for the grid is only 1,110 MW, not including the 200-MW power
barge of Therma Marine, Inc. Meanwhile, projected peak demand is t 1,300 MW plus the 250 MW
reserve margin as mandated by the Grid Code.
A.3 Local Scenario
The Davao Del Norte Electric Cooperative, Inc. (DANECO) which is providing electricity to the
provinces of Davao del Norte, Compostela Valley, the Island Garden City of Samal, and Tagum City
is presently experiencing base-load capacity shortage of 25 MW (total load requirement of 110
MW minus present load capacity of 85 MW) due to increase in demand. The National Power
Corporation (NAPOCOR) on the other hand, where DANECO source its power could no longer
cover for the shortage resulting to inevitable power interruptions. In 2007, DANECO embarked on
developing a 14 MW MHP along the Tandik Creek in Brgy, Tandawan, New Bataan Compostela
Valley. However, despite initial findings of viability, the project has not taken-off due to financing
constraints that prompted DANECO to tap the expertise of Asian NaturEnergy Corporation (ANC).

B. THE PROJECT
B.1. Development
The Tandik MHP Project is expected to be completed within two (2) years in two (2) development
phases. Phase 1 consists of the preliminaries, land acquisition, civil works, construction
administration building and powerhouse, re-greening to compensate for the lost trees during site
clearing, putting up utility facilities, installation of electro-mechanical equipment for the 5MW
MHP and transmission lines. Phase 2 entails the construction and installation of the remaining
9MW MHP.
B.2. Structure
ANC shall function as the developer and shall be responsible for arranging the financing, design,
permitting, and construction of the system. It shall take charge in importing electro-mechanical
equipment from suppliers, who shall likewise provide warranties for system. The Investor/s shall
provide/s equity. Under certain circumstances, the Investor and ANC may together form a Special
Purpose Entity (SPE) or a Joint Venture Corporation (JVC) for the project to function as the legal
entity and the project proponent.
C. FINANCIAL ANALYSIS
C.1. Costs
(In Philippine Pesos)
CAPACITY (MW)

CALCULATION
($1,000/KW @ P46.00=$1.00)
1,000x5000x46
762x14,000x46

PHASE
Phase 1
5.0
Civil Works*
5+9
Sub-Total
Phase 2
9.0
1,000x9000x46
Contingencies
Sub-Total
GRAND TOTAL
* Civil works for Phase 1 & 2 to be undertaken in Phase 1.

AMOUNT
230,000,000
480,000,000
710,000,000
414,000,000
40,000,000
454,000,000
1,164,000,000

C.2. Financing
Tandik MHP shall be financed thru bank borrowings and equity investments at a ratio of 80:20,
respectively, viz:
CAPACITY (MW)
PHASE
Phase 1
Civil Works
Sub-Total
Phase 2
Contingencies
Sub-Total
GRAND TOTAL

5.0
14
9.0

COSTS
230,000,000
480,000,000
710,000,000
414,000,000
40,000,000
454,000,000
1,164,000,000

BANK
BORROWINGS
184,000,000
384,000,000
568,000,000
331,200,000
32,000,000
363,200,000
931,200,000

(In Philippine Pesos)

EQUITY
INVESTMENTS
46,000,000
96,000,000
142,000,000
82,800,000
8,000,000
90,800,000
232,800,000

Bank borrowings shall be payable in fifteen (15) years with two (2) years grace period on interest
and on principal during construction stage. Bank interest rate pegged at 7%. Equity investments
shall be in form of non-participating convertible preferred shares, redeemable in three (3) years
(excluding construction phase) with a fixed rate of eight percent (8%) per annum.

C.2. Market
Power generated from the 5 MW MHP shall be sold to DANECO through a Renewable Energy
Purchase Agreement (REPPA) at a price of P4.50/kWh while the generated power from the 9 MW
MHP shall be sold to WESM at FIT rate of P5.9/kWh. DANECO is presently providing power to 16
municipalities and 2 cities consisting of 296 barangays. At present there are 197,439 household
connections with remaining 135,000 yet to be energized.
C.3. Financial Projections
Operating Years
Year 1
Operational MHP in MW
5
Gross Revenues
198,703,000
Less: LGU RE Support Fund
1,971,000
Special Realty Tax (GE)
3,450,000
Gross Margin
193,282,000
Less: Operation & Maintenance Costs
3,000,000
Interest on Borrowings (7%)
39,760,000
Earnings to Equity Investors
11,360,000
EBITDA
139,162,000
Repayment on Principal
22,610,000
Redemption of preferred shares
Cash Flows from Operations
116,552,000
Cash, Beginning of Year
CASH, END OF YEAR
116,552,000
EBITDA Earnings Before Income Tax, Depreciation and Amortization

(In Philippine Pesos)

Year 2
Year 3
14 (5+9)
14
510,927,000
510,927,000
5,074,000
5,074,000
9,660,000
9,660,000
496,193,000
496,193,000
6,000,000
6,000,000
63,600,000
60,890,000
18,624,000
18.624,000
407,969,000
410,679,000
38,650,000
41,360,000
232,800,000
369,319,000
136,519,000
116,552,000
485,871,000
485,871,000
622,390,000

C.4. Return on Investment (ROI) and Payback Period (PBP)

Operating Years
Operational MHP in MW
Total Capital
EBITDA
ROI
PBP (in Years)

Year 1
5
710,000,000
139,162,000

(In Philippine Pesos)

Year 2
Year 3
14 (5+9)
14
1,164,000,000
1,164,000,000
407,969,000
410,679,000

19.6%

35.0%

35.3%

5.10

2.85

3.83

D. ECONOMIC IMPACT
The project is envisioned to create direct jobs of 25,000 during the construction phase and 5,625
during the project operating years. The project is expected to spend more or less 750 million in the
project area that will indirectly spur economic activity and provide business opportunity for micro,
small and medium enterprises. More businesses mean more taxes to the government. The project
considers allotting 1% of its gross revenues to the host local government in form of LGU Renewable
Energy Support Fund. This will give the host LGU an additional income of more or less P4.0 million
annually. The additional income will likewise allow the host LGU to undertake more infrastructure
projects and expand their reach in providing services for health, sanitation, education, water, etc..
E. CONCLUSION
The Tandik MHP Project proves to be a very excellent investment opportunity with an

average ROI of 30% and a PBP of 4 years. This simply means that the project is able to
generate P.30 for every P1.00 invested. In four (4) years time, the project is already able to
recover its total invested capital of P1.164 billion. This leaves the developer 21 profit years of
the 25 years project life at an average annual EBITDA of P320 million.