Alsons Consolidated Resources, Inc. (ACR) participates in power generation in Mindanao through their 60% interest in Conal Holdings Corporation (Conal) and 20% direct interest in Alsing Power Holdings, Inc. (Alsing). Below is the illustration of ACR’s power interests:
ACR’s current power businesses will end their contract in 2015 and 2016 but ACR has more than enough to cover the decline in revenues when the time comes.
Among the power generation projects, MPC’s Illigan Diesel Power Plant will be the earliest to contribute in the revenues of ACR. Illigan Diesel Power Plant operated at an initial capacity of 10 MW with an objective of reaching 98 MW capacity by September.  In August the 200 MW coal-fired power plant, STEAG State Power Inc., will be in maintenance until the end of the year.  This will cause a deficit of 100 MW in the Mindanao power grid and will force diesel-fired power plants like Aboitiz’s Therma Marine and ACR’s Illigan Diesel Power Plant to operate at 24 hours.
Discount factor used is 5.6% or 8% net of 30% tax or [8% * 70%]. 8% is the highest interest rate among ACR’s debt obligation. Earnings are assumed to be the cash flow of the company as I do not expect bad debts in the electricity operations. I do not believe in discounting a company in perpetuity thus the ACR’s power plant operations are only discounted for not more than 10 years.
Illigan Power Plant
I assumed Illigan Power Plant to operate 10 hours per day from April to August at 10 MW capacity and 24 hours from September to December at 78.4 MW (98 MW x 80% load factor). For 2014 to 2015 I assumed Illigan Power Plant to operate 16 hours per day in 10 months at 78.4 MW. In the next eight years I expect Illigan Power Plant to operate 8 hours per day in 10 months at 78.4 MW.
Below is my calculation:
WMPC and SPPC
WMPC and SPPC operate 100 MW in Zamboanga and 50 MW in Saranggani respectively under an 18-year Build-Operate-Own contract with National Power Corporation (NPC).Under the Energy Conversion Agreement with NPC, WMPC and SPPC will sell all their outputs to NPC for a minimum rate. 
Sarangani Energy Corporaiton
Sarangani Energy Corporaiton (SEC) started the construction of their 210 MW power plant in Maasim, Sarangani on December 28, 2012. I expect the power plant to operate at base load capacity or at 24 hours per day for 10 months at a rate of P5/ kWh. The power rate is based on the power rate of Aboitiz’s coal-fired power plant, Cebu Energy which averages at P5.72 per kWh. 
To sum it all up, the value of ACR’s power business is as follows:
With ACR at P1.22, ACR is currently trading at 45% discount of the total value of the Company’s power business. The real estate business is just a bonus.
- Iligan gets new power plant in time for May 13 elections, http://manilastandardtoday.com/2013/05/08/iligan-gets-new-power-plant-in-time-for-may-13-elections/
- Mindanao power spot market opens in August for pre-trial, http://www.bworldonline.com/content.php?section=Economy&title=Mindanao-power-spot-market-opens-in-August-for-pre-trial&id=72031
- ACR SEC 17-A 2012, Note 35, p. 128, http://www.pse.com.ph/resource/corpt/2013/ACR_A17A_Dec2012.pdf
- AP SEC 17-A 2012, GENERATION OF ELECTRICITY, p. 9, http://www.pse.com.ph/resource/corpt/2013/AP_17A_Dec2012.pdf
Disclaimer: I do not claim to be an expert and nothing I say should be taken as a recommendation to buy or sell. Read more in the ABOUT page.