The renewable energy (RE) sector has seen greater interest and notable growth as investors are willing to place a higher value in cleaner energy technology compared to traditional utilities, according to a report by the Institute for Energy Economics and Financial Analysis (IEEFA).
The report, Business Model Innovations Drive the Philippines’ Energy Transition, that was released yesterday said to grow faster and attract even more financiers, companies should focus further on renewables and execute their business plans.
Ramnath Iyer, IEEFA climate and renewable energy finance lead for Asia and the author of the report, highlighted the emergence of pure RE developers and operators listed at the Philippine Stock Exchange.
“In terms of how investors view asset values, pure play renewables companies command a valuation premium over utilities having lower levels of renewables in their mix… Valuation premiums for pure play renewables companies — as seen in their higher price-to-book ratios, stronger market valuation of installed capacity and stock performance over the past five years — suggest that this focus on renewables as a concentrated strategy has paid off,” Iyer said in the report.
The report added at present, investors are willing to reward firms which plan to grow in the field of renewables and are able to execute their plans, as investors value each megawatt (MW) of installed capacity at ACEN Corp. at P137 million, based on the market capitalization and megawatts in operation as of August 4 this year, and Citicore Energy REIT Corp. at P102 million per MW.
“Examples of successful renewables investments and other innovative mechanisms, such as REITs and privately financed coal phaseouts and retirements, can guide regional fossil-dependent utilities to invest aggressively in renewables to stay relevant and capitalize on opportunities offered by the energy transition,” Iyer said.
However, he warned that local energy companies “who stick with fossil fuel assets as their main line of business, will likely continue to see ebbing interest among investors and financial markets unless they can change and adopt some of the more successful strategies.”
IEEFA said the government’s Green Energy Auction Program to generate maximum tariffs via competitive bidding for RE projects also grants cleaner technologies with more value.
Based on data from the Department of Energy, as of end-2022, the total installed on-grid capacity from RE — composed of geothermal, hydro, biomass, solar and wind technologies — is at 8,264 MW, or 29.24 percent of the 28,258 MW overall installed on-grid capacity in the Philippines, excluding battery storage and diesel-battery hybrid systems. – Jed Macapagal
