May 26, 2014

EDC eyeing a jv stake in a 220MW plant in Indonesia

News portal yesterday quoted the chief financial officer of First Philippine Holdings (FPH, not rated) as saying that Energy Development Corp (EDC) is finalizing an investment in a joint venture deal for a geothermal project in Indonesia in 2H14.

EDC plans to invest roughly $200m out of the total estimated cost of over $1b for the 220MW geothermal project. While EDC will initially take a minority (20%) stake in the project, it will have management control and can eventually secure majority control.

Our take: While the planned investments will add just 3.6% to EDC's total power plant capacity, this can provide the company access to an economy far bigger than that of the Philippines. More importantly, it can enhance EDC's credentials in geothermal power operations that may open more opportunities abroad. If executed effectively, this can potentially establish EDC as a key global player.

EDC has a 70% stake in Alterra Power Corp of Canada which has four geothermal concessions in Chile and Peru. EDC believes that it will be able to realize returns from the Indonesian investment ahead of those in South America.– WealthSec