August 02, 2015

Testing of AP's Mindanao plant still ongoing

Therma South Inc (TSI),a unit of Aboitiz Power Corp, may temporarily shut down the first 150-MW unit of its 300-MW coal-fired power plant in Davao. This is to address technical problems arising from an unstable supply in the Mindanao grid during the commissioning process. According to a BusinessWorld report, the power plant (which has yet to start commercial operation) was linked to the Mindanao grid in mid-June and a synchronization process has been ongoing.

On the other hand, the commissioning of the second 150-MW unit is still on track by 1Q2016. The Mindanao grid has been experiencing power supply shortages since last week due to the reduction in the output of the Agus and Pulangi hydroelectric complexes as water levels are down. Furthermore, one of two units of STEAG State Power Inc’s coal-fired power plant (210 MW) as well as that of the Mt. Apo geothermal plant (98 MW) were placed on maintenance shutdown.

Our take: A temporary shutdown of TSI could result in weak-than-expected 2H15 earnings for AP. The company, in a briefing last Thursday, said full testing of TSI could be completed as soon as the grid stabilizes, hopefully after STEAG comes back on line on 16 August. – WealthSec