Nordic firm gets perks for geothermal project

Geothermal power developer Envent Holdings, Inc. will spend $1.05 million for a project in Biliran after converting its contract with the government to a new one that carries fiscal and non-fiscal incentives under the Renewable Energy Law. “The signing of this agreement with the DoE (Department of Energy) allows the Biliran project to take advantage of the multiple advantages that the ... renewable energy legislation offers," Gudmundur F. Sigurjonsson, Envent Holdings chief executive officer, said in a statement. The DoE approved last Monday the conversion of Envent Holdings’ geothermal service contract for the Biliran plant into a renewable energy service contract, allowing the company to get benefits under the Renewable Energy Law, or Republic Act No. 9513. In its statement, the company said its “contractual base for [the] Biliran project has been substantially enhanced" following the contract’s conversion. “With the new contract, Biliran geothermal will take advantage of the groundbreaking renewable energy legislation," the company said. Among the fiscal incentives offered by the Renewable Energy Law are income tax holidays for the first seven years of operation, tax-free carbon credits from renewable energy projects, and tariff exemption and duty-free importation of machinery and equipment for the first 10 years of operation. Power from renewable energy sources are exempt from the value-added tax. Non-fiscal incentives, meanwhile, include the renewable energy portfolio standard, which includes mandatory utilization of renewable energy in power grids, feed-in tariffs which will give plants more competitive rates, and priority dispatch for power produced from renewable energy resources. Envent Holdings, which also has geothermal projects in Indonesia, plans to build three power plants with a total capacity of 150 megawatts (MW) in Biliran early next year. The first unit is scheduled to operate in 2012 at a capacity of 50 MW. In an e-mail to BusinessWorld, Mr. Sigurjonsson said Biliran Geothermal has secured electricity sales contracts worth $350 million, which will “take care of the income part of the project 10 years after project start." “We are now working on the project design, preparing environmental applications and the financial structure. The total cost estimate is above $100 million so the financial structure is an important task," Mr. Sigurjonsson said. The financial arrangements will be completed in the next five to 10 months. Pre-construction work is expected to start late this year and civil works will kick off early next year, he added. Surface exploration was completed early least year. It was performed by a group of subcontractors, including Phoenix Geophysics of Canada and the Philippine geothermal consultancy Fedco. The Iceland-backed geothermal developer has inked supply deals with Leyte II Electric Cooperative, Leyte IV Electric Cooperative, Leyte V Electric Cooperative, Don Orestes Romualdez Electric Cooperative, Southern Leyte Electric Cooperative and Biliran Electric Cooperative. Envent Holdings’ key shareholders are Reykjavik Energy Invest and Geysir Green Energy based in Iceland, where 100% of the power is derived from renewable sources. The company said it still has “multiple applications for new geothermal working areas pending consideration by the DoE." -- J. B. F. Santos and Sarwell Q. Meniano, BusinessWorld