Risk takers

In a country with an abundance of risk-averse taipans among our economic elite, Ricky Razon seems to be the ultimate risk taker. Nothing fazes him – not even having to drill three Malampaya wells at a cost of between $80 million and $90 million each, with no guarantees that any of those wells will prove to have commercial reserves.

Politicians like Duterte don’t faze him either. When Duterte viciously cursed the Ayalas for Manila Water’s “onerous” concession contract, he became the Ayalas’ white knight. He relieved them of a business that was causing them serious political headaches.

Taking over the right to provide electricity to Iloilo City from the longstanding utility involved a nasty fight in Congress and in the courts. He won both battles, and the people there love the better service and lower rates. His MORE Power has since also taken over local service in Bacolod and Bohol.

And there isn’t a more troublesome business in terms of dealing with government regulators and politicians, as well as assorted creepy tough guys with nasty motives, than the casino business. He is thriving there too.

His main business is port handling, inherited from his father. He expanded it worldwide, successfully dealing with Third World governments in Latin America and Africa.

He has lately focused on energy, an industry that is badly regulated, demands huge chunks of risk capital, and involves consumers who are highly sensitive to rates that limit profit upsides.

When he gave up his share of NGCP to Big Boy Sy, the impression was he was done with the energy sector. But he just took a breather. MORE Power, the distribution utility in Iloilo, was his first foray. Then came Malampaya.

But being upstream in Malampaya was not enough. He needed to be on the downstream side as well. And it happened when his Prime Infrastructure Capital bought a 60 percent controlling stake in First Gen’s natural gas-fired power plants for P50 billion.

Buying control of First Gas delivered the message that he was optimistic his efforts to extend the life of Malampaya would be successful.

Some were surprised that the Lopezes gave up control of First Gas. But Piki Lopez had always considered having natural gas in his portfolio only as a transition fuel toward more renewable energy. Now, Piki has more money to invest in geothermal and hydro.

In a sense, Piki is a big risk taker too. Drilling for geothermal is as iffy as drilling in Malampaya. With climate change, taking control of hydropower plants takes guts. But taking a risk in clean renewable energy has been on Piki’s agenda for years now.

If all he wanted was sure profits, Piki could have easily put up coal-fired power plants.

But Piki showed his commitment to clean energy by submitting the highest bid of P58.5 billion for government-owned PNOC-EDC in 2007. This bid surpassed the second-highest offer by P9.97 billion. The Lopezes eventually bought out their Icelandic partner for full ownership of EDC.

In the 2006 privatization of the Pantabangan-Masiway Hydroelectric Power Plant complex, the Lopezes submitted the winning bid of $129 million. This bid outpaced the second-highest offer from Aboitiz Power by $17 million.

More recently, the Lopezes won the bid for the 165-megawatt Casecnan Hydroelectric Power Plant in Nueva Ecija with a bid of $526 million. This was significantly higher than the offers from other bidders: the EEI Power Corp. consortium at $298.9 million and Aboitiz Group at $258 million.

Piki clearly wanted to win all those risk-taking bids as part of the long-term commitment of the Lopezes to grid-worthy renewable energy.

Back to Razon… he now controls over 2,000 MW from the First Gas plants. There were plans to build another 1,200 MW plant before the sale, which presumably will be implemented by Razon.

Razon got into Malampaya after the Duterte crony who bought Chevron’s shares proved unable to finance and manage the resource field. Razon bought out Shell, which wanted to divest after the government failed to grant them an extension of the service contract.

It was only Razon who had the resources and the stomach for risk-taking to take on the project.

Razon’s Prime Energy Resources Development B.V. has committed to invest up to $800 million to extend the production life of the Malampaya gas field and invest hundreds of millions more in drilling the expansion wells.

On top of all that, Razon also controls proposed pumped water storage projects with a potential of 2,000 MW in Rizal and Laguna.

The Wawa Pumped Storage Project in Rizal has a capacity of 600 MW and is expected to start operations by 2029.

On the other hand, the Pakil 1,400 MW Pumped Storage Project is targeted for completion by 2030.

Razon’s adroit handling of the political risks inherent in projects requiring friendly relations with the Malacañang occupant, as well as members of Congress, is behind his success.

In Malampaya, Razon also worked with Sen. Pia Cayetano for the passage of the Philippine Natural Gas Industry Development Act (Republic Act 12120). The new law prioritizes the use of indigenous natural gas, such as that from the Malampaya field, even if it results in higher electricity costs compared to imported sources.

This means that electricity suppliers may be required to source a portion of their energy supply from power plants that use indigenous natural gas, even if it is more expensive than imported alternatives.

Political risks that other conglomerates worry about seem to be all in a day’s work for Razon. He is supposed to have organized his own political party, the National Unity Party, but he has kept a very low profile in it.

Mixing business and politics is an art apparently perfected by Razon. His philosophy is to never fight City Hall. That’s how he managed to be on good terms with whoever is in Malacañang.

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco.