Young Philippine Executive Aims To Sharply Raise Solar Power Use

Solar Philippines’ Leandro Leviste quit Yale to come home and start what is becoming one of the largest solar power companies in the Philippines.

Leandro Leviste, the son of a prominent Philippine senator, has had no trouble opening doors in Manila, but the young Filipino CEO says he sometimes isn’t taken seriously. That made him welcome the switch from in-person meetings to online video during the Covid-19 lockdowns.

“We used to go to older people’s offices and they would look down on us because we looked like a startup,” says the 28-year-old boss of Solar Philippines Power Project Holdings Inc., or SPPPHI. “When we talk to investors and partners remotely, the age disparity becomes less apparent.”

What’s very apparent is that Leviste is a young man in a hurry to lift how much solar power the Philippines uses. He now has two solar farms in operation, with a combined capacity of 163 megawatts (MW). But he has preliminary permits and a goal of completing all the groundwork including financing for 10 gigawatts of capacity by 2025. That’s 60 times more than his current operating level and roughly 7.5 times the total amount of solar capacity for the entire country.

As with many other countries, the Philippines aims to jump on the renewable energy bandwagon, especially given that the country gets plenty of sunshine. Regulations require electric utilities to source at least 35% of their power needs from renewables by 2030, compared with 21% in 2020. So far, solar accounts for only 3%.

Leviste’s expansion plans won’t come cheap—he estimates it could cost around $8 billion in total. But Leviste thinks the ambitious goals are attainable, and to reach them, he will need substantial help from partnerships. So far, he has teamed up with Philippine billionaire Enrique Razon Jr. and Jaime Zobel de Ayala’s Ayala group. Also, Korea Electric Power (Kepco) paid nearly $40 million for 38% of his first farm in operation, in Batangas Province, where Leviste’s father was once governor. It is operated by Solar Philippine Calatagan Corp. (SPCC), which as of June was 62% owned by parent SPPPHI.

Leviste isn’t just eyeing expansion at home. He has a project planned for Indonesia too, together with the Panigoro family’s Medco Energi, which in March signed a power-purchase agreement (PPA) with the state utility PLN involving two proposed 25MW farms in Bali.

Large solar expansion requires three things: swathes of land for farms, big capex financing and a PPA for guaranteeing long-term sales to electric utilities that will distribute the solar power. The Philippines, unlike Indonesia and many developing countries, does not have a sole state-owned distributor of electric power.

Leviste has land, which he is hoping gives him a first-mover advantage in some areas. Over seven years, Leviste has bought or leased relatively flat agricultural and pasture lands near transmission lines, largely in Luzon, the most populated island. The businessman, who has a target of getting control of 10,000 hectares, says his father’s family, with a real estate business, bought land in Makati in the 1970s at around 100 pesos (about $7 then) a square meter. “I grew up being taught, ‘Don’t wait to buy land, buy land and wait,’ ” he says.

“I grew up being taught, ‘don’t wait to buy land, buy land and wait.’ ”

For financing, some will come through his listed Solar Philippines Nueva Ecija Corp. (SPNEC) and more is expected from partnerships. For Leviste, a pivotal tie-up is with Razon, whose Prime Infrastructure Capital holds 50% in two jointly owned solar projects. Solar Philippines Tarlac, with 100MW capacity, is already in operation, while Solar Philippines Tanauan, building a total of 170MW in two sites, expects to produce from early 2023.

The two businessmen eye much larger capacity. In 2021, through SPPPHI and Prime Infrastructure, they formed a joint venture called Terra Solar Philippines, in which Razon has 50.01% and Leviste has 49.99%. In the near future, it hopes to successfully complete negotiations of a 20-year PPA for a hefty sale of power to Manila Electric Co. (Meralco), the only distributor in Metro Manila, from solar farms to be developed with Razon. These farms, to be located across at least five provinces in Luzon, would have a combined total gross capacity of at least 2,500MW, and could be the largest solar power operation in the world. A 20-year PPA would open the way for bank loans for the project.

In late June, Solar Philippines won five long-term contracts to sell power to the wholesale electricity spot market after a Department of Energy competitive tender, creating a market for several projects with a combined gross capacity of 2,000MW. It also submitted an unsolicited offer to supply baseload power to Meralco for 24 hours a day for 20 years from 2024 by building a solar farm with a gross capacity of 1,800MW, supplemented by batteries.

For pursuing his overall plans, Leviste’s listed company is a linchpin. Some of the 2.7 billion pesos ($50.6 million) raised in its December IPO will go for construction of the first phase of a 500MW solar farm, 100km north of Manila, that would be the country’s largest to date. During July, SPNEC hopes to launch a rights offering to raise between 3 billion and 3.3 billion pesos. Shares of SPNEC, which began trading at 1 peso, were trading at around 1.65 pesos in late June.

In March, SPNEC approved a plan to buy its parent company’s stakes in more than 20 planned solar generation projects across the Philippines. SPNEC is issuing 24.4 billion new shares as payment. The parent’s ownership of SPNEC is expected to fall to 54.2% from 66.8% after the rights offering.

For the six months ended in March, SPNEC reported a loss of 48.3 million pesos. Unlisted SPPPHI said its net income in 2021 increased sixfold to 806.4 million pesos, though that was mainly due to the sale of its stake in a subsidiary. Revenue fell 19% to 1.23 billion pesos.

Leviste first got interested in building a solar power business in the Philippines in 2013. He was interning at Meralco during a summer break from Yale University where he was studying political science. Leviste was intrigued by Elon Musk’s companies Tesla and SolarCity, which led him to feel there was an opportunity at home to supply solar power more cheaply than what Filipinos were paying for electricity generated from fossil fuels.

During his second year at Yale, Leviste dropped out and returned to Manila. His father then knocked down a sprawling mango orchard and lots planted with other crops in Batangas, and used the land as security for a loan for a solar project. SPCC, the company he set up in 2015 to build the solar plant, pledged all its common shares to three banks. Leviste spent months at the 106ha site, overseeing the installation of over 200,000 photovoltaic (PV) panels. “It’s just like building with Lego,” he says.

Leviste says he went “all in” on solar. After his company in 2016 met a demanding deadline for completing that first grid-scale power plant, to qualify for pivotal tariff subsidies, he put up a marker inscribed “A monument to ‘It can’t be done.’ ”—a message for skeptics who thought he wouldn’t finish on time.

Alberto Dalusung III, a former director at the energy department and currently a member of the National Renewable Energy Board, is upbeat about what can be done with renewables, noting a USAID-funded study that identified nine competitive renewable energy zones in Luzon with an estimated 35 gigawatts (GW) of solar capacity and 54GW of wind capacity. “We’re really moving towards renewables,” he says. “The potential is so much bigger than what Solar Philippines has envisioned.”

If Philippine use of solar power increases significantly, however, Leviste could face stiffening competition and higher costs, says Joey Roxas, CEO of Eagle Equities in Manila. “The cost of land may rise but as the number of solar producers increase, competition could also depress power rates they could charge,” he notes.

Eduardo Francisco, president of BDO Capital & Investment, a subsidiary of the country’s largest lender, notes that the cost of providing solar power has gone down, thanks to cheaper PV panels, and describes Leviste’s business model as “basically workable,” But he adds, “It remains to be seen if there are enough PPAs being tendered between now and 2025 to cover Solar Philippines’ 10GW plan.”

Leviste has vied aggressively for long-term contracts to supply solar power to Meralco, the country’s largest electricity utility. He won his first deal in 2017 by offering to sell at only 2.999 pesos per kilowatt hour at a time when Meralco’s average cost of power was around 4.6 pesos per kwh. “I sacrificed future profits on that deal but if you consider that as our marketing expense to win future contracts, then it was the best investment that we ever made,” Leviste explains.

Though his solar business is now positioned to expand significantly, Leviste admits that many of his early bets didn’t deliver as expected, prompting the company to stop making solar panels and installing them on residential and commercial building rooftops. Targets have been scaled down for a subsidiary that aimed to provide solar power to off-grid and underserved areas throughout the country, for which it has secured a non-exclusive franchise from Congress in 2019. “Microgrid, commercial and residential rooftop will just account for a tenth of solar power use. The rest will come from solar farms connected to the grid,” he says. “We’d still love to do off-grid electrification on a CSR [corporate social responsibility] basis from the profits that we make from the solar farms.”

Leviste says the biggest source of value for his solar business isn’t going to be in the dividends from holding the operating assets for 25 years. “It’s on buying land at 200 pesos per square meter, and revaluing it once it’s industrial to 1,000 pesos per square meter, and infusing it into equity for a joint venture which would have a present value of 2,000 pesos per square meter. That’s how we can turn one peso into ten pesos over time,” he says. Aware of the obstacles to sharp expansion, he half-jokingly says, “We’re accumulating land left and right, but might just end up with cattle-raising as a business.”

Property and Politics

Whether Leandro Leviste proves a success as a big developer of solar power in the Philippines, his family name is already well known. A street in Makati central business district is named after his late grandfather Lauro P. Leviste, who was a real estate broker, in recognition of his role in developing the area near Manila after World War II.

With Leandro’s foray into land for solar projects, the Leviste family now has been involved in property for three generations. Leandro’s father, 82-year-old Antonio Leviste, was a successful developer in Batangas Province, where he was governor from 1972 to 1980. In 2009, Antonio was convicted of homicide for the 2007 shooting death of a long-time aide, and he was imprisoned until 2013. Antonio said it was in self-defense but the court rejected his claim, noting the aide was shot five times.

Leandro’s mother, 62-year-old Loren Legarda, is among the country’s most popular politicians. In the May election, she got the second-highest number of votes among 64 candidates vying for open Senate seats. The former broadcast journalist earlier served two terms as a senator. She and her husband separated in 2003, and their marriage was later annulled.

Leandro caught flak during deliberations in 2019 on a legislative franchise for a Solar Philippines subsidiary aiming to provide solar power to off-grid and underserved areas. It was opposed by utilities who feared this would violate their exclusive charters but supported by leaders of electricity-deficient areas. He was criticized as benefitting from his mother then chairing the powerful Senate finance committee. “Not at all,” Leandro told reporters in December 2018. “This is purely on the basis of merit.”

Legarda abstained from voting on the measure and denied lobbying for its passage. The bill eventually passed after clearer limits were added on the subsidiary’s scope of business. In 2022, Congress passed a law that let other microgrid service providers do business in power-starved communities without getting a congressional franchise, providing more competition.