The government’s move to retire its last coal plant is expected to send a strong signal to private coal plant owners that the reign of fossil fuels is ending. Following the buyout of a huge power conglomerate, officials are stalling on plans to shut down STEAG Mindanao Coal in Misamis Oriental, citing supply-security arguments that climate change activists insist have no basis in science.
By Carmela Fonbuena, Philippine Center for Investigative Journalism
Bulk carrier ships dot the coast of Villanueva, an industrial town in Misamis Oriental in the southern Philippines. Flying different flags, they deliver raw materials and industrial inputs — coal from Indonesia among them — to power plants and factories. They are constantly arriving, departing, or docking at jetties that jut from small piers.
“The ships arrive regularly. The pier in the middle, that belongs to STEAG Mindanao Coal,” said environmental activist Bencyrus Ellorin, referring to Mindanao’s first coal-fired power plant, which he had spent years fighting against.
Decades of scientific research show that burning coal releases more heat-trapping gases than any other fuel, intensifying extreme weather—stronger typhoons, heavier floods, and prolonged droughts — the very disasters the Philippines has endured as one of the world’s most climate-vulnerable countries.
Ellorin joined the Philippine Center for Investigative Journalism (PCIJ) in a hilly part of town overlooking the coal plant inside the 3,000-hectare PHIVIDEC industrial compound. The chimney stands as a stark reminder of a campaign lost and another still to fight.
Mindanao faced an urgent demand for more energy at the start of the century, when its economy was growing at a rate much faster than the national average in terms of gross regional domestic product.
At the time, Mindanao still operated as a separate power system, with its transmission grids unconnected to the rest of the country until 2023. It could not absorb the oversupply in Luzon, which had just emerged from the rolling blackouts of the 1990s power crisis and had seen the rise of independent power producers following the privatization of the power sector.
Ellorin said they pushed to expand the “crown jewel” of Mindanao’s power system — the Agus-Pulangi Hydroelectric Power — arguing it could still deliver more than its installed capacity of 1,000 megawatts (MW). But the proposals never materialized.
“What they were looking for then was who could build faster, because of the demand,’ said Romeo Montenegro, deputy executive director of the Mindanao Development Authority (MINDA).
As in Luzon in the 1990s, rotating blackouts in Mindanao in the 2010s were soon followed by a coal boom.
First coal-fired power plant in Mindanao
“STEAG Mindanao Coal” now towers over the small town. Its metallic grey steel-lattice smokestack, rising beside the boiler house, is the first thing neighboring residents see when they open their windows in the morning. Out at sea, fishermen and local tourists watch massive ships pass by, the smokestack cutting across the horizon.
The 210 MW facility got its name from the German energy firm that built and operated the plant, STEAG State Power Inc. Three years ago, in 2022, the local Aboitiz conglomerate acquired a controlling stake in the company through Aboitiz Power Corp. subsidiary SPI Power Inc. The group now owns 85% of the coal asset.
As is often the case with power plants, they rise side by side. “FDC Misamis Power,” with a larger 410 MW capacity, was built beside STEAG and commissioned in 2016.
It is easily distinguished by its more modern, concrete cylindrical chimney, painted in alternating red and white bands. The plant was built by a subsidiary of Filinvest Development Corp.
The two plants have supplied the growing energy demand of Mindanao, including businesses inside the state-owned PHIVIDEC industrial estate that provide jobs to residents of Villanueva and nearby towns and cities.
Poverty incidence improved with the surge in agro-industrial plantations and new industries in the region, though progress remains uneven, and nearly a fourth of Villanueva’s population is still poor.
SPI Power Inc. said it had helped develop the community through various corporate social responsibility (CSR) programs, focusing on education, livelihood, health and nutrition, disaster preparedness, environment and access to electricity, among others.
“Beyond responsible business operations and adhering to the ethical standards of safety, environment, and good corporate governance, SPI actively contributes to community development, anchored on Sustainable Development Goals,” the company told PCIJ in a statement.
Health concerns
What of the environmental and health concerns the activists had warned about?
PCIJ saw no smoke emission at the site, but residents have a common narrative. They said the chimneys of PHIVIDEC released fumes at night. They sometimes smelled a hint of burning match, but didn’t always know which of the plants was emitting it.
Mayor Julio Uy dismissed the health concerns, saying the national government would have warned them if the emissions had reached dangerous levels.
But Ma. Teresa “Baby Yap” Calion, who moved to town four years ago, blamed the coal plants for her asthmatic father’s worsening condition and repeated hospital trips, in an interview with PCIJ.
SPI Power Inc. told PCIJ it “has not received official complaints nor have any health-related concerns been escalated” to the company.
Energy mix
Over the years, activists’ fears came true: Mindanao’s energy mix was upended by the coal investments of the country’s most influential tycoons.
The Agus-Pulangai hydroelectric complexes, which had escaped privatization, are now aging and operating below their original capacity. They are no longer the region’s dominant source of energy.
The shift came as loss after loss piled up in the fight against coal plants. There are now eight coal plants in Mindanao, out of 31 in the country, excluding those projects already permitted to go online.
Nationwide, coal accounts for 63% of the Philippine power supply, up from 27% in 2006, while geothermal and hydropower, once at a combined 34%, have fallen to 22%.
Electricity generation has grown to become the country’s largest contributor to carbon dioxide emissions, overtaking the diesel-powered transportation sector.
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ADB’s ETM
Today, two decades after the campaign against coal began in Mindanao, Villanueva town once again finds itself the stage for the country’s fight against coal plants and dirty fossil fuels.
Eyes are on what will happen to a plan to retire STEAG Mindanao Coal under the Asian Development Bank’s (ADB) Early Transition Mechanism (ETM), a project announced at the COP26 in 2021. It offers incentives for coal plant owners to phase out their facilities and replace their capacity with renewable energy.
“Together with the ADB, the Philippines is pioneering a global standard in transitioning to a cleaner energy future,” said then Finance Secretary Carlos Dominguez during ETM’s launch in the UK.
STEAG was meant to be an important part of the energy transition strategy of the Philippines, which has set ambitious targets to increase the share of renewable power in the country’s energy mix to 35% by 2030 and 50% by 2040. The target is even higher in Mindanao — 50% renewable in its energy mix by 2030.
Larry Pascua, senior energy program officer of the Philippine Movement for Climate Justice (PMCJ), has questions about ADB’s ETM. But his group is open to the mechanism if it means a coal plant will be retired.
STEAG is a Built-Operate-Transfer (BOT) project scheduled for transfer to the Power Sector Assets and Liabilities Management Corp. (PSALM) in 2031.
PSALM is the state-owned entity under the DOE tasked with privatizing the assets and liabilities of the old National Power Corp. or Napocor, which once owned all of the country’s power plants. Under the early stages of the ETM proposal, the coal plant is supposed to be retired five years earlier, which is next year.
It will not be the first coal plant to be retired, but the government leading the shutdown of its last coal asset sends a strong signal to the private owners, he said.
The Philippine Energy Plan has no policy on phasing out coal, he said. “Retiring the STEAG plant would mean that the other coal plants in the country also have their limits. That’s the message.”
Mindanao hosts eight of the country’s 31 operating coal plants. Click here to explore PCIJ’s map of power plants in the Philippines.
Stalled plans
Environmental groups were surprised when, a year after STEAG was identified as a candidate for the ETM mechanism, the Aboitiz Group—one of the country’s biggest power producers—acquired controlling shares of the plant.
Pascua said the acquisition of STEAG by the Aboitiz Group signalled that it intended “to prolong its operations because it has one of the biggest coal operations in the country.”
“Tingin namin walang planong i-retire (We don’t think they have plans to retire the coal plant),” he said.
The Power Purchase Agreement (PPA) or supply contract covering the STEAG plant provides for a buyout mechanism by PSALM or the government. But in February this year, the Department of Energy (DOE) announced it would revisit plans for the early shutdown of the coal plant.
At the time, Energy Secretary Raphael Lotilla said the coal plant could be necessary to make up for the supply that would be lost once the long-overdue rehabilitation of the Agus and Pulangi hydropower dams gets underway.
The then energy chief also cited Mindanao’s role in powering the neighboring Visayas region now that the grids are connected.
This is where the project stands: DOE Energy Policy and Planning Bureau director Michael Sinocruz told PCIJ that the power plant has been confirmed for inclusion in the ETM, but the mechanism and timeline for its early retirement are still under discussion.
The ADB told PCIJ it is in “continuous discussions” with PSALM about the early retirement of the plant under its ETM program.
“We are exploring the options in coordination with the DOE. As discussions are still underway, we’re not in a position to share further details at this stage,” a spokesperson for ADB told PCIJ.
Aboitiz Power Corp. and SPI Power Inc. said they were “committed to honoring our contractual obligations once a way forward has been identified by PSALM.”
‘Battleground for energy transition’
Two possible scenarios are now feared by environmental groups: the coal plant continues operations, or in its place, a liquefied natural gas (LNG) operation, also involving a fossil fuel.
Two decades after they went to the streets to oppose the coal plant, activists are again geared to oppose these scenarios.
“It is literally a running battleground for energy transition,” said Ellorin. He is now the chairperson of Pinoy Aksyon for Governance and the Environment, a local think tank.
Ellorin supports renewed calls for the expansion of hydropower in Mindanao, combined with solar and wind, to replace the capacity that will be lost. Proponents believe they have improved their proposal from two decades ago to defeat its challengers.
They are counting on a different outcome from two decades ago — a decisive break from fossil fuels, whether coal or LNG.
Conglomerates do not contest the science and are making big commitments toward the energy transition, with some, like Aboitiz Power Corp., already among the country’s largest renewable energy producers. But the rollout lacks the urgency that climate activists say is needed.
Echoes of arguments from two decades ring loud, said Ellorin. The same supply-security arguments once used to justify coal are being repeated—claims that the country’s growing demand still requires coal plants to operate a little longer, which climate activists vehemently oppose.
Both sides are flipping studies, graphs, and analyses to back their positions, each accusing the other of pushing fuels that are unreliable and more costly.
The battle, said Gerry Arances of the Center for Energy Ecology and Development, is not only about coal’s contribution to climate change, but also about its rising costs.
“There is a need for the Philippines to really pursue a coal phase out program. It’s not just about climate change. In the Philippines, our dependence on coal has made electricity very expensive for consumers and businesses,” he said.
Coal is imported, contributing to higher electricity prices, in contrast to indigenous renewable energy. The country has some of the most expensive electricity in the region.
Conglomerates argue that other countries in the region subsidize power producers, but energy watchdogs point to pass-through provisions that shift risks to consumers and leave producers with none.
Pascua is hopeful, saying activists today wield “sharper arguments” compared with what they had decades ago to win the fight against fossil fuels. He urged the public to get involved to give the campaign a fighting chance.
This is the divide where the national government must decide. The fate of STEAG will show where it stands.
