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New Partner In Geothermal Project To Lift Basic Energy Corporation (BSC)?


Basic Energy Corporation or BSC is one of the publicly listed firms in the Philippines that is engaged in the development of alternative and renewable energy. In a disclosure that was published back in April 2010, the company said that it was looking for partners that would develop and further explore the Mabini, Batangas geothermal area. Based on the study that the company made, the field has a potential capacity to produce 20 megawatts (MW) of electricity. The good news is that the presence of ample infrastructure, demand for power in the area, and the close proximity of transmission lines would allow it to be developed in just 2 to 3 years. BSC, however, does not have enough funds to solely finance the project.

Now, it is no secret that at least three major corporations in the country are starting to heavily invest in the energy sector. San Miguel Corporation, in fact, already started with its $500 million bond road show today. The proceeds of  SMC’s bond issuance will be infused in its energy unit. Aboitiz Power (NYSE:AP), aside from its coal plants, is also into renewable energy. Last year, it opened a 42.5-megawatt (MW) Sibulan hydropower plant in Davao del Sur. Additionally, First Philippine Holdings (NYSE:FPH), said last December that it will put up a total of $750 million in renewable energy projects.

So you see, at least three big companies (SMC, AP, and FPH) are aggressively putting money in renewable energy. With the apparent viability of BSC Mabini field, looking for a partner may not be that hard. Such could, of course, fast track the field’s development and in the same way speed up the project’s future cash in flows.

On the technical note, BSC shares have in hibernation for quite some time already. In fact, since late 2008, it has been moving sideways in a very boring fashion. Though it appears that BSC has been consolidating into an ascending triangle which could potentially swing it higher. A break, therefore, of the PHP 0.19 resistance could push BSC towards it upside target of PHP 0.28.

By the way, some people might say that this stock is very illiquid. For the most part since 2008 it has been so but does CYBR ring a bell? CYBR for the most part of its consolidation has been trading very thin as well but when it broke out, trading volume also spiked. The same way could happen with BSC especially if a big company like SMC, for example, comes into the picture.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.