Aboitiz Equity H1 income drops 9% to P10.2B on lower power output

MANILA, Philippines - Cebu-based investment holding firm Aboitiz Equity Ventures Inc. (AEV) reported a nine percent drop in net income in the first half of the year, weighed down by lower contributions from its power unit.

In a financial report filed yesterday, AEV said its net earnings reached P10.2 billion during the period, translating to earnings per share of P1.85. In the second quarter alone, however, AEV’s net profit rose 11 percent to P5.6 billion.

Power continued to account for bulk of groupwide earnings at nearly 80 percent, followed by the banking and food units with contributions of 14 percent and six percent, respectively.

Aboitiz Power Corp. chalked in a net income of P8.1 billion during the period, down from P9.7 billion the previous level. The power generation business pumped in P7.8 billion, registering a 20-percent decline due to lower average selling price and net generation recorded.

Average selling prices fell 16 percent given the softening of the spot market prices vis-à-vis first semester 2010 levels. The average price of electricity in the Wholesale Electricity Spot Market recorded a 55 percent decrease as demand for electricity, particularly in the island of Luzon, remained flat versus last year.

Supply, in the meantime, showed increases given marked improvements on outage levels for Luzon-based power plants. The adverse impact on earnings, however, was tempered by AboitizPower’s strategic move of lowering its exposure to the spot market with the group’s increased contracted capacity.

AboitizPower’s net generation business likewise posted a seven percent decline from 4,984 gigawatt-hours (gwh) to 4,640 gwh. The drop was largely accounted for by reduced spot market transactions brought about by the prevailing low prices.

AboitizPower’s wholly-owned unit Therma Luzon Inc. (TLI), the administrator of the Pagbilao coal plant, recorded a margin squeeze for the period in review. Terms of its existing bilateral contracts do not allow TLI to cover for the increase in its fuel cost, which was mainly driven by the unfavorable global supply situation.

The combined income contribution of its hydro assets significantly improved from P116 million to P1.8 billion.

As of end-June 2011, AboitizPower’s attributable capacity was at 2,331 megawatts (MW), up 16 percent due to the completion of the 16.5-MW Plant A of Hedcor Sibulan in July 2010, completion of the last unit (or 82 MW) of the 26 percent-owned Cebu coal power plant in the fourth quarter of 2010, the assumption of full ownership and control over the 70-MW Bakun hydropower facility in May 2011, the acquisition of the 242-MW power barges in Navotas in May 2011, and the partial completion of the rehabilitation of the Ambuklao hydropower facility in June 2011.

– With Ted Torres