Water firm sets P1.5B capex for expansion

CEBU, Philippines - Recognizing the dire need for water distribution and bulk supply channels in Southern Philippines, Cebu-based Abejo Builders Corporation (ABC) earmarks P1.5 billion capital expenditure for the next two years to further expand its business outside of Cebu.

ABC president and chief executive officer (CEO) Gabino M. Abejo Jr., announced that the 12-year-old water company is bent on becoming one of the largest water supplier in the country, both in bulk and distribution supplies.

Pending the completion of nine contracts, Abejo said the prepared capex will be spent once these contracts will be clinched, which include water supply deal outside Cebu that requires at least P800 million investments.

Abejo, who is the guest speaker of the recently held CIE-School For Leaders 8th Baccalaureate ceremony, said that the company is ready to face the competition, although it is one of the latest entrants in the water supply business.

Currently, ABC is providing Metropolitan Cebu Water District (MCWD) a total of 17,000 cubic-meters a day.

With the infusion of P1.5 billion capex in the next two years the company expects to generate a total of 35,000 cubic-meters a day water supply, for both distribution and bulk water supply services.

“The competitors are getting stronger, faster, their watches are getting bigger, so we have to move much faster also,” said Abejo in an interview.

Although, the group has also other plans for expansion, such as into mining, tourism, and construction, Abejo said the focus now will be more directed to expand its water business, particularly exploring other areas in Southern Philippines, and eventually Metro Manila.

In Cebu alone, he said a study showed that MCWD has only been able to serve 60 percent of the total requirement in the Metropolis. Because of this, the company is also planning to enter into joint-venture agreement with different local government units (LGUs) specifically in the un-served localities for a possible water distribution facility.

At present, ABC has existing partnership with a big barangay in Cebu City, providing the bulk water supply and distribution service to the residents.

Abejo, who is recently hailed as the country’s Young Entrepreneur of the Year, said that just like power, water business has big potential for growth, adding that stable supply should be assured.

Aside from the P1.5 billion capex, of which 30 percent will be internally-source from the company’s buffer, and the rest will be loaned, ABC is also planning to enter into Initial Public Offering (IPO) to raise more capital.

In 2009, ABC posted total sales revenue of P51.08 million, with standing assets of P143.9 million.

Abejo said the company intends to generate P380 million total gross sales by 2012, assuming it can close the six projects currently being negotiated.

The company is preparing to expand its facilities in the ground water extraction, as well as desalination technology and surface water sourcing. (FREEMAN)