AEV earmarks P170 B capex for power projects

CEBU, Philippines - Pursuing the fertile business of power generation in the Philippines, Aboitiz Equity Ventures (AEV) has earmarked a capital expenditure of P170 billion in the next three to five years, to address the power supply shortage specifically in Mindanao.

AEV president and chief executive officer (CEO) Erramon I. Aboitiz, made this announcement during the company’s Annual Stockholders Meeting Monday held at the Radisson Blu Hotel in Cebu.

“We roughly have P35 billion worth of projects lined up for Mindanao. We are looking at putting up 354 MW in new capacity by 2015 to help address the critical power shortage in the region. The new capacity will come from the 300 MW clean coal facility of Therma South and 54 MW of run-of-river hydro plants of Hedcor,” said Aboitiz.

Likewise, Aboitiz said that with the company’s partnerships with the Meralco Group and Taiwan Corporation, and Team Energy Philippines Corporation, AEV is adding 1,000 MW of capacity to the Luzon Grid.

In the Visayas however, he said the capacity is still enough to serve the demand in the next five to four years. However, Aboitiz said eventually the company will be looking at another plant to be built in the Visayas by late 2016.

Aboitiz reported that in 2011, the company booked consolidated revenues of clsoe to P72 billion, recording a marginal decline versus the 2010 level.

The softening of the spot market prices at the Wholesale Electricity Spot Market (WESM) was the main driver for the lower topline performance given reduced revenues coming from its power generation business.

Operating income contributions from the power and food units resulted to a slight drop of the company’s cash generating capability, with Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) recording a three percent year-on-year decline, from P40 billion to P39 billion.

Lower net generation, soft spot market prices and increased coal costs brought on lower margins for its power generation business, Aboitiz said adding that the food unit (Pilmico) also contended with increased input costs during the year (2011).

However, these declining performances were offset by the strong showing of the company’s banking group Union Bank and City Savings Bank.

Of the total earnings contributions from the different strategic business units, power took the major lead contributing P16.5 billion, 78 percent of the total earnings contributions from its operating businesses.

The banking and food units ranked second and third contributing 16 percent and six percent, respectively.

Nevertheless, Aboitiz described 2011 as another good year for the company, despite the headwinds faced by teh Philippines from the continuing economic uncertainties in the United States and Europe’s sovereign debt problem and the political upheavals in many oil-producing contries that have caused a spiraling of fuel prices.

“The country proved resilient enough to face these challenges, resulting in modest economic growth of 3.7 percent. AEV, likewise turned in a steady performance, remaining on course in its strategic intents through the wind that powered us to extraordinary heights in 2010 had slowed down,” Aboitiz said.

Moving forward, Aboitiz said that the company envisioned that its growth will come from new Greenfield and Brownfield projects that will be needed to supply its expanding economy of the Philippines.

“We will also pursue the rehabilitation of our existing facilities to maximize capacity and improve realibility,” he said. (FREEMAN)