The softening of spot market prices, lower net generation and increasing cost of coal led Aboitiz Equity Ventures (AEV) to cap off 2011 with only P72 billion in consolidated revenue, a 3 percent drop from P74.5 billion in 2010.
The weighted average selling price for electricity sold last year declined by 7 percent from P5.47 per kilowatt hour (KWh) to only P5.11 per KWh, according to the report of AEV President and Chief Executive Officer Erramon I. Aboitiz.
AEV is the public-held holding company of the Aboitiz family, which is made up of three core business groups—power, financial services and food.
“Average selling prices for transactions in the spot market yielded a decline of 41 percent year on year. This was a result of both demand and supply conditions that prevailed during the year,” said Aboitiz.
He said the price dip was due to cooler and wetter weather conditions that led to lower power sales of 9,422 gigawatt hours . The figure is a drop from 2010’s 9.762 gigawatt hours amid last year’s 15 percent increase in generation capacity at 2,350 megawatts (MW) by the end of 2011 from only 2,051 MW in 2010.
By year end, AboitizPower reported P54.5 million in revenue, a 9 percent decline from 2010’s P59.5 million.
The trend can also be observed on the group’s food business which saw similar financial difficulty because of increasing input prices.
Income contribution from AEV’s 100 percent owned food subsidiary, Pilmico Foods Corp. recorded a 19 percent year-on-year decline with only P1.2 billion this year, said Aboitiz.
Cost pressures particularly on the profitability of the flour and swine segments, drove down their overall performance despite a 14 percent growth in the volume of feeds and swine operation divisions and improved selling prices booked by flour and feed units.
Of the whole sector, only the feeds unit had a positive income contribution growth with 14 percent increase last year.
Meanwhile, the banking segment ended the year with robust earnings from the UnionBank of the Philippines and City Savings Bank.
UnionBank garnered a P2.9 billion profit while City Savings Bank ended the year with P531 million in earnings, an increase of 26 percent and 69 percent respectively.
The strong performance of the banking arm offsets the group’s fiscal losses in their power and food businesses, Aboitiz said.
However, the power business still remains the group’s top moneymaking arm with its 78 percent income contribution amounting to P16.5 billion. Banking remains second contributing 16 percent of total profit while the food business ranked last with 6 percent of the group’s total earnings.
Amid the downward trend in group’s two ventures, Aboitiz assured stakeholders that the company will remain strong, citing a total asset increase of 15 percent equivalent to P201 billion as of December last year.
“The increase was attributed mainly to the higher fixed assets of the power units, given the acquisition of the Navotas power barges, the assumption of full ownership of Luzon Hydro and the investments made by greenfield and rehabilitation projects and the food unit’s expansion activities in the swine business,” said Aboitiz.
Aboitiz added that they will continue to look for more opportunities to maximize their core competencies to help spur growth.
The group is investing an estimated P170 billion within the next three to five years in their power generation business.
“We have roughly P35 billion worth of projects lined 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,” Aboitiz said.
This new capacity will come from the 300 megawatt Davao-based clean coal facility of Therma South and the 354 megawatt run-of-river hydro plants of Hedcor Inc. in Davao del Sur and Bukidnon.
Aboitiz is also looking at a 600 MW power plant in Subic and another 300 MW plant from a brownfield project.