Aboitiz company to invest P42B in power business

Aboitiz Equity Ventures (AEV) will spend P42 billion this year to increase the capacity of its power-generation business.

Erramon Aboitiz, AEV president and chief executive officer, said after the AEV’s annual stockholders meeting yesterday that of the P44 billion capital expenditure set for this year, P42 billion would be focused on the power-generation business while the P2 billion would be for AEV’s other businesses in banking and food.

Aboitiz said the P44 billion capital expenditure this year was made possible after AEV, which is the holding company of the Aboitiz group of companies, achieved a record-high consolidated revenue increase of 113 percent in 2010 or close to P75 billion.

The AEV officials’ decision to pour more investments into their power businesses was influenced by the excellent and still high growth potential for the business.

“Of the total earnings contribution from AEV’s four strategic business units, the power unit took the major lead turning in P19.1 billion, which is 85 percent of the total earnings contribution to the company. The banking and food units ranked second and third, contributing 12 percent and 7 percent respectively, thereby offsetting the already-negative share of the integrated transport and logistics group,” said Aboitiz.

Aboitiz said that the generation business accounted for 93 percent of the total earnings from AboitizPower’s segments while the distribution business contributed a total of P1.9 billion, which was 23 percent higher than last year’s distribution income.

“The company is now in various stages of developing for two clean coal projects and some small hydros that are expected to break ground within this year,” Aboitiz said.

Iker Aboitiz, one of the officers of AEV, said they are still negotiating for acquisition of some power plants like the Agus and Pulangi Hydroelectric power plants although they were not expecting the deals to happen within the year.

While income from power in the first quarter of this year showed a 31 percent decline with only P3.9 billion compared to the same period last year, the group is confident that they could still see a good performance this year.

“Prices in the spot market had gone down and demand is also low so we are only generating low. But we see this improving within the next few months or in fact it has already started with the warmer months already here. We also expect the prices in the spot market to still go up,” Iker Aboitiz said.

For the food business, Tony Moraza, AEV director, said food business also slowed down in the first quarter of the year due to the rising commodity prices, which they weren’t able to pass to the consumers yet affecting their profit margins.

Moraza, however, said they had already started to implement price increases in some products.

Erramon Aboitiz said they would invest P900 million for their food business to build more silos for bulk storage and for dredging in their Iligan ports to accommodate bigger vessels.

“The banking group will also have P350 million for more branches and investments in IT and another P400 million to put up the building in Banilad (Cebu City),” he said.