AEV eyes Asean market expansion

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Moving HQ to Arca South in 5 years
CONGLOMERATE Aboitiz Equity Ventures Inc. (AEV) is scouting for opportunities for its various business segments aside from its main energy business in a bid to expand its reach in the region.

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Manuel R. Lozano, AEV chief financial officer (CFO) and senior vice president, said the Aboitiz group is observing fast growth and expansion in its banking, cement, land, and food businesses, leveraging on the bright prospects of the Philippine economy.

These segments are expected to increase their revenue generation to AEV so that in the long term, Aboitiz Power Corp’s (AP) earnings contribution will decrease to 50 percent from the current 67 percent.

“Our power unit is listed. Our goal is to be able to differentiate it [from AEV]. In the old days, we reached a peak where power was 86 percent of AEV. So from an investors’ point of view, that makes AEV look like it is AP. We want to make sure that they see that AP is distinct. [The conglomerate] is about different basic businesses that supply goods and services to the Philippines, not just power,” Lozano told reporters over the weekend.

“Our goal [is to grow]banking, housing, food, and now infrastructure—all of those are basic goods that will grow with the country, grow with the consumption of the people. So we want to make AEV have a broader play in the Philippine market,” he added.

But he added this goal may take “many years” to reach.

The group is also keen on expanding in the booming Southeast Asian markets such as Indonesia, Vietnam and Myanmar, particularly in the geothermal and hydro segments in power, as well as in food and infrastructure.

Lozano said those three markets are attractive to AEV because of their growing population, improving consumption, shortages in supply of food raw materials and power, and the need for expertise in these sectors where AEV is leading.

“We were able to invest in Vietnam [for our]aqua feeds business so we hope to capitalize on that presence, to do more in Vietnam [as]that will be our first Asean business. All of our businesses are Philippine-centric but [our food unit]Pilmico was able to go to Vietnam,” Lozano said.

“There are a lot of growth opportunities in Indonesia, both in power and different food types, so Indonesia is a good market. Myanmar also, we find it quite interesting but we haven’t been able to penetrate Myanmar. Generally speaking, Southeast Asia, so those three markets we think are quite good. I think we can compete [there],” the AEV chief said.

“We can provide some value added beyond money, because we don’t want to go into a country and all we’re going to do is investment. We want to add value in food, geothermal, hydro projects, and infrastructure, and we think we have that expertise to provide in those countries… The markets are growing and it’s not far from us. It’s easier for us to manage so we’d like to stay nearby,” he added.

Part of the planned expansion involves scouting for strategic merger and acquisition (M&A) opportunities in and out of the country. These include the bid for the $2.5-billion Indonesian and Philippine geothermal assets of American power giant Chevron, and the recent $1.2-billion deal to acquire significant stakes in GNPower Mariveles’ 604-megawatt (MW) power plant and GNPower Dinginin’s 668-MW plant due in 2019.

Coming from a P58-billion capital expenditure (capex) this year, Lozano said AEV is setting its 2017 capital spending at the same level or “more than P50 billion” for the group’s upcoming and current projects, which will be mostly financed by internally generated funds.

Any spending requirement for future acquisitions will be provided by a potential fund raising initiative in the fixed income debt market by next year, Lozano said without giving more details.
 
Expansion per segment
Power vehicle AP is currently working on five projects and planning three more for an aggregate net capacity of 1,685.3 MW.

Its 8.8-MW Aseagas biomass plant is expected to come online within this year, while its 400-MW Pagbilao 3 coal-fired power plant and Manolo Fortich hydropower plant are up for completion next year. Meanwhile, its 8.5-MW Maris hydro power plant and 300-MW Cebu coal fired power plant are set to operate by 2018.

Three plants are in the planning stage. The 150-MW third unit of the Cebu coal plant is set for completion by 2020, while the other two are the 600-MW Subic coal plant and 150-MW third unit of the Davao coal plant.

Its food unit Pilmico plans to grow its sow farming levels to 25,000 heads by 2020 from 14,000 heads expected by end-2017, while expanding its feeds business in the Philippines and Vietnam, flour exports in Asean, protein (meats and poultry) production, and scouting for M&As in the region.

Based on its second quarter report, Pilmico allocated P2.3 billion in capex this year for these initiatives.

In real estate, AboitizLand Inc. has set a P1.2-billion capex budget until end-2017 for active land banking initiatives in the provinces.

AboitizLand is scouting for land parcels of at least 20 hectares in size to be used for mid-income housing developments.

Its cement manufacturing and infrastructure arm Republic Cement & Building Materials Inc. is also expected to contribute significantly in the next six years of the Duterte administration, which is being tagged as the “Golden Age of Infrastructure” of the country.

Lozano said domestic cement supply is still lacking and “with the infrastructure thrust that the government is talking about, that will require a lot of cement. We think cement demand would be growing not just next year but for the next four to five years. So we’re quite bullish on that.”

Banking arm Union Bank of the Philippines is transitioning into the online and mobile space and is expanding its branch network by 10 percent per year, mostly in urban integrated developments across the country.

“UnionBank, if you see the [earnings]results, is better and they have a lot of expansion. They’re utilizing more of their capital with their Focus 2020 plan. Even City Savings Bank, our savings bank, is also growing its branches. So banking will not slow down,” Lozano said.

Lozano said the group prefers to boost its capacities in its existing businesses than start another venture that may weigh on earnings but if ever they branch out, AEV may take on partners with expertise in the new business space.

AEV’s five main business are power (AP), banking (UnionBank), property (AboitizLand), food (Pilmico), and cement (Republic Cement).
 
HQ move
The Aboitiz group is also set to move its headquarters to Ayala Land Inc’s master-planned central business district (CBD) Arca South within the next five years.

Lozano said the group acquired a “big” parcel of land in the CBD where the Aboitiz tower will rise, which will be within the height restrictions for buildings in Arca South (8 to 12 storeys) due to its proximity to the Ninoy Aquino International Airport.

“They’re planning it as early as now,” he said.

AEV holds its main offices at the NAC Tower in Bonifacio Global City.

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