Ayala Corp.,the oldest conglomerate in the Philippines, plans to surpass its P20-billion net income target in the next two years as its power investments begin to contribute strongly to earnings.
Ayala Corp. President and Chief Operating Officer Fernando Zobel de Ayala said the company intends to exceed its P20-billion profit target by 2016.
“Our earnings outlook for each of our key business units remains upbeat, with mostly double-digit growth expected in 2014. This puts us in line with our aspiration to surpass the P20-billion net income level in 2016,” he said during the company’s annual stockholders meeting on Friday.
In an interview with reporters, Ayala Corp. chief financial officer Delfin Gonzales said the income target will be mainly supported by the group’s growing investment in the power sector.
“We are in the trajectory to hit the P20-billion target. Part of the contribution will come not only from the existing businesses but also from energy. In the case of GN power, the investments that we have are now on commercial operation, so that will be contributing to the income,” Gonzales said.
AC Energy Holdings Inc., the power unit of Ayala Corp., has a strategic partnership with GN Power in several power ventures.
$300M exchangeable bonds
The company said the earnings contribution from several of the group’s power assets are expected this year.
Also on Friday, Ayala Corp. announced in a disclosure to the Philippine Stock Exchange that it raised $300 million from the sale by unit AYC Finance Ltd. of 0.50 percent bonds due in 2019 which are exchangeable for common shares of Ayala Land, Inc. (ALI).
ALI is the property arm of Ayala Corp., while AYC is a wholly-owned and guaranteed subsidiary of the group.
Gonzales explained that the exchangeable bond issuance will not result in a dilution because the ALI shares to be exchanged will come from Ayala Corp.’s shares in ALI.
Strong power pipeline
As a result, Ayala Corp.’s stake in ALI will go down to 46.5 percent from close to 49 percent, assuming that the $300 million bonds will be fully exchanged.
To reach a portfolio of 1,000 megawatts of power generating assets, Ayala Corp. is now working to reach the financial close for its two power projects within the next six to 12 months.
“We have a strong pipeline. In particular, we have two scale projects that are targeted to close within the next six to 12 months,” said Eric Francia, managing director of Ayala Corp.
Francia said one of the projects is in Mindanao while the other one is in Mariveles, Bataan.
“One is the Mindanao project in Kauswagan, Lanao del Norte. This is going to be three to four units of 135 megawatts, so that’s anywhere between 405 to 540 megawatts. AC Energy will be underwriting the entire equity requirement for that, so that’s going to be over $200 million,” Francia said.
“Beyond that, we’re also developing a second plant beside GN Power in Mariveles. We will be taking roughly 50 percent equity participation underwriting. That’s going to be two times 600 [megawatts]. We could potentially surpass 1,000 megawatts once that is closed,” he added.
However, Francia noted that the amounts he disclosed were just initial estimates and no final investment cost has yet been confirmed by the whole group for the power investments mentioned.