Aboitiz To Recover Power Business - Marvin Germo

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Aboitiz To Recover Power Business

By: Marvin Germo | June 24, 2019

Decline in Profit

Aboitiz Equity Ventures, Inc. (AEV) is planning to recover its power business in order to boost its earnings this 2019 after it recorded a 27% decline in the first quarter of the year. This decline in performance was just a temporary situation, according to the firm. The business is already running on its basic state in line with its expectations. From January to March, AEV had a consolidated income of P3.5 billion, lower compared to P4.8 billion it generated in the same period last year. This came despite the 28% increase in gross revenues, which is P47.40 billion during the same period. Let’s take a look at some major key points with regards to their plan to open their power business.

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The Main Cause of Q1 Results

The firm believes that Aboitiz Power Corporation, or the power segment of AEV, dragged the results of the first quarter. The company had to buy power even if the price was higher during that time, which was basically a result of over-contracting and outages in preparation for the launching of Therma Visayas, Inc. (TVI). As you can see, during the first quarter of the year, the purchasing requirement was too high for AEV. And now that the needs for purchase power are dying down, the company expects greater results as they move forward. Part of the second quarter will still be affected but the probability for a better outcome is high.

Delays In Operation

Aside from the purchasing power, there was also an unexpected shutdown of Aboitiz Power’s geothermal plants during the first quarter. This delay caused a portion of the decline in profit in the said period. As for the TVI, it already started its operation in the second quarter of the year with a two-unit plant with a capacity of 340 megawatts (MW). This will basically serve power to Visayan Electric Co. together with other electric cooperatives that will give access to Visayas and Luzon region. Its 668-MW GNPower Dinginin Ltd. Co., which is its first unit, is expected to go online in the last few months of the year. The second unit will then commence in 2020.

Bonds To Increase Its Capital

As far as capital is concern, AEV will issue bonds in the next two years once it secures its acquisition plans. This will follow the completion of its fixed-rate bonds worth P5-billion which was offered this week. According to the firm, sooner or later, it will issue another set of bond offering as they see the increase in opportunities across its subsidiaries. The plans on issuing bonds will, of course, depend on the growth and performance of the conglomerate’s businesses. And as forecasted by Aboitiz, if there will be a lot of growth opportunities for the company, they will surely be required the full utilization of at least P30-billion to put their projects and plans into reality.

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