CEBU CITY -- Seeing higher demand for energy and more opportunities for growth as the country bounces back from the economic crisis, Aboitiz Power Corp. has programmed P17.4 billion for capital expenditures this year and is eyeing P72 billion worth of greenfield projects to boost its energy generation portfolio.

The capex of P17.4 billion will finance the ongoing implementation of some projects, expansion of existing plants, and acquisition of more assets from state-owned Power Sector Assets and Liabilities Management Corp., such as the Agus hydropower plant in Mindanao.

It will also pursue the implementation of smaller hydropower projects.

On top of these, Aboitiz Power President and Chief Executive Officer Erramon I. Aboitiz said the firm was looking at constructing two 150-megawatt coal-fired power projects in Mindanao, a coal plant in Subic, and several hydropower projects in Mindanao and Northern Luzon. These projects, estimated to cost a total of P72 billion, are expected to start by 2011.

“Our country will demand more power in its hunger for growth and progress. We are therefore ramping up our capabilities to develop greenfield projects to help meet the country’s power requirements,” Mr. Aboitiz told stockholders yesterday.

In Mindanao, Aboitiz Power is looking at a new 150-MW coal plant beside the existing 232-MW coal plant of STEAG State Power, Inc., which is 34% owned by Aboitiz Power. This will likely be undertaken with partners in STEAG, Mr. Aboitiz said.

The company is also looking for a site in Southern Mindanao on which to build another 150-MW coal plant.

This year’s capex will be financed by internal funds. Mr. Aboitiz said there were no plans to conduct any fund-raising activities this year “unless something unexpected comes along.”

Aboitiz Power’s generation capacity is expected to increase by 18% to 2,055 megawatts by the end of this year after the takeover of two power barges with combined capacity of 200 MW in Mindanao; completion and commissioning of the 42.5-MW hydropower plant in Sibulan; completion of the 246-MW coal plant in Cebu; and the rehabilitation of the Ambuklao hydropower complex, which is being expanded to 105 MW. The company’s capacity has expanded 12 times since it started expanding its generation business.

The power group continued to account for the lion’s share of total earnings contributions to mother company Aboitiz Equity Ventures, Inc. last year. The power group accounted for P4.3 billion or 56% of the total, which was 30% higher than in 2008. It was followed by the banking group with 23%, the food group with 16%, and the transport group with 5%.

Power generation alone accounted for P3.6 billion, higher by 68% over 2008 figures, while the distribution business provided P1.2 billion, an increase of 5%, as electricity sales increased 6% to 3,322 gigawatt-hours.

The distribution business is projected to continue growing this year as Aboitiz Power utilities enter the Performance-Based Regulation regime.

Three utilities have either started or are about to be regulated.

Cotabato Light began its regulatory period in April last year while Davao Light and Visayan Electric will start in July this year.

An “open access” regime is expected to open more opportunities for, as well as threats, to the distribution business.

“Deregulation and open access will redefine the rules of the game, simultaneously introducing more opportunities and threats,” Mr. Aboitiz said.

“We anticipate operating in an environment of heightened competition, confronted with the realities of a more empowered consumer with higher expectations and new demands,” he added.

Under an open access regime, all utilities will have a wires business -- the traditional lines and poles, substations and transformers -- as well as a supply business, which refers to customer service, meter reading and bill delivery.

Aboitiz Power continued to exhibit strong growth in the first quarter of this year, as it posted earnings of P7.4 billion, nearly 20 times higher than in the same period last year, mainly because of the company’s increased capacity and the continued operation of Aboitiz Power plants to cover the shortfall during the power shortage that gripped the entire country earlier this year.

BY MARITES S. VILLAMOR, Visayas Bureau Chief

From BusinessWorld :

Posted on 09:52 PM, May 17, 2010

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