Aboitiz Equity Ventures, Inc. Shareholders Report YTD September 2014

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1 Aboitiz Equity Ventures, Inc. Shareholders Report YTD September 2014

2 net income 16,558 EPS = P3.00 1, ,314 10,971 14% 14,256 EPS = P ,371 10,062 AEV s consolidated net income for the first nine months of 2014 declined by 14% to P14.3 bn. This was largely attributable to the weaker performance of the Banking and Power units as well as the one-time gain registered in the same period last year by AEV due to the sale of CSB to UBP. The Power unit accounted for the bulk of earnings at 72% of total contributions from AEV s business segments, followed by the Banking, Food and Property units with contributions of 17%, 7% and 4% of total, respectively Power Banking Parent & Others In P million Food Real Estate 2

3 core net income 16,431 EPS = P ,314 16% 13,876 EPS = P ,371 Non-recurring items are as follows: Non- Recurring Items Parent 1, Power (1,171) (250) Total Gains/(Losses) ,142 Power Food Banking Real Estate 10,312 Parent & Others one-offs include one-time gain recognized due to the sale of a couple of AEV s subsidiaries and net FX gains due to the revaluation of consolidated dollar liabilities and placements. one-offs include the gains booked from the sale of City Savings Bank, net FX loss due to the revaluation of consolidated dollar loans and placements, and pretermination of loans at the Power SBU Parent level. In P million 3

4 beneficial EBITDA 25,435 24, ,505 3,732 3% 662 1,665 2,845 EBITDA down due to the weaker performance by the Banking and Power units. 19,902 19,504 Beneficial EBITDA is the summation of the proportionate share of AEV in the EBITDA of its subsidiaries and associate companies Power Food In P million Banking Real Estate Parent & Others 4

5 Project Updates Davao Bulk Water Project - AEV entered into a joint venture with J.V. Angeles Construction Corp. (JVACC) to jointly construct both a raw water treatment facility with RE component and conveyance system which will deliver 300 MLD of treated bulk water to Davao City. - In early 2013, JVACC submitted an unsolicited proposal to the local water agency. - On June 20, 2014, the Notice of Award (NoA) from the Davao City Water District (DCWD) was received. - Currently working on Joint Venture and Water Purchase Agreements. CALAX Bid - AboitizLand and Ayala Infrastrucuture bidded for the CALAX project. A public-private partnership deal that involves developing a four-lane, 47-km closed-system toll expressway connecting the Cavite Express way and the Southern Luzon Express way. - The consortium submitted the highest compliant bid offering P11.55 billion premium. AseaGas - In June 2012, AEV partnered with GazAsia LTd., a British company, to build a plant that produces liquid bio-methane fuel from organic waste. - Aseagas is already a registered with the Department of Energy as a Renewable Energy (RE) developer. - Commencement of construction work is within the next few months and is expected to be completed in two years. - Should the pilot project be successful, the operations could be easily scaled up. 5

6 Results of Operations Power Group Distribution Generation Parent & Others 10,971 9,298 8% 10,062 8,285 AboitizPower s consolidated net income recorded an 8% decrease for the first nine months of The Generation segment s net income contribution dropped by 11% due to the weaker performance of SNAP Magat, and APRI. TLI s income contribution was also muted due to the expiration of its income tax holiday beginning January ,866 1,908 Meanwhile, the Distribution segment registered a 2% YoY increase in earnings contribution. The growth was due to the strong industrial sales from Davao Light and fresh income contribution from the recently acquired LiMa Enerzone Corporation. In P million 6

7 Results of Operations Generation Average Selling Price for Spot Market Transaction P/kWh Average selling price was up 10% YoY, from P4.69/kWh to P5.16/kWh. The increase was due to higher average selling price of bilateral contracts brought about by the Company s dollar-linked contracts and the implementation of Therma Mobile s contract Average Selling Price for Contracted Capacity P/kWh

8 Results of Operations Generation WESM Prices (P/MWh) Luzon Grid Source: WESM, SNAP 8

9 Results of Operations Generation Energy Sales Capacity Sales 8,248 2% 8,395 13% 1,782 1,571 1,484 1,266 1,474 1, ,291 5, Energy contracts Capacity contracts Energy contracts Capacity contracts Spot market Spot market Ancillary Energy sales increased mostly brought about by higher bilateral sales. Capacity sales stood 13% higher YoY mainly as a result of higher contracted levels and increased ancillary volumes. 9

levels constrained the offering of ancillary services during the second and third quarter.

10 Results of Operations Generation Ancillary sales declined due to lower water levels Despite the hefty growth in the first quarter, the YTD ancillary revenues declined as lower water levels constrained the offering of ancillary services during the second and third quarter. Ancillary Revenues At 100% In P million 34% Accepted/Billed Capacity (in GW/h) 9% 3,947 2, ,042 10

Other Developments Generation Greenfield and Brownfield Developments 300 MW Coal-fired Power Plant in Davao A project of wholly owned subsidiary, Therma South, Inc.

11 Other Developments Generation Greenfield and Brownfield Developments 300 MW Coal-fired Power Plant in Davao A project of wholly owned subsidiary, Therma South, Inc. (TSI), which involves the construction and operation of 2x150MW coal-fired power plant in Davao, the biggest load center in the island of Mindanao. The project broke ground in May Commissioning and testing of the first unit is expected to begin during the fourth quarter of The Facility is expected to become fully operational within the first half

12 Other Developments Generation Greenfield and Brownfield Developments 300 MW(net) Coal-fired Project in Toledo City, Cebu Therma Visayas, Inc. ( TSI ), a wholly owned subsidiary of AboitizPower, is developing a 2x150 MW (net) coalfired power project in Toledo City. The project site was acquired in December The Environmental clearance was issued in May Turnover of the first unit is targeted for year-end 2017, with the second following three months thereafter. 400 MW Coal-fired Power Plant in Pagbilao, Quezon In September 2011, AP signed a Memorandum of Understanding with Marubeni Corporation to formalize their intention to jointly develop, construct and operate a coal-fired power plant with a capacity of 400 MW (net). The unit will be located within the premises of the existing 735 MW (net) Pagbilao coal-fired plant. Commercial operations of the generating unit is targeted within the year

Other Developments Generation Greenfield and Brownfield Developments 14 MW Sabangan Hydro Power Plant Project A project of Hedcor Sabangan, Inc.

13 Other Developments Generation Greenfield and Brownfield Developments 14 MW Sabangan Hydro Power Plant Project A project of Hedcor Sabangan, Inc., that involves the construction of a run-of-river hydropower plant facility to be located in Mt. Province (Northern Luzon) The project was granted all the permits and licenses in the first quarter of The construction commenced in May 2013 and will take approximately 24 months to finish. 13

14 Other Developments Generation Greenfield and Brownfield Developments 68 MW Manolo Fortich Hydro Power Plant Project A project of Hedcor Bukidnon, Inc., this involves the construction of a runof-river hydropower plant facility to be located in Mt. Province (Northern Luzon) Currently completing the permits and licenses after which a 24-month construction period will follow. 600 MW Coal-fired Power Plant in Subic Project by Redondo Peninsula Energy, Inc. (RP Energy), a JV among Meralco PowerGen Corporation (MPGC), Aboitiz subsidiary Therma Power, Inc. (TPI) and Taiwan Cogeneration International Corporation (TCIC). Commercial operation is estimated to begin by AboitizPower, through TPI will have an equity interest of 25% in RP Energy. 14

15 Other Developments Generation Green/Brownfield Developments Moving Forward Other Power Plant Developments 100%-owned subsidiary Hedcor, Inc. (Hedcor) is conducting feasibility studies for potential hydropower projects located in Luzon and Mindanao. Based on current findings, Hedcor sees the potential of building plants with capacities ranging from 20 MW to 60 MW. When the projects pass the evaluation stage and once permits are secured, the two-year construction period for the hydropower plant facilities will commence. The SN Aboitiz Power Group (SNAP Group) is continuing its focus on growth through Greenfield development with new opportunities being sought and 380 MW of projects undergoing feasibility studies. Further, SNAP secured renewable energy service contracts (RESC) from the DOE for a twin mini-hydro facility project along the Maris Canal, one at the Ramon, Isabela while the other at the Alfonso Lista, Ifugao. AboitizPower is also exploring new geothermal resources. Pre-development works are ongoing in several areas namely, Negron-Cuadrado located in Central Luzon and Mt. Apo Mindanao. Both projects have already been awarded geothermal renewable energy service contracts (GRESC) by the DOE. AboitizPower is actively exploring the viability of developing wind power projects and photovoltaic solar projects consistent with the Company s focus on environmental sustainability and diversified power generation technologies, among others. 15

16 Other Developments Generation Participation in the Government s Privatization Program for its Power Assets AboitizPower continues to closely evaluate the investment viability of the remaining power generation assets that PSALM intends to auction off. AboitizPower is also keen on participating in PSALM s public auction for the IPP Administrator contracts, which involves the transfer of the management and control of total energy output of power plants under contract with NPC to the IPP administrators. In November 2013, Aboitiz Energy Solutions, Inc. (AESI) participated in the bidding for the IPPA of the strips of the Unified Leyte Geothermal Power Plant (ULGPP). AESI won 40 strips of energy corresponding to 40 MW capacity of ULGPP. The Notice of Award was issued to AESI on January 29, This IPPA contract will allow AESI to sell 40 MW of geothermal power from ULGPP, beginning January 1,

17 Result of Operations Distribution Attributable Electricity Sales (in GWh) 9% 2,790 3,142 3,322 3,606 3,727 3,934 4,076 3,024 3, The growth was mainly driven by the resurgence in industrial consumption particularly in Davao Light and Subic Enerzone s franchise areas. This was further supported by the contribution of Lima Enerzone Corporation. Electricity Sales, by Customer Type (in GWh) 816 2% % 2,208 2,466 9% 3,024 3,299 Residential Commercial & Industrial Total Power Sales 17

18 Other Developments Distribution SYSTEMS LOSS Gov t Cap 8.50% 2% 1% 1% 1% 1% 0% LEC MEZC BEZC 4% 4% 0% 7% 8% 8% 8% 5% 8% 8% SEZC SFELAPCO Davao Light VECO Cotabato Light All distribution units are within the regulator-imposed cap on system loss levels of 8.5%. 18

19 Other Developments Distribution GROSS MARGIN P/kWh * The group s year-to-date gross margin on a per kwh basis declined from P1.73 of the first nine months of 2013 to P1.66 for the same period this year. The decrease was due to the higher direct costs incurred by the distribution group as a result of the lag in the recovery of VECO s cost of purchased power and the additional costs registered by Davao Light and Cotabato light for running their embedded plants to cover for the energy shortfall in the Mindanao grid. * Year-to-date 19

20 Other Developments Distribution Performance-Based Regulation Cotabato Light The reset process has been delayed due to the issuance of an Issues Paper on the Implementation of PBR for Distribution Utilities under the RDWR by the ERC in VECO and Davao Light Visayan Electric and Davao Light s Second Regulatory Period ended on June 30, They are still implementing the distribution, supply and metering charges approved for the last year of the 2nd Regulatory Period.. SFELAPCO and Subic EnerZone San Fernando Electric and Subic Enerzone entered the 4-yr regulatory PBR period in Oct Currently in the 3rd Regulatory Year. 20

Other Developments Distribution On June 19, 2014, AboitizPower

LUC is the electricity distribution utility serving the LiMA

21 Other Developments Distribution On June 19, 2014, AboitizPower acquired 100% ownership interest of LiMA Utilities Corporation (LUC) from LiMA Land, Inc. (LLI), a wholly owned subsidiary of AboitizLand, Inc. LUC is the electricity distribution utility serving the LiMA Technology Center located in Batangas. The acquisition is in line with the AboitizPower s strategy of expanding its EnerZone brand. 21

22 Results of Operations Banking 3,314 UnionBank s income contribution dropped 28% YoY 2,371 28% The decline was mainly due to the drop in total other income largely in view of exceptionally higher trading gains posted during the same period last year. UnionBank UnionBank As of 47.1% As of 47.4% In P million 22

23 Results of Operations Banking In P million 6,397 25% 7,971 Total net interest income grew by 29% YoY UnionBank s increase in net interest income is attributable to the expansion in average levels of earnings assets alongside with continuous reduction in average funding costs. UnionBank 23

24 Results of Operations Banking In P million 120, ,476 2% Total loan book rose by 2% YoY The increase was principally as a result of the inclusion of CitySavings loan book to UnionBank s. UnionBank 24

25 Results of Operations Banking In P billion 16% YoY expansion in total deposit liabilities % 301 Total deposit liabilities expanded mainly due to the increase in the outstanding levels of demand and time deposit. UnionBank s focus on low cost funds maintained. UnionBank 25

26 Results of Operations Food In P million Pilmico s Income contribution has been kept in line with the same period last year The Flour segment improved income by 19% year-on-year coming from operating efficiency and increase in income contribution from its byproducts. The Farms division, on the other hand, also contributed higher earnings on account of higher volumes sales and average selling price. The Feeds segment ended the quarter with lower contribution due to higher input cost and the expiration of the ITH of the Iligan Feedmill % Flour Feeds Farms 26

27 Other Developments Food Feeds Feedmill Expansion Iligan: Sep 2014 Sep 2015 Feedmill Expansion Trlac: Nov 2014 Nov 2015 Inter-Island Pier 2: Sep 2014 July 2015 Farms Farm Expansion 3: Increase in sow level from 8,360 to 13,640 heads completed by Q Breeder Farm 2: November 2014 July 2016 Offsite Nursery Farm 2: February 2015 August 2016 Grow-fin farm 7-11: January 2016 August 2017 Farms Expansion 4: Increase sow level to 25,340 by 2020 Layer Farm: August 2014 October

28 Results of Operations Real Estate AboitizLand s Income Contribution rose 801% YoY AboitizLand posted a net income of P1.5 bn during the period in review from P163 mn of the same period last year. The growth was mainly due to the gain on sale of the LiMa Utilities Corporation to AboitizPower. 801% 251% 1, In P million Gain on LUC Sale 163 YTD 3Q13 YTD 3Q14 28

29 Other Developments Real Estate Outlook AboitizLand has budgeted P5.4 bn CAPEX to support its growth initiatives. 51% of which will be allocated for land acquisition and 40% for project construction. As of, total CAPEX spent amounted to P3.0 bn. This was used for land acquisition and development of existing projects. Moreover, AboitizLand s JVC with Ayala Land Inc, is now set to proceed with the planning of the 15-hectare mixed use development in Mandaue City, Cebu. 29

End Sept 2014 Total Liabilities 2013 End Sept 2014 Total Equity

30 Financial Condition Consolidated Figures, In P Million Total Assets Cash & Cash Equivalents 247, ,756 36,118 43, End Sept 2014 Total Liabilities 2013 End Sept 2014 Total Equity 124, , , , End Sept End Sept

31 Dividends Internal dividend policy is to payout 1/3 of previous year s net earnings On March 11, 2014, AEV declared a dividend of P1.27 per share to all stockholders of record as of March 25, 2014, payable on April 22, which translated to more than 1/3 of 2012 net earnings On the same day, a special cash dividend of P0.53 per share to all stockholders of record as of March 25, 2014, payable on April 22, Paid out over P9.9 billion in dividends on April 22, % 4.2% 3.7% 3.3% 3.4% 2.9% Note: Dividend yields are based on closing prices as of date of dividend declaration. Dividend per share Special Cash Dividend Dividend yield 31

32 Share Price Performance YTD September 2014 PSEi: +24% AEV: -1% 32

33 33 Is there a better way?

outlook Net income Shareholders Report FIRST QUARTER 2014 Core Net Income 6,849 EPS = P1.24 4,868 EPS = P0.88 5,529 EPS = P1.00 4,398 EPS = P0.

outlook Net income Shareholders Report FIRST QUARTER 2014 Core Net Income 6,849 EPS = P1.24 4,868 EPS = P0.88 5,529 EPS = P1.00 4,398 EPS = P0. Shareholders Report FIRST QUARTER 2014 outlook Net income Power Core Net Income Power 6,849 EPS = P1.24 325 1,794 3,530 Banking 5,529 EPS = P1.00 325 1,794 4% 3,483 8,364 Banking Food Food 29% 4,868 EPS