Posted on September 26, 2016
A SUBSIDIARY of Aboitiz Power Corp. is raising P4.1
billion by issuing debt notes found by the Philippine Rating Services Corp.
(PhilRatings) to have minimal credit risk.
In a statement issued over the
weekend, the local debt watcher said it assigned a “PRS Aa plus” rating on a
proposed debt issuance by Hedcor Sibulan, Inc., a special purpose company owned
by AboitizPower.
The rating reflects the “high quality” and “very low credit risk” of the proposed debt as well as the “very strong” capacity of the issuer to meet its financial commitment on the obligation.
PhilRatings assigned a “stable” outlook to the credit rating on the proposed debt issue of Hedcor Sibulan. The outlook indicates the score will likely remain unchanged within the next 12 months.
The assigned rating and outlook took into account Hedcor Sibulan’s track record and “substantial experience” of shareholders, management and technical personnel; “relatively stable” profitability profile; and “healthy” liquidity and capital position, among others.
PhilRatings further noted the run-of-the river hydropower producer’s profitability “remained adequate to service its contract with its sole customer, Davao Light and Power Corp. (DLPC), despite having significantly lower rainfall in 2015.”
“[The company’s] healthy margins provide for a more than adequate buffer in relation to unexpected shocks to service the proposed debt issuance,” PhilRatings added.
BusinessWorld contacted AboitizPower for more details about the proposed debt issue, but such information were not immediately available.
Hedcor Sibulan is a wholly owned subsidiary of the power business of the Aboitiz Group that has engaged in the industry for almost 98 years and maintained interests in the country’s largest privately owned distribution utilities.
AboitizPower, which has outstanding PRS Aaa-rated bonds worth P10 billion, either directly or indirectly, owns the outstanding preferred shares in Hedcor Sibulan.
Hedcor, Inc. -- the main subsidiary of the Aboitiz Group for hydro power projects -- directly assists in the operations of Hedcor Sibulan. It operates 22 facilities with a total capacity of 185 megawatts (MW) across the country.
Hedcor Sibulan improved its sales at a compounded annual growth rate (CAGR) of 8.60% from 2011 to 2014. This outpaced the rising cost of plant operations plus general and administrative expenses during the period.
“The company was able to record a CAGR of 34% for its net income and an average net profit margin of 48.30% for the period 2011 to 2014. This was due in part to the income tax holiday that its operating assets were eligible for,” PhilRatings said.
From 2010 to 2012, meanwhile, Hedcor Sibulan managed to maintain its debt holdings to around P3.2 billion. Its debt-to-equity, liabilities-to-capitalization and solvency ratios averaged 1.6 times, 61.10% and 1.7 times, respectively.
“The company extinguished all of its debt by issuing preferred shares beginning 2013. As such, the company maintained a balance sheet supported mostly by equity,” PhilRatings said.
“From the issuance of the proposed debt until its maturity, the company’s capitalization is seen to remain manageable and will continue to improve as debt is repaid and retained earnings are beefed up,” it added.
In assessing the creditworthiness of Hedcor Sibulan, the debt watcher also considered its operational history; concentration risk from having only one customer and all assets located within the Davao region; and limited growth prospects.
Hedcor Sibulan was formed to develop, construct and operate run-of-the-river hydroelectric power plants in Barangay Sibulan in Sta. Cruz, Davao del Sur. It harnesses water from the Sibulan River and Baroring Creek running through Mt. Apo and other adjacent mountains.
The company currently has three power plants with an aggregate capacity of 49.1 megawatts (MW). These are Sibulan Hydro A (16.5 MW), Sibulan Hydro B (26 MW) and Tudaya Hydro 1 (6.6 MW).
Hedcor Sibulan supplies power generated from the plants to DLPC alone, through a twelve-year contract that became effective in 2010. The customer is wholly owned by AboitizPower and stands as the third-largest privately owned electric distribution utility in the Philippines. -- Keith Richard D. Mariano
The rating reflects the “high quality” and “very low credit risk” of the proposed debt as well as the “very strong” capacity of the issuer to meet its financial commitment on the obligation.
PhilRatings assigned a “stable” outlook to the credit rating on the proposed debt issue of Hedcor Sibulan. The outlook indicates the score will likely remain unchanged within the next 12 months.
The assigned rating and outlook took into account Hedcor Sibulan’s track record and “substantial experience” of shareholders, management and technical personnel; “relatively stable” profitability profile; and “healthy” liquidity and capital position, among others.
PhilRatings further noted the run-of-the river hydropower producer’s profitability “remained adequate to service its contract with its sole customer, Davao Light and Power Corp. (DLPC), despite having significantly lower rainfall in 2015.”
“[The company’s] healthy margins provide for a more than adequate buffer in relation to unexpected shocks to service the proposed debt issuance,” PhilRatings added.
BusinessWorld contacted AboitizPower for more details about the proposed debt issue, but such information were not immediately available.
Hedcor Sibulan is a wholly owned subsidiary of the power business of the Aboitiz Group that has engaged in the industry for almost 98 years and maintained interests in the country’s largest privately owned distribution utilities.
AboitizPower, which has outstanding PRS Aaa-rated bonds worth P10 billion, either directly or indirectly, owns the outstanding preferred shares in Hedcor Sibulan.
Hedcor, Inc. -- the main subsidiary of the Aboitiz Group for hydro power projects -- directly assists in the operations of Hedcor Sibulan. It operates 22 facilities with a total capacity of 185 megawatts (MW) across the country.
Hedcor Sibulan improved its sales at a compounded annual growth rate (CAGR) of 8.60% from 2011 to 2014. This outpaced the rising cost of plant operations plus general and administrative expenses during the period.
“The company was able to record a CAGR of 34% for its net income and an average net profit margin of 48.30% for the period 2011 to 2014. This was due in part to the income tax holiday that its operating assets were eligible for,” PhilRatings said.
From 2010 to 2012, meanwhile, Hedcor Sibulan managed to maintain its debt holdings to around P3.2 billion. Its debt-to-equity, liabilities-to-capitalization and solvency ratios averaged 1.6 times, 61.10% and 1.7 times, respectively.
“The company extinguished all of its debt by issuing preferred shares beginning 2013. As such, the company maintained a balance sheet supported mostly by equity,” PhilRatings said.
“From the issuance of the proposed debt until its maturity, the company’s capitalization is seen to remain manageable and will continue to improve as debt is repaid and retained earnings are beefed up,” it added.
In assessing the creditworthiness of Hedcor Sibulan, the debt watcher also considered its operational history; concentration risk from having only one customer and all assets located within the Davao region; and limited growth prospects.
Hedcor Sibulan was formed to develop, construct and operate run-of-the-river hydroelectric power plants in Barangay Sibulan in Sta. Cruz, Davao del Sur. It harnesses water from the Sibulan River and Baroring Creek running through Mt. Apo and other adjacent mountains.
The company currently has three power plants with an aggregate capacity of 49.1 megawatts (MW). These are Sibulan Hydro A (16.5 MW), Sibulan Hydro B (26 MW) and Tudaya Hydro 1 (6.6 MW).
Hedcor Sibulan supplies power generated from the plants to DLPC alone, through a twelve-year contract that became effective in 2010. The customer is wholly owned by AboitizPower and stands as the third-largest privately owned electric distribution utility in the Philippines. -- Keith Richard D. Mariano
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