VECO sees flat contribution to AboitizPower this year

September 13, 2017 By Victor V. Saulon, Sub-Editor

http://bworldonline.com/veco-sees-flat-contribution-aboitizpower-year/

TOP OFFICIALS of Visayan Electric Co., Inc. (VECO) expect the company’s contribution to parent firm Aboitiz Power Corp. this year to be around the same as in 2016, although revenues are projected to be slightly higher in 2017.

“It’s flat. The contribution to AboitizPower will probably be about P800 million, P850 million, somewhere there,” Anton Mari G. Perdices, VECO chief operating officer, told reporters last week.

This will come from income and revenues that company officials expect to be slightly higher than in 2016, an election year that provided a boost to consumption, including power usage.

“We’re going to be almost slightly better than last year,” said Jaime Jose Y. Aboitiz, VECO president and vice-chairman, when asked about expectations for the company’s revenues and profit this year.

Without giving figures, Mr. Aboitiz placed the growth at between 3% and 5%.

“But the kilowatt-hour growth is less than last year. You have to remember also last year, almost all utilities did well because it was an election year,” he said.

“The rate is the same as last year,” he said, referring to the distribution charge allowed by the regulator for the company’s franchise area. 

VECO, the country’s second largest electric utility in terms of customer base, serves the cities of Cebu, Mandaue, Talisay and Naga. Its coverage also includes four municipalities of the greater part of metropolitan Cebu, namely: Liloan, Consolacion, Minglanilla and San Fernando. 

The utility, a partnership between listed firms AboitizPower and Vivant Corp., has a franchise service area spanning about 674 square kilometers with an estimated population of 1.73 million.

In 2016, AboitizPower and subsidiaries reported a 13.5% increase in net income to P21.5 billion on revenues that grew by 5% to P89.16 billion.

“Utilities typically grow organically… Our compounded annual growth rate has been between 4% and 5% over the past couple of years,” Mr. Aboitiz said, adding the same is also true for Davao Light & Power Company, Inc., a company where he is also president. “It almost tracks GDP (gross domestic product).”

Mr. Perdices said VECO’s customer base grows between 3% and 4% annually. For the AboitzPower group, there are about 100,000-plus customers, while VECO’s customer count is around 411,000.

AboitizPower has ownership interests in eight distribution utilities, making it one of the largest electricity distributors in the Philippines. Based on its annual report, the company supplies power to franchise areas covering a total of 18 cities and municipalities in Luzon, Visayas and Mindanao. 

Mr. Perdices said the company was still reviewing its capital expenditure for next year, although he said VECO’s budget averages between P700 million and P1 billion yearly.

“The big chunk there really is substations and power transformers. [They’re] really expensive,” he said, adding that the Energy Regulatory Commission requires the company to submit a five-year plan to cover the properties it plans to buy and substations it intends to build.

“We can’t just throw money away. That’s why they’re there to check and balance,” the VECO official added.

One of the company’s future high-budget projects is a system that allows prepaid electricity, for which it has a pilot project with about 200 customers.

“We’re finalizing the capex plan for this. It’s not cheap,” Mr. Perdices said. “The meter alone for the prepaid [electricity] is about 2 to 2.5 times the cost of the regular meter.”

Mr. Aboitiz said prepaid electricity also requires an expensive communication backbone, which the company is also completing. 

“Until we finalize that, we won’t be able to roll it out on a bigger scale. When we do roll it out on a bigger scale though, it’s going to be offered in a geographic area,” he said, adding that a partial application of the project would not be “cost effective.”