Ayala Corp. to merge energy, water and infrastructure units

April 21, 2020 | 12:09 am By Adam J. Ang

https://www.bworldonline.com/ayala-corp-to-merge-energy-water-and-infrastructure-units/

AYALA Corp. is merging its energy, water, transport, and logistic entities to boost its power and infrastructure portfolios in the country.

In an announcement sent to the stock exchange on Monday, the diversified conglomerate said it was consolidating two of its listed firms, AC Energy, Inc. and Manila Water Co., Inc., as well as its unlisted unit, AC Infrastructure Holdings Corp. (AC Infra).

The consolidated firms will be placed under AC Energy, which is set to be renamed as AC Energy and Infrastructure Corp. (ACEIC).

“We believe that consolidating our various infrastructure interests creates a formidable platform with a strong balance sheet and allows Ayala to participate in the many opportunities in infrastructure development in a more significant way,” Ayala Corp. Chairman and Chief Executive Officer Jaime Augusto Zobel de Ayala said in a statement.

Ayala Corp. will sell and transfer its shares in its infrastructure arm to ACEIC, as well as its shares in MWC or its shares in Philwater Holdings Co., Inc. The new holding firm will also subscribe to primary shares in AC Infra.

Analysts saw the move to consolidate the businesses as “strategic” as it could offer more to investors and in turn, they could bet on the company for the long-term.

“The move of Ayala seems strategic to consolidates all it BUs (business units) into one platform to benefit from synergies as well as make them a more formidable player in the infrastructure space,” said Luis A. Limlingan, managing director of Regina Capital Development Corp.

Claire T. Alviar, a research associate at Philstocks Financial, Inc., said the consolidation is “more strategic for the company to integrate the said units into one company.”

“It can perform better in its industry since the company has now more capacity to offer… Lastly, opportunities will rise given that the integrated unit could offer more services, so planning and executing one project would be easier, and this is favorable for the clients,” she added.

Shares in Ayala Corp. on Monday rose by 1.51% to close at P606 apiece.

The announcement came as Ayala-led AC Energy Philippines Inc. (ACEPH) held a “virtual” annual stockholders meeting during which it was renamed AC Energy Corp. after stockholders adopted a resolution to change the company’s name.

In the meeting of ACEPH held via teleconference on Monday, a majority of the company’s stockholders approved the resolution to change the corporate name of the Ayala unit, as well as the move to raise its authorized capital stock to P48.4 billion from P24.4 billion.

The move to change the company’s name followed ACEPH’s acquisition of the international renewables business of its parent company AC Energy, Inc.

“The Board of Directors has deemed it appropriate to amend the name of the corporation and remove ‘Philippines’ from the corporate name to make it clear and to emphasize that the business and operations of the corporation are no longer limited to the Philippines, but also in other countries in the Asia-Pacific region,” ACEPH President John Eric T. Francia said in the virtual meeting.

Last month, ACEPH’s board agreed to inject primary shares to its parent in exchange for the latter’s shares in Presage Corp., which has a portfolio of renewable energy projects in Indonesia, Vietnam and other countries in the Asia-Pacific region.

Stockholders approved the proposal to increase the firm’s authorized capital stock to realize this deal, which is expected to close within the year.

“The issuance of additional shares to AC Energy will require an increase in the corporation’s authorized capital stock, thus the board has approved the creation of P24 billion shares,” Mr. Francia said.

Mr. Francia said that minority shareholders are not compelled to subscribe to additional shares of ACEPH upon the infusion of the international asset to the company, but it will put up a follow-on offering as required by the Philippine Stock Exchange.

“ACEPH will need to undertake a follow-on offering after this second asset-for-shares swap. This will be a public offering and will not be limited to existing shareholders of ACEPH,” he added.

The company has been repurchasing up to P1 billion of its shares since March 24.

It is also expecting to complete its stock rights offer of up to P2.27 billion within the second quarter of the year.

In June last year, AC Energy acquired the controlling stake of the Philippine Investment Management (Phinma) Group in Phinma Energy Corp., which was later renamed AC Energy Philippines.

Meanwhile, the listed firm said it had seen a 30%-40% drop in power demand, which brought down its uptake volumes, as businesses have temporarily shuttered following the implementation of the enhanced community quarantine (ECQ) in Luzon.

The company has since worked with both suppliers and consumers to ensure unhampered delivery of energy services.

“Most of our plants are under bilateral contracts or feed-in-tariff arrangements, so our commercial operations team is working closely with our customers and suppliers to make sure that we maintain a balanced portfolio, in terms of energy supplied and energy delivered,” Mr. Francia said.

Amid slumping oil prices, the energy firm said its peaking power plants are in a “very good position” to provide cost-efficient power supply and ancillary services to the grid during periods of high demand.

The company also saw delays in their on-going projects due to work restrictions as per quarantine protocols. “However, our development teams continue with planning, engineering and permitting work on projects to maximize timelines,” he said.

ACEPH ENDS COAL INVESTMENTS
Further, ACEPH will no longer invest in coal-fired power plants in part of its commitment to having a low-carbon portfolio by 2030.

“With its new EMS (Environmental Management System) policy, ACEPH will now focus on renewable investments and we will not be making additional investments in coal plants. The company, however, remains open to thermal technology such as gas or diesel-fired power plants that complement our renewable assets and developments, Mr. Francia said.

AC Energy targets to have an attributable capacity of about 1,500 megawatts this 2020 with 50% of this coming from renewables.

“We are making a commitment to transition into [a] low-carbon portfolio by rebalancing our generation portfolio to grow our renewable energy assets,” ACEPH Chairman Fernando Zobel de Ayala said in a taped video message.

Shares in ACEPH on Monday grew by 4.23% to close at P2.22 each.