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Biz Buzz: Energy sector turf war

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Biz Buzz: Energy sector turf war

/ 05:07 AM May 01, 2017

There is a brewing dispute in the energy sector between a private behemoth and its government counterpart that could shake things up in this otherwise sleepy industry.

We’re talking about the growing tension between the state-owned National Transmission Corp. (Transco) and the privately run National Grid Corporation of the Philippines (NGCP) as evidenced by an exchange of stern letters in recent weeks about the use of the country’s power grid.

The first salvo was fired by Transco and its newly appointed president and CEO Melvin Matibag when he wrote NGCP president and CEO Henry Sy Jr. asking the latter to explain why telecommunications firms Globe Telecom and Smart Communications were allowed to set up facilities inside NGCP’s substations.

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According to the pro-Transco camp, Globe and Smart were using NGCP facilities for their internet broadband services (the so-called “broadband over power” scheme where fiberoptic cables are laid down alongside power cables).

Transco’s point is that it technically still owns the facilities that NGCP is now operating courtesy of the contract it entered into with the government in 2008. As such, Transco’s permission should first be sought before anyone else uses the facilities.

A letter sent by Matibag—a longtime associate of Energy Secretary Alfonso Cusi from their President Arroyo-era days running the Manila International Airport Authority—to NGCP included a collection of photographs of air-conditioned shipping container that allegedly housed telco facilities within NGCP’s premises.

A terse reply from NGCP a few days later, meanwhile, denied the allegations, saying these were “untrue and unfounded.”

Nonetheless, an NGCP insider offered this analogy: “When you rent a house, you are free to make improvements like installing air-conditioning or cable TV. And you’re free to invite guests over for dinner, as long as they don’t destroy anything, right?”

Who’s right? Who’s wrong? Watch this space, folks because friction between the two parties is just starting to build up. —DAXIM L. LUCAS

Eastwest COO ‘on leave’

Gotianun-family owned Eastwest Banking Corp. announced a major shakeup of its top brass last month, including the appointment of a new president and CEO—a move widely believed to be related to the ongoing suspense thriller gripping the business community about whom President Duterte will appoint as the country’s next central bank governor.

But it seems the shakeup was not limited to the promotion to vice chair of Eastwest head honcho (and rumored candidate for the Bangko Sentral ng Pilipinas governorship) Antonio Moncupa or the appointment of veteran banker Jesus Roberto Reyes as the new president.

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Biz Buzz learned that Eastwest’s chief operating officer Jose “Toto” Hilado has gone “on leave” last Thursday for reasons that are yet unclear. It could very well be just a well deserved two-week vacation, after all, he does work hard. But what caused the eye of many of his peers is that his leave coincides with the entry of the bank’s new president. Normally, one would like to be at the office when the new boss arrives, but clearly not in this case.

To recall, Hilado was poached from the Rizal Commercial Banking Corp. in 2014 into Eastwest with the promise that he would be the bank’s next CEO when Moncupa retired. But things didn’t happen that way and subsequent deviations to the plan left many bankers, especially those within the tightly knit community of bank treasurers, surprised with the mid-course changes made to the plans for him.

And so when Eastwest announced last month that Moncupa would be promoted and that a new CEO would be hired (starting today, May 1), the industry already began to wonder what Hilado would do next.

Well, the answer came last week. No, he has not resigned. He’s just on leave. But whether that’s the final state of things—especially with the governorship of the central bank, where Moncupa is a candidate, still undecided—the situation remains, shall we say, “dynamic.” —DAXIM L. LUCAS

No IPO, no problem

It may have had experienced a hiccup in its bid to go public, but everything else seems to be looking up for logistics firm LBC Express Inc.

That’s because the oldest cargo and freight forwarder in the country—originally known as “Luzon Brokerage Co.” when it was founded in 1945 by Carlos Araneta—reported a sharp increase in its earnings for the previous fiscal year.

How sharp? According to LBC, the operating company reported a net income of P920.2 million for 2016, representing a 117-percent increase over the P424.7 million it reported the previous year. The company attributed this jump to the rising demand for air and courier services, alongside “improved cost” (meaning cheaper) air and sea freight.

It was also a good year for the firm’s shareholders as its parent firm, LBC Holdings, declared a P313.7-million cash dividend in the fourth quarter of 2016. At 22 centavos per share, this represents a whopping 36-percent payout ratio.

According to the company, it serves Filipinos in more than 20 countries with a network of over 1,200 in addition to 5,300 partner agents. All told, this network of 6,500 outlets offers convenient and reliable options for express delivery.

The firm also has three key cargo hubs, specifically in Manila, Clark and Cagayan de Oro, and 78 delivery hubs, with a team of 1,410 delivery associates and more than 6,000 employees nationwide.

Now all this would have been a compelling investment story for an initial public offering, had the Securities and Exchange Commission been less skeptical of the company (due to LBC’s failure to declare certain material information in its proposed initial public offering prospectus about its past legal issues).

These legal issues included one raised by the central bank against a shuttered sister firm (LBC Bank), which supposedly extended advances to the logistics business. That was raised in 2011, and today—six years later —the logistics arm is showing that it’s doing very well, thank you very much, without any financial assistance.

There are those who believe that LBC’s chances with the corporate regulator may have been hurt by the mere family name of the company’s owners, making them distant cousins of former First Gentleman Jose Miguel Arroyo. And the bulk of SEC’s officials are appointees of the previous administration, of course. But whether the speculation is true or not is anyone’s guess.

In any case, at the rate LBC is going—especially with the logistics industry booming as the Philippine economy grows—it may not even need a P1.2-billion IPO anymore. That, or it may come to an understanding with the SEC going forward. Abangan. —DAXIM L. LUCAS

SMC’s RE play

Conglomerate San Miguel Corp., in a major foray into the renewable energy space, said it would push forward with a tidal power project, the first in the Philippines when completed.

SMC president Ramon Ang said the company envisioned a 20,000-megawatt project over a decade, which would help bring down the cost of electricity while cutting reliance on less environment-friendly power options.

Details remained scant at this stage. But based on the timing, SMC wanted to move fast on the project. Ang said they would submit a proposal to the Department of Energy “in the next few weeks.” By year-five, SMC should be producing 4,000-MW from its tidal power project.

Tidal energy is a form of hydropower where electricity is produced from the change in water levels from high tide and low tide. Since there are limited sites around the world where a big enough water surge occurs (the US Department of Energy said it should be more than 16 feet), tidal energy projects are less common. France, South Korea, China and Russia are among those with tidal power plants.

Ang said he was unable to name their technology partner at this stage. But he noted the conglomerate’s plan has even attracted the interest of Vietnam’s trade minister.

He noted the Philippines would come first. “This project is not a maybe-we will do this in the Philippines,” Ang said. —MIGUEL R. CAMUS

Hotel for millennials

Recognizing the increasing purchasing power of young people, Gotianun-led Filinvest Development Corp. (FDC) plans to create a new “hip and cool” hotel brand specifically targeting the millennials.

The first of such hotel for millennials will be put up in Cebu and later in other areas as part of FDC’s plan to build a 5,000-key hotel portfolio by 2020. The upcoming brand will offer accommodations priced at around P3,000 to P4,000 a night, FDC president Josephine Gotianun-Yap said in a press chat.

Having said that, FDC expects that the biggest bulk of its hotel business will still come from the traditional market, that which caters to “MICE” (meetings, incentives, conferences and events), local businessmen, domestic tourists and families.

This year, FDC is set to open in Boracay its third hotel under the deluxe Crimson brand. Crimson Boracay will be offering close to 200 rooms, adding to existing accommodations offered in Mactan, Cebu and Alabang.

FDC also has other projects in the pipeline, including another in Mactan, Cebu, alongside new hotels in Puerto Princesa, Tagaytay, Clark and Cubao. Tourism, after all, is widely seen to be the next big thing in this country. —DORIS DUMLAO-ABADILLA

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