MPIC eyes Mindanao market for expanding power business

Metro Pacific Investments Corp. (MPIC) is looking at expanding the business of Global Business Power Corp. (GBPC), a major power generation player in the Visayas and some parts of Luzon that MPIC unit Beacon Electric Asset Holdings recently took control of.

Asked about his vision for GBPC, MPIC chair Manuel V. Pangilinan said there would be sustained focus on Visayas. He said the company also hoped to enter the Mindanao market.

MPIC president and CEO Jose Ma. K. Lim said the conglomerate might consider GBPC’s expansion into Mindanao if there were opportunities spotted.  For now, he said, the new projects of GBPC were in Visayas and in Luzon.

GBPC has about 852 megawatts (MW) of capacity in coal-fired and diesel-fired power plants, including Panay Energy Development Corp.’s (a unit of GBPC) 150-MW coal-fired power plant in La Paz, Iloilo, which is set to start operations this year.

Also, a major expansion is underway in the 670-MW coal-fired power plant of Global Luzon Energy Development Corp. (another unit of GBPC) in La Union, which is scheduled to become operational by 2022.

Officials of MPIC said the conglomerate was switching gears, seeing the booming power sector as a major new growth driver, which the conglomerate is tapping through unit Beacon’s controlling stake in GBPC.

“If we take a snapshot of 2016, which is a year of transition, 54 to 55 percent (of profit) came from power. That’s distribution and power generation,” MPIC CFO David J. Nicol told reporters. “About 35 percent is a split between the toll roads and water business. The balance (or about 10 percent) is contributions from other businesses.”

Lim said Beacon had become a bigger company with the recent acquisition of the controlling 56-percent interest in GT Capital Holdings Inc.’s unit GBPC for P22.06 billion. Beacon also has a 35-percent share in Manila Electric Co. (Meralco).

The water business used to be a major contributor to the conglomerate’s bottomline, Lim said, but recent tariff issues had slowed its growth. MPIC’s water business is anchored on Maynilad Water Services, Inc. which is awaiting an international arbitration panel to resolve its case with Metropolitan Waterworks and Sewerage System (MWSS) over a deferred tariff hike implementation and the regulator’s refusal to pay the company for losses incurred from the issue.

“Since we took over Maynilad, and that was 2007, MPIC has been profitable,” Lim said.

However, in 2013, Maynilad faced a major challenge to its business.

The MWSS rejected the company’s petition for an P8.58 per cubic meter (cu.m.) hike in its basic water charge and instead ordered Maynilad to reduce its rate by P1.46/cu.m. The appeals panel’s decision resulted in a hike of P3.06/cu.m. in Maynilad’s tariff but the approved rate includes the corporate income tax (CIT) component—a factor that was excluded from the lower rate approved for another water provider, Manila Water Co. Inc. MWSS said it wanted to exclude the tax component for Maynilad as well. The case is now in an international arbitration panel with Maynilad filing claims for billions of revenue losses from Jan. 1, 2013 due to the non-implementation of approved rate hike.

In 2015, MPIC’s consolidated net income attributable to owners of the parent company jumped 20 percent to P9.6 billion. Consolidated core net income grew 22 percent to P10.3 billion.

For the first quarter of 2016, the conglomerate posted an 8-percent growth in net income attributable to owners of the parent company (up to P2.6 billion from P2.4 billion). Core net income increased 7 percent to P2.7 billion from P2.6 billion.