BIZ BUZZ: Aboitiz: ‘Saan ka pa?’

We mentioned in a previous edition of Biz Buzz about how power prices of AboitizPower subsidiary Davao Light and Power Co. (DLPC) are significantly lower than those of other electric cooperatives in the region, including Nordeco, whose franchise area is adjacent to DLPC, due to alleged malicious intentions. After conferring with folks at Aboitiz, they graciously offered a simple explanation.

Many electric cooperatives in Mindanao are over-contracted, meaning, they committed to buy more power than they can sell. Hence, their prices per kilowatt-hour (kWh) is higher. Even if they want to buy cheaper power from lower priced sources like PSALM, they cannot since it will just add on to their power bills and jack up the already high prices they charge to their consumers.

The position paper of Nordeco in the Congressional Legislative Franchise Hearing indicated that they have a 135 megawatt (MW) contract against a 104 MW demand. Who pays for the unused 31 MW of excess electricity? Customers.

As for Davao Light, they are under-contracted, meaning they have the option to buy more lower cost electricity from generators in Mindanao. And since there is an oversupply of power in this region, prices are lower than in most parts of the country. Regardless of who’s the CEO of PSALM or any other power generator in the market, sheer market forces will drive all power buyers to purchase from power providers that have the supply and the lowest cost.

Power generation is a pass through cost to consumers. Davao Light does not gain more margins from this cost element in the electricity bill. The ultimate beneficiary of finding and contracting lower cost power are simply the customers of Davao Light. Plain and simple.

Glad to hear that there are well governed and professionally managed power distribution utilities out there that are really doing their jobs, not just in making electricity available to its customers, but also in truly managing the cost of power that consumers have to pay at the end of the day.

As of Wednesday Sept 6, 2023 the residential cost of electricity in Davao Light was at P5.68 per KWH. At Nordeco, it’s 74 percent more.

Saan ka pa? Response, Amen.

– Tina Arceo-Dumlao

RFM, ABA buy back shares

Philippine stocks are not getting a lot of love these days with escalating inflation and the specter of a slowing domestic economy putting a damper on investor appetite.

But even against a backdrop of negative sentiment, food and beverage firm RFM Corp. and holding firm AbaCore Capital Holdings Inc. believe that their stocks are being undervalued a bit too much, thus their decision to buy back their battered stocks.

RFM CEO Jose Ma. Concepcion III announced over the weekend that through a personal holding company, he bought 15 million RFM shares at P3 each.

“At P3 a share, the market is valuing RFM at only 10 times price/earnings ratio. RFM has good sales and income growth track record over the years and our portfolio of brands like Selecta Ice Cream, Selecta Milk, Royal Pasta and Fiesta Pasta are significant market leaders in their own categories,” Concepcion explained.

He added that RFM has so far bought back 132 million shares.

ABA, meanwhile, said it believes that there has been an “unwarranted drop” in its share price in terms of the price-to-book value ratio and the income potential of its projects and investments, thus the approval last week of its buyback program.

“We are pursuing this buyback program policy because we believe our stock has strong long-term fundamentals. As such, buying back our stock institutes our confidence in the company’s future, ABA vice-chair Antonio Victoriano Gregorio III said.

ABA has interests in tourism, real estate, financial services and energy.

Gregorio added: “This 2023, we are pleased to announce more business ventures across the markets we operate in. We believe these initiatives will solidify our long-term fundamentals and allow us to fulfill our growth prospects.

– Tina Arceo-Dumlao