Aboitiz Power on the prowl; raises P3 billion

 Looks like Aboitiz Power Corporation (PSE:AP) is on the prowl again for more acquisitions after its Board approved the issuance of P3 billion worth of peso-denominated bonds through a private placement. Proceeds of the fund-raising exercise will become part of its war chest for acquisitions of power assets.

 In a disclosure to the Philippine Stock exchange, it said it may increase the issue size depending on the market appetite. The offering is handled by BDO Capital & Investment Corp., BPI Capital Corp., First Metro Investment Corp. and ING Bank N.V. and will run up to the end of the year.

 That such a fund-raising campaign is conducted in the middle of a raging financial crisis speaks well of the company. Lesser companies in times like this would rather seal the hatches and ride the storm rather than venture out into the open capital markets.

 But it is precisely these times when energy demand is expected to slow down that one should start top build up the necessary infrastructure. The best time to invest is when there is so much blood in the streets; just ask Warren Buffett, the legendary investor.

 In the past few years, the Aboitiz group has been actively adding power assets to its portfolio by buying assets from the government or other investors. In July, it bested Energy Development Corporation (PSE:EDC) in acquiring the Tiwi-Makban complex, the first geothermal asset sold by PSALM, the government arm tasked to privatize power assets. It is also the first geothermal asset held by the Aboitiz group.

 In a joint venture with SN Power of Norway, Aboitiz Power has taken over the operations of the Ambuklao and Binga hydro plants in Benguet in the middle of the year. Earlier in 2006, it has acquired a significant chunk of ownership in the 232-MW STEAG coal plant in Mindanao.

 Aboitiz Power has a large pool of government assets it can cast its net into. Among the assets scheduled for disposal by the government in 2009 include: 

• the 116-MW Subic and 620-MW Limay diesel plants, both to be sold in January;
• the 246-MW Angat hydroelectric plant, in February;
• the 310-MW Navotas I and II diesel plants, and the 197.8-MW Naga gas and diesel plants, in April
• the 192.5-MW Palinpinon geothermal plant, in July
• the 850-MW decommissioned Sucat and the 112.5-MW Tongonan geothermal plant, in August
• the 150-MW Bacon-Manito geothermal complex, in September and
• the 54-MW decommissioned Cebu diesel plant, in October

  In the first nine months of the year, the company reported a P3.17 billion net income, a 35% net income growth year-on-year on the back of the continued expansion of its power generation business. However, it is likely that the overall income for the whole year will be tempered owing to the costs in acquiring the new assets Tiwi-Makban and Ambuklao-Binga.

 While the Aboitiz group belongs to an old, well established business clan, its power business is run by a new generation descendant in Luis Miguel Aboitiz, who is young, dynamic and has the required academic and business credentials to run a difficult business in trying times.

 Aboitiz Power is one energy company worth watching by investors, consumers and by the energy community at large.

(Disclaimer: The author does not hold any shares in any of the Aboitiz companies and does not intend to invest in them in the near future. He is not connected with the Aboitiz group, and is not tasked to write about them)