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Filinvest slates 2011 entry into power sector via coal plants

Posted on April 17, 2011 09:26:44 PM [ BusinessWorld Online ]
FILINVEST DEVELOPMENT Corp. will start building two coal-fired power plants in the next six months as part of its plans to diversify into the power industry on top of its core business in real estate, a ranking official said.
Lenders will be tapped to fund the project as the planned fund-raising via the sale of shares on the local bourse remains shelved amid “volatile” conditions, Lourdes Gotianun-Yap, president and chief executive of Filinvest Development, said.
“We are looking at within three to six months for the construction because we will have to bid out [the projects],” Ms. Gotianun-Yap told reporters in a chance interview late last week.
The company had earlier said the plants would each have a 150-megawatt capacity and would be located in Luzon and Visayas.
Filinvest Development is also interested in bagging independent power producer administration contracts, she added, referring to deals for entities to manage and trade the output of the government’s partnerships with privately run generation projects.
Earlier, the Gotianun family had failed to diversify into the power sector back in 2007 when it lost the auction for the government’s 60% stake in Philippine National Oil Co.-Energy Development Corp. The Lopez-led consortium Red Vulcan Holdings Corp. instead won the bid.
Ms. Gotianun-Yap went on to note that the planned construction of their two coal plants will push through even as the share sale remains shelved.
“On the fund-raising, we will have to wait for the market to be more stable but we will definitely look at that...[and] explore increasing the float of Filinvest Development,” she said.
Only 7.7% of Filinvest Development shares are listed on the local bourse which requires a 10% public float by November.
The company had already postponed its follow-on offering involving the sale of as much as 2.88 billion shares back in January given unfavorable offer prices and unstable market conditions.
The local stock exchange’s performance had fallen by nearly a tenth since January on inflation fears before picking up late in March amid announcements of a mega-deal between two telecommunication firms.
Since then, the Philippine Stock Exchange index has slightly risen by 0.86% to 4,251.64 on Friday from 4,215.21 at the start of the trading year on Jan. 3.
Ms. Gotianun-Yap said the company is waiting for a “more sustainable and consistent [market] level.”
The company will instead make use of project financing credit lines from the likes of the Development Bank of the Philippines and the International Finance Corp., she said.
“We have a lot of people who have expressed interest to join us,” she said, refusing to disclose potential partners.
Sought for comment, an analyst said the country’s power sector needs more private investments for rates to be more competitive.
“[The diversification] is not surprising considering cost of power continues to be expensive. It opens a window of opportunity to conglomerates,” Astro C. del Castillo, managing director of brokerage firm First Grade Holdings, Inc., said in a phone interview yesterday.
Real estate, represented by subsidiary Filinvest Land, Inc., is the largest business segment of Filinvest Development, according to its Web site.
Other businesses of the conglomerate include East West Bank, Festival Supermall, Inc., Cyberzone Properties, Inc., and Filinvest Asia Corp.
Filinvest Development is also into sugar production through Pacific Sugar Holdings Corp., Davao Sugar Central Co., Inc., Cotabato Sugar Central Co., Inc., and High Yield Sugar Farms Corp.
Shares in the company, whose consolidated net income more than doubled to P3.8 billion in the nine months that ended in September last year, were unchanged at P5 each on Friday. -- NJCM
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