Aboitiz unit gets 12-year power supply deal

Hedcor Inc., the power generating unit of listed investment holding firm Aboitiz Equity Ventures Inc. (AEV), won the bidding for a 12-year contract to supply electricity to Davao Light & Power Co. Inc.

In a disclosure to the Philippine Stock Exchange, AEV said subsidiary Hedcor was selected as the preferred bidder with its winning offer price of P4.0856 per kilowatthour (kwh).

Under the contract, Hedcor will supply 400 million kwh of electricity to Davao Light & Power beginning 2009.

The notice of award is expected to be issued to the Hedcor consortium within 15 days from yesterday’s conclusion of bid evaluation, AEV said.

Hedcor is the pioneer in the development and operation of environment-friendly mini-hydropower plants (below 50 megawatts of electricity) in the Philippines, operating 19 generating facilities in Benguet and Davao with a combined installed capacity of 113 megawatts.

The Aboitiz group is consolidating all its power generation/distribution assets into one company, Aboitiz Power Corp. The move is seen to enhance shareholder value and is in preparation for an initial public offering of shares sometime in March or April this year.

Among the group’s power companies that would be folded into Aboitiz Power include Hedcor, Luzon Hydro Corp., Western Mindanao Power, Southern Philippines Power, Davao Light & Power, Cotabato Light & Power, Visayan Electric, San Fernando Electric, Subic Enerzone, and Aboitiz Energy Solutions.

These corporations had a combined net profit of P1.98 billion in the first nine months of 2006. Of the total, P634 million was contributed by Davao Light, the third largest power distribution utility in the country.

AEV recently raised about P6.1 billion (approximately $124 million) from the sale of 742.51 million of its treasury shares. About 92 percent of the offering was taken up by foreign investors while the balance of eight percent was subscribed by domestic investors.

Proceeds from the sale will be used to fund various greenfield power projects, as well as support its participation in the privatization of the National Power Corp. power plants as they become available.

The Aboitiz group needs $270 million to finance the purchase of the 360-megawatt Magat hydroelectric power plant in Ramona, Isabela. AEV, together with partner SN Power, the second largest hydropower producer in Europe, won the bidding for Magat in December last year with a bid of $530 million.

It has also joined the auction to supply power in Sibulan and Tamugan, both in Davao, which would require the construction of a combined 72 megawatt hydroplant ‑ Sibulan (42 megawatts) and Tamugan (30 megawatts). About P8 billion to P9 billion will be needed for these two projects.