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Stock Commentary

Aboitiz Power commits to spending P190-B on renewables

Merkado Barkada
Aboitiz Power commits to spending P190-B on renewables

Aboitiz Power [AP 23.00 unch], the energy arm of the Aboitiz Family, plans to spend an average of P19 billion per year on “greenfield” renewable energy projects over the next decade. (NOTE: “Greenfield” is an industry term that means “new”, as opposed to the gross-sounding “brownfield” that refers to projects that are either acquired or upgraded.)

Once constructed, the planned renewable energy projects will have an aggregate capacity of 3,700 megawatts (MW), which, when added to AP’s existing 900 MW of renewable energy capacity, will give AP a total of 9,200 MW in 2031.

The majority of the plan’s projects will benefit Luzon.

MB BOTTOM-LINE

While margins are compressing slightly due to an increase in supply, it’s safe to say that the Philippines (and Luzon in particular) can use as much power as it can get... for now, and for the foreseeable future. That makes AP’s capex investments a pretty safe bet.

Whether or not AP will execute a 10-year plan like this to the letter is a lot less certain. Pronouncements like this are great for headlines, but there is nothing that ties AP to any of these projections. They’re just internal goals, and internal goals are very easy to shift. Imagine if we were reading this press release for the first time in August of 2019. We’d think: “Of course! Energy is critical, and we can always use more of it. Plus, with all this infrastructure building and the growth of the middle class...” Then COVID would have hit, and that glorious 10-year plan would have gone through a few major revisions.

I’m happy when companies make these kinds of statements, however, as it gives investors and shareholders a look into the minds of the board and the company’s owners, to see their intentions. I just want readers to be critical when reading statements like these, and to evaluate them against past performance and the company’s current actions. I’d rather a company make grand announcements that are transparently executed with reasonable success, than the same (or even better) performance with no guidance. A long-term investor needs these signals to help evaluate a company’s relevance to the investor’s thesis.

 

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