Aboitiz Equity Ventures, Inc.digitalfcb.com/aboitizdev/wp-content/uploads/2014/...J.V. Angeles Construction Corp. (JVACC) to jointly construct both a raw water treatment facility with

Aboitiz Equity Ventures, Inc.

Shareholders’ ReportFirst Half 2014

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7,309 6,789

2,774

1,504

631

648

111

181

1H2013 1H2014

20%9,485

EPS = P1.72

11,915EPS = P2.16

• AEV’s consolidated net income for the first half of 2014 declined by 20% to P9.5 bn. This was largely attributable to the weaker performance of UBP and the one-time gain registered in the same period last year by AEV due to the sale of CSB to UBP.

• The Power unit accounted for the bulk of earnings at 74% of total contributions from AEV’s business segments, followed by the Banking, Food and Property units with contributions of 16%, 7% and 2% of total, respectively

In P million

1H2014 net income

Power Banking

Food

Parent & Others

Real Estate

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1H2014 core net income

• Non-recurring items are as follows:

• 1H2014 one-offs include one-time gain recognized due to the sale of a couple of AEV’s subsidiaries and net FX gains due to revaluation of consolidated dollar liabilities and placements.

• 1H2013 one-offs include the proceeds gained from the sale of CitySavings Bank, net FX loss due to the revaluation of consolidated dollar loans and placements, and debt prepayment cost at the Power SBU Parent level.

In P million

Non-Recurring Items1H2013 1H2014

Parent 1,272 626 Power (1,055) 159 Total Gains/(Losses) 217 785

8,364 6,630

2,774

1,504

631

648

111

181

1H2013 1H2014

26%8,700

EPS = P1.58

11,698EPS = P2.12

Power Banking

Food

Parent & Others

Real Estate

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1H2014 beneficial EBITDA

• EBITDA down due to the weaker performance by the Banking unit and Power unit.

• Beneficial EBITDA is the summation of the proportionate share of AEV in the EBITDA of its subsidiaries and associate companies

13,485 12,952

3,031 1,821

1,044

1,130

1H2013 1H2014

9%

17,66116,159

Power Banking

Food

Parent & Others

Real Estate

In P million

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Project Updates

Davao Bulk Water Project

- AEV entered into a joint venture with J.V. Angeles Construction Corp. (JVACC) to jointly construct both a raw water treatment facility with RE component and conveyance system which will deliver 300 MLD of treated bulk water to Davao City.

- In early 2013, JVACC submitted an unsolicited proposal to the local water agency.

- On June 20, 2014, the Notice of Award (NoA) from the Davao City Water District (DCWD) was received.

- Currently working on Joint Venture and Water Purchase Agreements.

CALAX Bid

- AboitizLand and Ayala Infrastrucuture bidded for the CALAX project. A public-private partnership deal that involves developing a four-lane, 47-km closed-system toll expressway connecting the Cavite Express way and the Southern Luzon Express way.

- The consortium submitted the highest compliant bid offering P11.55 billion premium.

AseaGas

- In June 2012, AEV partnered with GazAsia LTd., a British company, to build a plant that produces liquid bio-methane fuel from organic waste.

- Aseagas is already a registered with the Department of Energy as a Renewable Energy (RE) developer.

- Commencement of construction work is within the next few months and es expected to be completed in two years.

- Should the pilot project be successful, the operations could be easily scaled up.

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Results of Operations Power Group

1,251 1,112

6,201 5,836

1H2013 1H2014

Distribution Generation Parent & Others

7,309

7%

In P million

6,789 AboitizPower’s consolidated net income recorded a 7% decrease for the first half of 2014. The Generation segment’s net income contribution dropped by 6% due to the weaker performance of SNAP Magat (low water level), APRI (GRSC) and STEAG (Outage).

Meanwhile, the Distribution segment registered an 11% YoY earnings decline as a result of higher direct cost incurred by the distribution group.

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Results of Operations Generation

Average Selling Price for Spot Market TransactionP/kWh

1H2013 1H2014

5.15 5.12

Average Selling Price for Contracted CapacityP/kWh

1H2013 1H2014

4.75 5.17

Average selling price was up 7% YoY, from P4.83/kWh to P5.16/kWh. The increase was due to the increase in the average selling price of bilateral contracts brought about by the Company’s dollar-linked contracts and the implementation of Therma Mobile’s contract.

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Source: WESM, SNAP

WESM Prices (P/MWh) – Luzon Grid

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4,366 4,692

996 863

1H2013 1H2014Contracted Capacity Spot Market

5,361 5,5564%

Energy Sales

• Energy sales increased mostly brought about by higher bilateral sales.

Capacity Sales

1,172 1,452

229

199 64

116

1H2013 1H2014

Contracted capacity Spot market Ancillary services

1,465

1,766

21% +81%

+24%

• Capacity sales stood 21% higher YoYmainly as a result of higher contracted levels and increased ancillary volumes.

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Ancillary RevenuesAt 100%

In P million

Accepted/Billed Capacity(in GW/h)

1H2013 1H2014

557 688

1H2013 1H2014

2,609 1,769

32%24%

Ancillary sales declined due to lower water levels

Despite the positive first quarter performance, the YTD ancillary revenues declined as lower water levels constrained us from offering ancillary services during the second quarter.

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Other Developments Generation

• 300 MW Coal-fired Power Plant in Davao– A project of wholly owned subsidiary,

Therma South, Inc. (TSI), which involves the construction and operation of 2x150MW coal-fired power plant in Davao, the biggest load center in the island of Mindanao.

– The project broke ground in May 2012. Commissioning and testing of the first unit is expected to begin during the fourth quarter of 2014. The Facility is expected to become fully operational within the first half 2015.

Greenfield and Brownfield Developments

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• 300 MW(net) Coal-fired Project in Toledo City, Cebu

– Therma Visayas, Inc. (“TSI”), a wholly owned subsidiary of AboitizPower, is developing a 2x150 MW (net) coal-fired power project in Toledo City.

– The project site was acquired in December 2011.

– The Environmental clearance was issued in May 2013.

– Turnover of the first unit is targeted for year-end 2017, with the second following three months thereafter.

400 MW Coal-fired Power Plant in Pagbilao, Quezon

In September 2011, AP signed a Memorandum of Understanding with Marubeni Corporation to formalize their intention to jointly develop, construct and operate a coal-fired power plant with a capacity of 400 MW (net).

The unit will be located within the premises of the existing 735 MW (net) Pagbilao coal-fired plant.

Commercial operations of the generating unit is targeted within the year 2017.


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14 MW Sabangan Hydro Power Plant Project

A project of Hedcor Sabangan, Inc., that involves the construction of a run-of-river hydropower plant facility to be located in Mt. Province (Northern Luzon)

The project was granted all the permits and licenses in the first quarter of 2013.

The construction commenced in May 2013 and will take approximately 24 months to finish.


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• 68 MW Manolo Fortich Hydro Power Plant Project

– A project of Hedcor Bukidnon, Inc., this involves the construction of a run-of-river hydropower plant facility to be located in Mt. Province (Northern Luzon)

– Currently completing the permits and licenses after which a 24-month construction period will follow.

600 MW Coal-fired Power Plant in Subic

Project by Redondo Peninsula Energy, Inc. (RP Energy), a JV among MeralcoPowerGen Corporation (MPGC), Aboitiz subsidiary Therma Power, Inc. (TPI) and Taiwan Cogeneration International Corporation (TCIC).

Commercial operation is estimated to begin by 2018.

AboitizPower, through TPI will have an equity interest of 25% in RP Energy.


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Green/Brownfield Developments Moving Forward Other Power Plant Developments

100%-owned subsidiary Hedcor, Inc. (Hedcor) is conducting feasibility studies for potential hydropower projects located in Luzon and Mindanao. Based on current findings, Hedcor sees the potential of building plants with capacities ranging from 20 MW to 60 MW. When the projects pass the evaluation stage and once permits are secured, the two-year construction period for the hydropower plant facilities will commence.

The SN Aboitiz Power Group (SNAP Group) is continuing its focus on growth through Greenfield development with new opportunities being sought and 380 MW of projects undergoing feasibility studies. Further, SNAP secured renewable energy service contracts (RESC) from the DOE for a twin mini-hydro facility project along the Maris Canal, one at the Ramon, Isabela while the other at the Alfonso Lista, Ifugao.

AboitizPower is also exploring new geothermal resources. Pre-development works are ongoing in several areas namely, Negron-Cuadrado located in Central Luzon and Mt. Apo Mindanao. Both projects have already been awarded geothermal renewable energy service contracts (GRESC) by the DOE.

AboitizPower is actively exploring the viability of developing wind power projects and photovoltaic solar projects consistent with the Company’s focus on environmental sustainability and diversified power generation technologies, among others.

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Participation in the Government’s Privatization Program for its Power Assets AboitizPower continues to closely evaluate the investment viability of the remaining

power generation assets that PSALM intends to auction off. AboitizPower is also keen on participating in PSALM’s public auction for the IPP

Administrator contracts, which involves the transfer of the management and control of total energy output of power plants under contract with NPC to the IPP administrators.

In November 2013, Aboitiz Energy Solutions, Inc. (AESI) participated in the bidding for the IPPA of the strips of the Unified Leyte Geothermal Power Plant (ULGPP). AESI won 40 strips of energy corresponding to 40 MW capacity of ULGPP. The Notice of Award was issued to AESI on January 29, 2014. This IPPA contract will allow AESI to sell 40 MW of geothermal power from ULGPP, beginning January 1, 2015.

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Result of Operations Distribution

Attributable Electricity Sales(in GWh)

2,790 3,142 3,322 3,606 3,727 3,934 4,076

1,997 2,122

2007 2008 2009 2010 2011 2012 2013 1H2013 1H2014

6%

The growth was mainly driven by the resurgence in industrial consumption particularly in Davao Light’s franchise area as its customer hit by the Typhoon Pablo in December 2012 has normalized operations. Davao Light’s performance was also further bolstered by the additional industrial customers.

Electricity Sales, by Customer Type(in GWh)

545

1,452

1,997

548

1,574

2,122

Residential Commercial & Industrial Total Power Sales

1H2013 1H2014

6%

0.4%

8%

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Other Developments Distribution

SYSTEMS LOSS

•All distribution units are within the regulator-imposed cap on system loss levels of 8.5%.

SFELAPCOSEZC Davao Light VECO CotabatoLight

BEZC

1H2013

1H2014

1% 1%

5 %

1%

8% 8% 8%

1% 1%

4%

8%7%

8%8%

Gov’t Cap – 8.50%

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GROSS MARGINP/kWh

* Year-to-date

*

1.21 1.16

1.25

1.44

1.60

1.77

1.58

2008 2009 2010 2011 2012 2013 1H2014

• The group’s year-to-date gross margin on a per kWh basis declined from P1.71 of the first half of 2013 to P1.58 for the same period this year.

• The decrease was due to the higher direct costs recorded by the distribution group during the quarter brought about by the lag in the recovery of VECO’s cost of purchased power as well as the additional costs incurred by Davao Light and Cotabato Light due to the running of their embedded plants to cover for the energy shortfall in the Mindanao grid during the period.

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Performance-Based Regulation

Cotabato LightA reset process should have been

initiated 18 months prior to the start of the 3rd Regulatory Period. However, there has been a delay due to the issuance of an Issues Paper on the implementation of PBR. This paper aims to revisit various matters relating to the

reset process.

VECO and Davao LightVECO and Davao Light’s 2nd

Regulatory Period ended on June 30, 2014. They are still

implementing the distribution, supply and metering charges

approved for the last year of the 2nd Regulatory Period.

SFELAPCO and Subic EnerZoneFor the third regulatory year

covering Oct. 1, 2013 to Sept. 30, 2014, SEZ was able to implement the new rate while SFELAPCO is

still awaiting for the release of its application. The resulting under-recoveries from the lag starting

from Oct. 1, 2013 will be included by SFELAPCO and SEZ as under-recoveries in its rate filings in the

fourth regulatory year.

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– On June 19, 2014, AboitizPoweracquired 100% ownership interest of LiMA Utilities Corporation (LUC) from LiMA Land, Inc. (LLI), a wholly owned subsidiary of AboitizLand, Inc. LUC is the electricity distribution utility serving the LiMA Technology Center located in Batangas. The acquisition is in line with the AboitizPower’sstrategy of expanding its EnerZonebrand.

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Results of Operations Banking

2,774

1,504

1H2013 1H2014

UnionBank

UnionBank’s income contribution dropped 46% YoY

• The decline was mainly due to the drop in total other income largely in view of exceptionally higher trading gains posted during the same period last year.

46%

In P million

UnionBankAs of 1H2013 44.8%As of 1H2014 47.4%

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4,063

5,241

1H2013 1H2014

UnionBank

In P million

29%

Total net interest income grew by 29% YoY

UnionBank’s increase in net interest income is attributable to the expansion in average levels of earnings assets alongside with continuous reduction in average funding costs.

99,743

122,217

1H2013 1H2014

UnionBank

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In P million

Total loan book rose by 26% YoY

• The increase was principally as a result of the inclusion of CitySavings’ loan book to UnionBank’s.

26%

25


260

298

1H2013 1H2014

UnionBank

In P billion

• Total deposit liabilities expanded mainly due to the increase in the outstanding levels of demand and time deposit.

• UnionBank’s focus on low cost funds maintained.

15%

15% YoY expansion in total deposit liabilities

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Results of Operations Food

Pilmico’s Income contribution has been kept in line with the same period last year

• The Flour segment posted a strong performance buoyed by the higher contribution from By-Products and lower financing costs. The Farms division, on the other hand, also contributed higher earnings on account of higher volumes sales and average selling price.

• The Feeds segment ended the quarter with lower contribution due to higher input cost and the expiration of the ITH of the Iligan Feedmill.

In P million

Flour Feeds Farms

230 308

286 166

115 173

1H2013 1H2014

6486303%

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Other Developments Food

Feeds Feedmill Expansion Iligan: June 2014 – July 2015

Inter-Island Pier 2: July 2014 – July 2015

Farms Completion of Farm Expansion 2: Increase in sow level from 6,500 to 8,360 heads completed by Q2 2014

Grow-fin farm 1 to 5 expansion: March 2014 – October 2014

Grow-fin farm 6: January 2014 – June 2014 (completed)

Grow-fin farm 7: September 2015 – February 2016

Completion of Farm Expansion 3: Increase in sow level from 8,360 to 13,640 heads completed by Q2 2017

Breeder Farm 2: November 2014 – July 2016

Offsite Nursery Farm 2: February 2015 – August 2016

Grow-fin farm 8-11: January 2016 – August 2017

Layer Farm: August 2014 – October 2015

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Results of Operations Real Estate

AboitizLand’s Income Contribution rose 877% YoY

AboitizLand posted a net income of P1.1 bnduring the period in review from P111 mn of the same period last year. The growth was mainly due to the gain on sale of the LiMaUtilities Corporation to AboitizPower.

111

1,084

1H2013 1H2014

877%

In P million

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Other Developments Real Estate

Outlook

AboitizLand has budgeted P5.4 bn CAPEX to support its growth initiatives. 51% of which will be allocated for land acquisition and 40% for project construction.

As of 1H2014, total CAPEX spent amounted to P2.2 bn. This was used for land acquisition and development of existing projects.

• Moreover, AboitizLand’s 50-50 JVC with Ayala Land Inc, is now set to proceed with the planning of the 15-hectare mixed use development in Mandaue City, Cebu.

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Financial Condition

Consolidated Figures, In P Million

2013 End June 2014

247,088 253,464

Total Assets

Total Liabilities

Cash & Cash Equivalents

Total Equity

2013 End June 2014

36,118 30,996

2013 End June 2014

124,539 132,065

2013 End June 2014

122,549 121,399

0.27

0.52

1.58 1.58

1.44 1.27

4.6% 4.2% 3.7% 3.3% 3.4% 2.9%

0.56 0.53

2009 2010 2011 2012 2013 2014

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Dividends

Internal dividend policy is to payout 1/3 of previous year’s net earnings

On March 11, 2014, AEV declared a dividend of P1.27 per share to all stockholders of record as of March 25, 2014, payable on April 22, 2014. which translated to more than 1/3 of 2012 net earnings

On the same day, a special cash dividend of P0.53 per share to all stockholders of record as of March 25, 2014, payable on April 22, 2014.

Paid out over P9.9 billion in dividends on April 22, 2014

Note: Dividend yields are based on closing prices as of date of dividend declaration.

2.001.80

Dividend per share

Dividend yield

Special Cash Dividend

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Share Price Performance

YTD June 2014

PSEi: +16%

AEV: +3%

Is there a better way?

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Documents

Aboitiz Equity Ventures, Inc.digitalfcb.com/aboitizdev/wp-content/uploads/2014/...J.V. Angeles Construction Corp. (JVACC) to jointly construct both a raw water treatment facility with