First Metro Asset Management Inc

The Bellwether 110

Releasing the 10th issue of The Bellwether, as published by FMIC’s IAG-Research.

This is a fortnightly publication on market action and outlook.

The following are the highlights of the issue:

  • Metro Pacific Investments’ Rail and Road Projects Take Off
  • Aboitiz Power Corporation’s Steam Cost Rises
  • Benguet Corporation Restructures

Metro Pacific Investments’ Rail and Road Projects Take Off

Unfolding Infrastructure Portfolio. MPI’s Public- Private Partnership (PPP)-oriented growth drivers, will kick in 2013, key of which is MPI’s likely first light rail project. This is to be done by MPI’s consortium with Ayala Corp., an unnamed local fund, an operator yet to be selected, which will collectively bid for the $650mn or Php28bn (project cost) 11-km LRT 1 South exten-sion on Build Transfer Operate (BTO) arrangement with the government. The consortium is putting up 30% in equity or $200mn (Php8.6bn) while the balance will be on project financing, Php19.3bn. Internal rate of return eyed by the consortium is 13%, to be achieved through a revenue sharing with the government via subsidy and a tariff hike. LRT’s daily traffic is 500k passengers or at an average fare of Php12/head, the company is estimated to generate Php2bn in yearly topline. Government adds about Php40/head in subsi-dy to keep the losing light rail company afloat.

Aboitiz Power Corporation’s Steam Cost Rises

Lower than Expected Steam Reserve Extraction or Lower Steam Reserves? Tiwi Macban’s lower-than-expected steam reserve extraction rate is hold-ing back Aboitiz Power Corp.’s (AP) power supply contracting ability. AP’s Tiwi-Macban is not renewing a 200MW Power Supply Agreement (PSA) with Meralco, which ends this year, until AP is able to conclude a steam sales agreement with Chevron. Chevron is the steam field operator and steam fuel supplier of AP’s geothermal plant 747MW Tiwi- Macban.

Benguet Corporation Restructures

Corporate Restructuring. The country’s fourth largest primary gold producer Benguet Corp. (BC), with 1H2012 gold output of 188kg, is adopting a corporate restructuring that will markedly delineate mining activi-ties from other allied and non-allied businesses where it may soon engage. BC has both a nickel and a gold tailings dam project subsidiary, Benguet Nickel Mining Inc. (BNMI) and Balatoc Gold Resources Inc., respec-tively. This move followed a balance sheet clean-up last year that had seen a debt buy-back deal cut BC’s leverage. On the other hand, capital infusions and improving profits plugged a capital deficit

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First Metro Asset Management Inc