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Ayala Land may delay REIT offering to 2020

AYALA LAND, Inc. (ALI) may postpone its real estate investment trust (REIT) offering to next year, as it waits for the final guidelines to be released by the Securities and Exchange Commission (SEC).

“If we can get it this year, or early next year, we’ll just adhere to the SEC timeline, which is really now about the release of the new guidelines,” ALI Chief Finance Officer Augusto Cesar D. Bengzon told reporters last week.

The listed property developer in April said it will place its prime office assets in the Makati Central Business District under a REIT valued at $500 million. The company then said it can conduct the REIT offering under existing SEC rules, in a bid to have the first such listing in the country a decade after Republic Act No. 9856 or the REIT Act of 2009 was implemented.

Mr. Bengzon however noted that the commission would prefer that all companies follow the latest guidelines for such a listing.

“We’ve done quite a bit of work already. It will just need some tweaking when the new rules come out, tweak the prospectus and the registration statement,” Mr. Bengzon said.

Sought for comment on when they can release the final rules, SEC Commissioner Ephyro Luis B. Amatong said they hope to finish it within the year.

“It depends on the number and complexity of the comments we receive,” Mr. Amatong said in a text message.

The SEC on Friday released the draft rules for REITs, which sought to lower the public ownership requirement for REITs to 33%, from the current 40% on the first year which should be raised to 67% on the second year.

Mr. Bengzon said they may reduce their REIT’s public float in line with the new rules. Capital raised is still expected to be within the $300-million level.

Other changes include the requirement to reinvest all proceeds of a REIT offering into the Philippines, in order to promote growth in the capital market and Filipino participation in real estate.

The SEC also wants to create a special committee that will review related party transactions (RPT) for REITs. This will tighten the corporate regulator’s review process for RPTs.

Meanwhile, REIT fund managers will have to secure a license from the SEC, provided that they have a minimum paid-up capital of P10 million for both domestic and foreign firms. This levels the playing field for foreign firms, which are currently required to have a paid-up capital of at least P100 million.

The SEC further adjusted the required track record of officers of a REIT property manager to three years, from the current requirement of five years.

Comments on the proposed guidelines may be submitted to the commission until Oct. 18.

CREDIT RATING
Meanwhile, ALI secured the highest credit rating of its P10-billion fixed rate bonds to be issued next month, according to local debt watcher Philippine Rating Services Corp. (Philratings).

In a statement, Philratings said the bonds with a PRS Aaa rating are of the highest quality with minimal credit risk, with the issuer having an “extremely strong” capacity to meet its obligations. The rating also carries a stable outlook, which means it is unlikely to change in the next 12 months.

Philratings said it took into account ALI’s well-diversified portfolio, sustained healthy outlook for the economy and real estate industry, continuously growing profitability, and sound capitalization.

The bonds will be split between tenors of two years and 7.25 years, as the company said there is demand for short-term offerings. This will be the third issuance out of ALI’s P50-billion debt securities program. It previously raised P8 billion and P3 billion in May and September, respectively. — Arra B. Francia

Hyundai, Lalamove team up to move businesses forward

HYUNDAI and Lalamove, the leading on-demand delivery service in Asia, have announced a partnership that allows business owners to get the most out of their Hyundai H-100 trucks. The program aims to empower micro, small, and medium enterprises (SMSEs) and large corporations alike by reducing transportation costs, expanding consumer reach, and helping ensure on-time deliveries.

Hyundai Asia Resources, Inc. (HARI) President and CEO Ma. Fe Perez-Agudo was enthusiastic about bringing this partnership to Filipino entrepreneurs. “Hyundai and Lalamove speak the same language when it comes to transportation. One of Hyundai’s advocacies is sustainable mobility, and we are so excited to contribute to this by marrying the strength, durability, and efficiency of the H-100 with Lalamove’s wide network of partners and convenient user interface,” she said.

The partnership will deliver several benefits and perks to Lalamove partners using H-100 vans, including deep discounts for parts and service, faster turnaround on preventive maintenance service (PMS), fixed rates for picking up and delivering units for PMS, and a program for fleet expansion and refleeting.

The Hyundai H-100 is a versatile light truck designed to excel at transporting cargo and passengers alike, thanks to its powerful engine and wide wheelbase. Its 2.5-liter CRDi Euro 4 engine delivers cutting-edge fuel efficiency while adhering to modern standards of reduced carbon emissions.

The H-100’s payload capacity of 1335 kilograms is the best in its class. Aside from cargo capacity and fuel efficiency, the H-100 prioritizes the driver’s comfort. An adjustable driver seat and centrally mounted, all-round ventilation with optional air-conditioning make long hauls a breeze.

The truck will also stand the test of time, with each vehicle undergoing a 7-dip electrodeposition process to produce a durable and rustproof coating. Every H-100 is backed by Hyundai’s best-in-class 5-year Unlimited Mileage Warranty, ensuring that owners and drivers get the most out of their truck.

The Hyundai H-100 will help power you into a bright future as a Lalamove Partner with its best-in-class payload capacity and cutting-edge fuel efficiency.

Dannah Majarocon, managing director of Lalamove Philippines, said, “Lalamove’s mission is to empower local communities. This means providing our partner drivers with a source of livelihood. The H-100 is a durable and versatile vehicle that is fully equipped to do this and to satisfy our customers’ delivery needs. On top of that, Lalamove will have easy access to PMS and parts given Hyundai’s ever-growing nationwide network of dealerships.”

Ms. Agudo concluded: “This partnership targets the ‘last mile’ logistics challenge for businesses and end customers. The H-100 and Lalamove will ensure that partners get to maximize profit without having to maintain their own fleet.”

House bill proposes national level coordination of coastal policy

A LEGISLATOR has filed a bill proposing a scheme for sustainable coastal management which creates a national committee to coordinate the efforts of local governments.

Las Piñas City Rep. Camille A. Villar filed House Bill No. 3315 which if passed will become the Integrated Coastal Management Act. It hopes to create a National Coordinating Committee on Integrated Coastal Management.

The committee, as proposed, will “formulate, institute and implement the country’s national policy on coastal management aimed at ensuring the sustainable development of the coastal and marine environment and resources.”

Under HB 3315, local government units are to submit their coastal management plans to the committee.

The committee, through the help of the Department of Environment and Natural Resources, also has the power to grant incentives to LGUs which perform well in the development and implementation of their respective coastal management plans.

Ms. Villar noted that coastal environments such as mangroves, seagrass beds, and coral reefs are key sources of livelihood.

“They are among the most productive and biologically diverse landscapes known to man. Coastal and marine areas are vital sources of food, minerals and raw materials, as well as a natural setting for sports, recreation, and other social and cultural activities, while marine-related economic activities, including fisheries, marine transportation, tourism, coastal mining, and offshore oil and gas development make significant contributions to a country’s GDP as well as provide livelihood and employment opportunities to coastal communities,” Ms. Villar said in a statement.

The bill also requires each province to organize a scientific advisory group to help vet coastal management plans.

“The bill (also) aims to achieve food security, poverty alleviation… respect for sustainable traditional resource rights of indigenous peoples, and to reduce vulnerability to climate change, and human-induced and natural hazards,” Ms. Villar added. — Vince Angelo C. Ferreras

Local weaves are now in fashion

IN WOVEN textile lies a fingerprint not only of the actual person who made it, but the communities that inspire it.

Habi: The Philippine Textile Council is opening its doors from Oct. 11-13 for the 9th Likhang Habi Market Fair at the Glorietta 3 Activity Center in Makati City.

This year’s theme is “The Highlights of our HABI Journey.” The fair will feature a Habi Craft Corner where visitors can learn the basics of weaving using pure Philippine cotton and other natural local fibers, and create their own woven products. Habi goers can also participate in the Community Craft Loom and learn modern weaving using different materials, textures, colors, and weaving techniques. There will also be workshops on macramé,the art of knotting.

The Likhang Habi Market Fair will also have a baybayin workshop with lessons on writing and understanding the pre-colonial writing script of the Philippines. Cultural dance performances, traditional Filipino music from different regions of the country, and Filipino art installations will also be part of the fair, leading to a holistic educational experience on Filipino heritage and identity.

“We encourage Likhang Habi fairgoers to immerse themselves in the beautiful weaving communities and traditional textiles of our country,” said Habi Chair Maribel Ongpin in a release. “We will have participating weavers from Luzon, Visayas, and Mindanao so the opportunity to learn at the fair is endless.”

Fifty-two merchants from all over the Philippines will participate this year. The fair will also showcase sustainable and ethical fashion and other lifestyle products using traditional textiles such as habol negrense from Negros Occidental, yakan from Basilan, inaul from Maguindanao, binubudan from Ifugao, binakol and abel from Ilocos, and tepina from Palawan, among others. During the fair, talks about sustainable shoemaking and the local shoe industry will also be a highlight.

The fair will also see the awarding of the 2nd Lourdes Montinola Piña Prize, which recognizes exceptional craftsmanship and mastery of the delicate process of turning pineapple threads into works of art.

Several merchants will also present contemporary Filipino fabrics such as cotton ikat and cotton abaca, the result of combining pure Philippine cotton with other indigenous fabrics. Promoting the use of pure Philippine cotton is one of the long-term commitments of HABI.

“There is an abundance of beautiful fabrics in the Philippines and we want to show that these fabrics from different corners of the Philippines can be a part of our modern lifestyle,” said Habi President Adelaida Lim.

BusinessWorld’s cursory look at Habi’s offerings during a preview last month in Makati yielded items that were quite young-looking, fit to be seen on the hands and hips of Manila’s young and stylish set.

“Surprisingly, native textiles are a current trend. There are backpacks, laptop cases and note pad covers using traditional textiles. In addition, designers are using it for casual, affordable clothing. There are buyers for these things, or why would designers be making them? Buying local is cool,” Ms. Lim told BusinessWorld.

Marking nine years in the fair circuit, Ms. Lim talks about the achievements the fair has had. “While we are still working on reviving the cotton industry, we feel that the promotion of indigenous textiles is quite successful. Today we are seeing a resurgence is the work of handloom weavers. They are far busier now than when Habi first encountered them. The weavers are also now able to demand more for their work. In addition, we are seeing a definite interest in local handwoven fabrics. Designers are using indigenous textiles in their fashion shows and RTW lines.”

Superb Q4 deals on Subaru Forester, XV

MOTOR IMAGE PILIPINAS, Inc., the exclusive distributor of Subaru vehicles in the Philippines, marks the beginning of the last quarter of 2019 with superb deals on the New Forester and XV. There are also other offers tailor-made to suit every customer looking to get their very own Subie in the segment of their choice:

Apart from discounts, future owners also get to enjoy Subaru’s warranty coverage for new Subaru cars that has been increased to five years or up to 100,000km (whichever is earlier). Visit your nearest Subaru dealership today and speak to one of our sales consultants to find out how you could finally drive home that Subaru you’ve been eyeing before the year ends.

Savoy Hotel Mactan to open in November

Savoy Hotel Mactan is located within the 28.8-hectare Mactan Newtown township in Cebu. — COMPANY HANDOUT

MEGAWORLD Corp. looks to attract business travelers and families in its P1.7-billion Savoy Hotel in Mactan, Cebu once it opens in November.

In a statement issued over the weekend, the listed property developer said Savoy Hotel Mactan will have a total of 547 guest room and suites across 18 floors. It offers superior and deluxe rooms, as well as deluxe premier and junior suites.

“Savoy Hotel Mactan is just 15 minutes away from the airport, which makes it a perfect choice for business travelers,” Megaworld Hotels Managing Director Raymundo V. Melendres said in a statement.

“Its location also allows one to experience the beach and the township at the same time, where restaurants, cafes, supermarket, spa, and other retail shops are just within easy reach.”

Hotel amenities include a swimming pool, paved sunbathing lounge, fitness center, business center, and a flower garden.

Guests can select from several food and beverage outlets such as Savoy Cafe, Lobby Cafe, Zabana Bar, Pool Bar, and the Patio. It also has function and meeting rooms.

The hotel’s interiors were designed by Hirsh Bedner Associates, the same company that was handled Marina Bay Sands in Singapore and Shangri-La Dubai and St. Regis Abu Dhabi in the United Arab Emirates.

Rooms will be priced at P3,288 to P5,888 per night, depending on which category a guest chooses. The hotel will also offer complimentary shuttle services to and from the Mactan Newtown beach, while rides to and from the Mactan-Cebu International Airport may be arranged.

Savoy Hotel Mactan stands inside the 28.8-hectare Mactan Newtown township in Cebu, which will also house office towers, condominiums, leisure amenities, retail shops, and The Newtown School of Excellence.

This will be the third project under Megaworld’s homegrown brand, after it opened the same in Boracay Newcoast and Newport City in Pasay.

It forms part of the five homegrown hotel brands that the company developed, with the others being Richmonde Hotels, Belmont Hotels, Twin Lakes Hotel, and Hotel Lucky China Town. The company now has about 3,200 hotel rooms, which is seen to grow further with the opening of more homegrown brands in Parañaque, Bacolod, Iloilo, Boracay, and Laguna.

The company’s hotel business grew its revenues by 56% to P574 million in the first half of 2019. Overall, Megaworld’s net income attributable to the parent surged 16% to P8.3 billion, following a 20% uptick in revenues to P16.8 billion. — Arra B. Francia

Treasury bills to fetch lower rates on easing inflation, weak US data

RATES OF Treasury bills (T-bills) on offer today are likely to decline further on the back of easing inflation data and the central bank’s decision to cut policy rates and banks’ reserve requirement ratios (RRR).

The Bureau of the Treasury (BTr) will auction off P20 billion worth of T-bills today, broken down into P8 billion in three-month papers, P6 billion in six-month securities, and another P6 billion in one-year debt.

A bond trader said yields on the short-term debt papers will likely decline by five basis points (bps) across all tenors against the previous offering.

“[The market] will price in the recent cut in the RRR and the policy rate and the low inflation trend,” the trader said on Friday.

On Sept. 16, the government raised just P12.983 billion via T-bills out of the P15-billion program even as bids by banks were more than twice the its offering, totaling P35.1 billion.

Broken down, the BTr awarded P4 billion as planned via the 91-day T-bills with tenders amounting to P11.9 billion. The papers fetched a lower average yield of 3.037%.

The Treasury also borrowed P5 billion as programmed through the 182-day papers, with the tenor attracting bids worth P12.75 billion. The six-month securities’ average rate declined to 3.42%.

Meanwhile, the government only raised P3.983 billion via the 364-day T-bills out of a P6-billion program, even as total bids reached P10.403 billion as the average rate for the tenor inched up to 3.666%.

“Yields could adjust lower to partly reflect the latest 0.25-bp cut in local policy rate on Sept. 26 and the surprise decision to cut RRR by one percentage point on Sept. 27 (effective November 2019),” Rizal Commercial Banking Corp. (RCBC) economist Michael L. Ricafort said.

Headline inflation eased further to 0.9% in September, the slowest in three years, amid lower food prices and electricity rates, the Philippine Statistics Authority reported on Friday. This compares to the 1.7% logged in August and the 6.7% print in the same month last year.

Last month’s inflation print fell at the low end of the Bangko Sentral ng Pilipinas’ (BSP) 0.6-1.4% forecast for September. It was also below the 1.1% median estimate in BusinessWorld’s poll of 16 economists.

For the nine months to September, headline inflation averaged at 2.8%, well within the BSP’s 2-4% target range for 2019.

The central bank’s policy-setting Monetary Board slashed benchmark interest rates by another 25 bps at its meeting on Sept. 26 amid a manageable inflation outlook. This brought the rates for overnight reverse repurchase, overnight deposit and lending to four percent, 3.5% and 4.5%, respectively.

On Sept. 27, the central bank announced it will reduce lenders’ RRR by another 100 bps, which will take effect in November. This will bring the reserve requirement of universal and commercial banks to 15% from 16%, thrift banks to five percent from six percent, and to three percent from four percent for rural and cooperative banks.

The bond trader said lower US Treasury yields may also affect Monday’s auction results.

RCBC’s Mr. Ricafort added that lower global crude oil prices and weak US data on manufacturing and services sectors may cause yields on government securities to go down further.

“Higher possibility another [of a] Fed rate cut after the contraction in US manufacturing gauge to 10-year lows or since the previous global recession and US services gauge at three-year lows, thereby resulting to some easing in benchmark interest rates in the US and in other developed countries recently,” Mr. Ricafort said.

US services sector activity slowed to a three-year low in September amid rising concerns about tariffs, suggesting that trade tensions were spilling over to the broader economy.

The Institute for Supply Management (ISM) said its non-manufacturing activity index fell to a reading of 52.6 in September, the lowest since August 2016, from 56.4 in August. A reading above 50 indicates expansion in the services sector, which accounts for more than two-thirds of US economic activity.

The ISM reported on Tuesday that its measure of national manufacturing activity plunged in September to its lowest level since June 2009, when the Great Recession was ending.

The US economy is chugging along despite the headwinds it faces, Federal Reserve Chair Jerome Powell said on Friday, in remarks that gave little more away about the path of monetary policy.

“While not everyone fully shares economic opportunities and the economy faces some risks, overall it is — as I like to say — in a good place. Our job is to keep it there as long as possible,” Mr. Powell said in brief remarks introducing a “Fed Listens” event at the US central bank’s headquarters in Washington.

The Fed cut interest rates for the first time in more than a decade in July and did so again at its subsequent policy meeting in September in what Mr. Powell and some others have characterized as “insurance” against risks to the economy.

US job growth increased moderately in September and the unemployment rate dropped to near a 50-year low, the US Labor department reported on Friday, allaying concerns the economy is nearing recession.

The government is set to borrow P220 billion from the local market this quarter, broken down into P100 billion in T-bills and P120 billion via Treasury bonds.

It is looking to raise P1.189 trillion this year from local and foreign sources to fund its budget deficit, which is expected to widen to as much as 3.2% of gross domestic product. — Beatrice M. Laforga with Reuters

JBS USA to produce pork without growth drug banned by China in bid to increase more exports

CHICAGO — JBS USA will remove a growth drug banned by Beijing from its US hog supply, the company said on Friday, accelerating the competition for pork exports as China grapples with a devastating pig disease.

The meat packer’s move away from the drug ractopamine, a feed additive, shows how companies are maneuvering to take advantage of an expected shortage in China, the world’s largest pork consumer, due to African swine fever (ASF).

Though not harmful to humans, the disease is deadly to pigs, with no vaccine available. It surfaced for the first time in Asia more than a year ago in China, and has now spread to over 50 countries, according to the World Organization of Animal Health — including those that account for 75% of global pork production.

JBS USA, owned by Brazil’s JBS SA, said it removed ractopamine from internally owned production systems in August 2018. Now the company will also prohibit the drug from diets of hogs owned by farmers who sell livestock to JBS USA.

The Colorado-based JBS unit sells pork under brands including Swift and Swift Premium.

“Early on, basically JBS said, ‘You guys chase that export stuff. We’re going to serve the domestic market,’” Steve Meyer economist for US commodity firm said. “It’s pretty much an about face on that.”

Rival U.S. pork producer Smithfield Foods [SFII.UL], which is owned by China’s WH Group, already raises all of the hogs on its company-owned and contract farms without the drug.

Tyson Foods Inc previously told Reuters it was looking at diversifying its pork supply to include ractopamine-free hogs as demand expands.

“We are confident this decision will provide long-term benefits to our producer partners and our industry by ensuring U.S. pork products are able to compete fairly in the international marketplace,” JBS USA said in an emailed statement.

Ractopamine is used in some countries to raise leaner pigs, but China does not allow its use or tolerate residues in imported meat. The European Union also bans ractopamine.

Elanco Animal Health, the manufacturer of Paylean, its brand name for a ractopamine feed ingredient, did not immediately respond to a request for comment.

Beijing blocked pork imports from a Canadian company this summer because China’s customs agency said a shipment contained ractopamine.. — Reuters

Ultheraphy is not just for women

ACCESS TO technology and information has been beneficial in educating ourselves about beauty and skincare. Articles and knowledgeable beauty gurus now advise that one should start investing on anti-aging products as one approaches 30 — to delay the aging, not totally prevent it. This applies for both women and men.

The Merz Group was founded in Frankfurt, Germany in 1884 by pharmacist Frederick Merz who developed a water-soluble base topical skin cream. In 1953, Merz developed the first anti-aging cream. As a company, it evolved to do active research and development of products and services in aesthetic medicine and dermatology.

“With the rise in usage of dermal fillers and non-invasive lifting and tightening treatments, I can confidently say we’re in the perfect position to make sure our patients get top quality products,” Christian Baatz, a member of the Merz Shareholders’ Council & Supervisory Board, was quoted as saying in a press release.

During The Merz Agenda forum on Sept. 27 at the Edsa Shangri-la Hotel in Mandaluyong City, company executives discussed the benefits of advancements in technology in the beauty industry and its best-selling treatment, ultherapy, its flagship service when the aesthetics company arrived in the Philippines in 2015.

NO NEED FOR SURGERY
Ultherapy is “a non-surgical procedure that uses micro-focused ultrasound to lift and tighten skin on the brow, under the chin, neck and chest.”

Depending on the treatment area, the procedure takes 60 to 90 minutes. No downtime required. Results appear within two to three months, with further improvements in six months as the collagen-building process continues.

The procedure helps in restoring collagen, the most abundant body protein found in skin, muscles, tendons, and bones.

“Collagen occurs naturally in your body under the skin. When we age, we tend to lose it. Then there will be laxity. [Skin] laxity means your skin is not as firm as it was before,” Merz Asia Pacific’s regional commercial director Conway Rappa told BusinessWorld.

“Instead of injecting a substance, you are actually making your own natural body mechanism work again. The skin cells will start bringing out quality again and it will tighten and lift your skin,” Merz CEO Phillip Burchard explained during the forum.

Mr. Rappa stressed that Merz Aesthetics focuses on enhancing features that people “like about themselves.”

“Rather than fixing something they don’t like about themselves, they could enhance the portions that they like. It is not possible to try to look like someone else. Instead, we can try to gain back some years and feel like a better version of ourselves,” he said.

ULTHERAPY FOR TWO
In August this year, Merz expanded its services by introducing Ultherapy For Two, a campaign that allows scheduled treatments with a companion.

The campaign was introduced after Merz Aesthetics found out from market research that men only undergo treatment upon the recommendation of their wives.

“Men do not actively go for treatments for themselves. Men do have purchasing power but they like to buy gadgets for the boys like cars and devices,” Mr. Rappa said.

There remains a stigma when it comes to aesthetic treatments which the beauty and aesthetics industry seeks to debunk. Mr. Rappa noted that the stigma exists due to the invasive type of treatments available in the past.

“In the Philippines, [similar to other countries], there will be a segment of the population who feel that there is a stigma to treatments. Since [ultherapy] is non-invasive, we want to make sure that people understand it,” he said.

For more information, visit http://locator.ultherapy.com/philippines, www.ultherapy.com, or www.merzaesthetics.com/merz-aesthetics. Merz Aesthetics Philippines is located at the 10th Floor, Ore Central Building, 9th Ave. corner 31st St., BGC, Taguig City. — Michelle Anne P. Soliman

Honda announces exclusive deals for new Civic 1.8 S CVT and CR-V Touring Diesel 9AT

HONDA CARS PHILIPPINES, Inc. (HCPI) recently announced cash discounts, low cash-out and low monthly amortization all-in bundle for the new Civic 1.8 S CVT and CR-V Touring Diesel 9AT.

The new Civic 1.8 S CVT is the new entry-level variant for the Civic. On the outside, the Civic 1.8 S CVT sports new halogen projector headlights with integrated daytime running lights and 16-inch two-tone alloy wheels to maintain that sporty and aggressive look.

On the inside, the Civic 1.8 S CVT gets Honda’s 7-inch touchscreen display audio system to provide customers a functional yet entertaining driving experience. The new Civic 1.8 S CVT is available at the suggested retail price of P1,115,000.

The CR-V Touring Diesel 9AT is the limited edition variant of one of Honda’s all-time best-selling model, the CR-V. Loaded for a bold and sophisticated exterior styling, this limited edition variant is upgraded with a new grille, running board, rear bumper protector and an exhaust pipe finisher. And to differentiate this CR-V model from its other variants, Honda has equipped this limited version with a Touring Edition emblem. The CR-V Touring Diesel 9AT is available at the suggested retail price of P1,738,000 and comes in three colors: White Orchid Pearl, Modern Steel Metallic and Dark Olive Metallic.

Now until Oct. 31 only, a cash discount of P50,000 for the Civic 1.8 S CVT and P107,000 for the CR-V Touring Diesel 9AT are offered outright.

On top of that, both the Civic 1.8 S CVT and the CR-V Touring Diesel 9AT are available through low net cash-out of 15% and 20% down payment with up to 60 months payment term.

This promo is available through BPI Family Savings Bank, RCBC Savings Bank, Security Bank Corp., EastWest Banking Corp., PNB Savings Bank, Philippine Savings Bank, China Bank Savings, Bank of Commerce, United Coconut Planters Bank, Sterling Bank of Asia, Maybank Philippines Inc., BDO Unibank, Inc., and Robinsons Bank only.

Moreover, the offer includes three-year LTO Registration and Chattel Mortgage, plus an additional one-year Comprehensive Insurance with Acts of Nature (Free Insurance Package available on selected bank partners only).

First Gen plans to lease floating storage regas unit for LNG by Q1

By Victor V. Saulon
Sub-Editor

FIRST GEN Corp. targets to lease a floating storage regasification unit (FSRU) for liquefied natural gas (LNG) early next year when it has determined the volume that it needs to import fuel to existing power plants and potential capacity expansion, its top official said.

“Until we know what we need, that’s when we can contract. So when we do that, is probably some time first quarter of next year,” said First Gen President and Chief Operating Officer Francis Giles B. Puno in an interview.

He said the standard storage size of an FSRU is about 120 metric tons (MT) to about 150-160 MT. But the volume should also factor in the number of times transport ships will be bringing in LNG from foreign sources, and the volume of gas used by the existing power plants.

“There are international service providers that can provide the floating storage regas unit itself. There are many vendors that do that,” he said, adding that the company is in talks these vendors. “That discussion has been there for some time already as well.”

Mr. Puno said the “base case” today for First Gen remains the construction of an onshore LNG import terminal.

In December last year, the company signed a joint development agreement with Japan’s Tokyo Gas Co., Ltd. to build the terminal within the Lopez-led company’s power generation complex in Batangas City.

In September this year, First Gen named Japan’s JGC Corp. as the engineering, procurement and construction contractor. The immediate focus of the partnership is to complete a detailed study to modify the existing jetty in Batangas to accommodate large- and small-scale LNG vessels, while continuing to receive liquid fuel.

First Gen, the country’s leading gas power generation company, has around 2,000 megawatts (MW) in operating gas facilities comprising of four gas-fired power plants, namely: the 1,000-MW Santa Rita power plant, the 500-MW San Lorenzo, the 414-MW San Gabriel, and the 97-MW Avion power plant.

Mr. Puno said site preparations for the onshore terminal had been completed.

“Then we’ll build the jetty — the reconfiguration of the existing jetty. So now that’s going through detailed studies,” he said.

Feasibility studies will help configure the jetty to accommodate the FSRU, which is a big vessel that will be permanently docked.

“We’re studying that to see if there’s any fatal flaw, technical specification that needs to be done to essentially adjust the existing jetty that we have. So that will determine also the size of the ship that we can bring in,” he said.

First Gen targets to start using the FSRU in 2021, although it has an existing contract with the consortium behind the country’s Malampaya gas until 2024.

Mr. Puno said there are times when Malampaya gas capacity is “maxed out” thus the need to buy imported LNG towards the end of the concession when there might be uncertainty on the reliability of the home-sourced natural gas.

“They (Malampaya consortium) need to reinvest. So whereas before we were planning to construct and hopefully start operating the onshore terminal by 2024, the floating storage allows us to accelerate that sooner just in case, for example, Malampaya is not enough,” he said. “It also allows us to expand quicker, like build more capacity potentially.”

He said the FSRU would allow the company to take advantage of the current market situation where the price of gas is “cost competitive.”

“At some stage, we’re hoping that we can even import gas at a price that is at least equal if not cheaper than the existing Malampaya. So that’s also good for the consumers,” he said.

The existing gas contract with Malampaya only has the Santa Rita and San Lorenzo plants under a “firm” deal. For the San Gabriel and Avion plants, the contract is “flexible.”

Mr. Puno said plants under the flexible contract would “potentially” use the imported LNG. “Or maybe new capacity. That’s one. And secondly, we also have Ilijan, ‘yung sa San Miguel [Corp.], which will expire in 2022, I believe. So in two years’ time, they will need more gas as well.”

“Right now, we’re also in discussion with them (San Miguel) on being able to sell gas to Ilijan,” he said.

First Gen has identified “numerous” LNG suppliers, which are kept engaged in the discussions, Mr. Puno said. He said locking in a contract at this time would be premature.

Mr. Puno also said that the company’s dollar commitment for imported gas is an even bigger number than the investment for the regasification infrastructure, but did not disclose figures.

“Once the demand is already firmed up then we can contract. And contracting really is not that difficult. The question really is do we have the infrastructure to bring in the gas and then utilize that,” he said.

He said First Gen is looking to initially contract with gas suppliers for the FSRU, which is a smaller volume than that for the onshore facility.

“Anyway, the contract for Santa Rita and San Lorenzo will only expire in 2024. We don’t need as much gas today than in 2024. In 2024, definitely we’ll need the gas,” he said.

Yields on gov’t securities decline across-the-board

By Lourdes O. Pilar
Researcher

YIELDS ON government securities (GS) fell almost across-the- board last week following the release of slower-than-expected inflation data for September.

Week on week, government securities’ (GS) yields went down by 10.1 basis points (bp) on average, according to the PHP Bloomberg Valuation Service (BVAL) Reference Rates as of Oct. 4 published on the Philippine Dealing System’s website.

“Positive signs of economic growth encourage a decline in GS prices. The not-so-encouraging US manufacturing data may have had an impact and the lower-than-expected inflation print have also contributed to this week’s GS movements,” said Union Bank of the Philippines, Inc. (UnionBank)Chief Economist Ruben Carlo O. Asuncion in an e-mail.

ATRAM Trust Corp. Head of Fixed Income Jose Miguel B. Liboro likewise attributed the rally to the September inflation result, adding that falling global bond yields contributed to increased buying sentiment for debt papers.

“[September’s] inflation print of 0.9% validated investors’ short-term expectations and caused yields to drift lower,” Mr. Liboro said in a separate e-mail.

Inflation decelerated to 0.9% in September, the slowest since the 0.7% logged in April 2016 and matching the 0.9% inflation rates in May 2015 and May 2016.

It was also within the Bangko Sentral ng Pilipinas’ (BSP) projection of 0.6%-1.4% for the month and below the median estimate of 1.1% in a BusinessWorld poll of economists.

The September result brought the nine-month average to 2.8%, well within the BSPs 2-4% target range and 2.5% forecast for the year.

Meanwhile, US manufacturing activity tumbled to a more than 10-year low in September amid lingering trade tensions weighing on exports, which further stoked fears of a sharp slowdown in economic growth in the third quarter.

The Institute for Supply Management’s index of national factory activity, which dropped 1.3 points to a reading of 47.8 last month, was its lowest in June 2009.

An index reading below 50 indicates contraction in the manufacturing sector, which accounts for about 11% of the US economy.

At the secondary market, bond yields fell almost across-the-board at the close of trading last Friday except for the 364-day Treasury bills (T-bills), which inched up by a mere 0.5 bp to fetch 3.71%.

At the short end of the yield curve, rates on the 91- and 182-day T-bills fell 3.3 bps and 8.7 bps to 3.096% and 3.314%, respectively.

At the belly, yields on the two-, three-, four-, five-, and seven-year Treasury bonds (T-bonds) fell by 9.9 bps (to 3.952%), 11.6 bps (4.094%), 14 bps (4.225%), 16.5 bps (4.347%), and 16.4 bps (4.537%).

The long end of the yield curve saw rates on the 10-, 20-, and 25-year T-bonds decline by 9.6 bps, 10.4 bps, and 11.5 bps, respectively, to fetch 4.724%, 5.011%, and 4.985%.

For this week, UnionBank’s Mr. Asuncion expects data on Philippine foreign trade and foreign direct investments, which are scheduled to be released on Thursday, to drive yield movements.

“I do expect positive signs for the economy from these data (or at least, will be pointing to positive signs). Thus, I would expect further decline in prices of government securities as investors tend to be risk averse,” Mr. Asuncion said.

ATRAM Trust’s Mr. Liboro said the local bond market “is likely to be more reactive to movements in global bond yields” given the “absence of local catalysts over the next couple of weeks.”

“Local bond yields are likely to consolidate along current levels unless sharp movements abroad cause additional volatility,” Mr. Liboro said.

In a text message last Friday, BDO Unibank, Inc. chief market strategist Jonathan L. Ravelas expect rates to “move sideways to down” this week.

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