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Pilipinas Shell reports higher profit in first half

Pilipinas Shell Petroleum Corp. said on Monday, Aug. 13, that it recorded a 30% increase in its first-half net income, which it attributed in part to the gains of its marketing businesses and inventory holding gains.
The company did not disclose the figures for its semestral performance and the comparative data last year.
“The strong performance is attributed to the higher earnings of its marketing businesses and inventory holding gains from its manufacturing and supply chain segments,” the company said in a statement. — Victor V. Saulon

ECOP members pledge to grant 300,000 workers regular status this year

The Employers Confederation of the Philippines (ECOP) pledged to regularize 300,000 employees from its member companies by the end of this year.
Department of Labor and Employment(DoLE) Secretary Silvestre H. Bello said in a statement on Monday “I am glad to inform you that ECOP is committing 300,000 regular workers from their members by the end of the year.”
DoLE added that the employers group is already coming up with a plan and will partner with the labor department to implement it.
“This is a significant number which demonstrates the employers’ cooperation with the government,” Mr. Bello said.
Since the start of President Rodrigo R. Duterte’s term in 2016, 321, 964 workers were already regularized. — Gillian M. Cortez

EDC’s first-half net income down by 21%

Energy Development Corp. (EDC) reported a first-half profit of P4.1 billion, down 21% from last year’s P5.2 billion recurring net income attributable to equity holders of the parent firm, it told the stock exchange on Monday.
The Lopez-led company also reported a 3% decline in consolidated revenues during the period to P17.1 billion from P17.7 in the same period last year.
“Our first half results, similar to what we communicated to the market during our Q1 earnings announcement, were largely dominated by the impact of Typhoon Urduja that hit Leyte island, site of our biggest business unit, in December. Leyte’s generation volume was down by 18.5% for the first 6 months,” said EDC Chief Financial Officer Nestor H. Vasay in a statement.
The company did not disclose its profit and revenue figures for the second half, and the comparative data from a year ago. — Victor V. Saulon

AC Energy signs deal to build solar power plants in Vietnam province

AC Energy, Inc. and its Vietnamese partner have signed an engineering, procurement, and construction (EPC) contract and a financing deal to develop of solar power plants in Vietnam’s Ninh Thuan province, its parent firm Ayala Corp. told the stock exchange on Monday.
“We are excited to scale up our development initiatives in Vietnam. We expect to build on this momentum and add more projects in the future,” said Eric T. Francia, AC Energy’s president and chief executive officer.
The Ayala’s business arm in the energy sector said its project with the BIM Group of Vietnam is estimated at around $237 million, which will be financed by debt and equity. AC Energy will participate with a 30% voting stake and approximately 50% economic share, it said. — Victor V. Saulon

Security Bank launches feeder funds

Security Bank Corp. launched two investment vehicles allowing the public to invest in developed and emerging markets worldwide.
In a statement, Security Bank said it recently launched two new types of feeder funds, the SB US Equity Index Feeder Fund and SB Global Equity Index Feeder Fund.
The SB US Equity Index Feeder Fund aims to invest in US equities with diversified growth and value styles. The fund invests in up to 4,000 corporate names from the US stock exchange.
On the other hand, The SB Global Equity Index Feeder Fund allows the public to invest in up to 8,000 firms in developed and emerging markets around the world. — Karl Angelo N. Vidal

Government fully awards Treasury bills as rates drop

The government made a full award of the Treasury bills (T-bill) it auctioned off on Monday as rates slipped across all tenors.
The Bureau of the Treasury (BTr) borrowed P15 billion as planned at its T-bills auction on Monday, Aug. 13.
Total tenders amounted to P49.4 billion, climbing from the P46.4 billion recorded at last week’s offering.
Broken down, the government borrowed P4 billion as planned via the 91-day tenor as tenders by investors amounted to P11.665 billion. The average rate slid by 4.6 basis points (bp) to 3.244% from the 3.29% logged in the previous auction.
The Treasury also made a full award of the 182-day papers as it raised P5 billion out of the total offers amounting to P20.91 billion. The average yield declined 6.9 basis points to 4.117% from last week’s 4.186%.
For the 364-day T-bills, the BTr borrowed P6 billion out of the P16.831 billion offered by banks and other financial institutions. The average rate likewise slipped slightly by 0.7 basis point to 4.892% from the 4.899% tallied in the previous offering.
At the secondary market prior to the auction, three-month and six-month papers were quoted at 3.6379% and 4.375%, respectively, while one-year securities fetched a 4.843% yield. — Karl Angelo N. Vidal

BPI Direct BanKo aims to hit goal of opening 200 branches this year

BPI Direct BanKo Inc., the microfinance unit of Bank of the Philippine Islands (BPI), is set to hit its target of having 200 branches by year-end, leveraging on the branch-lite initiative of the local central bank.
In a press briefing, BPI Direct BanKo President Jerome B. Minglana said the lender plans to open 65 more branches by end-2018.
“Wer’re planning to open 65 more branches [to complete our target of] 200 branches,” Mr. Minglana told reporters Monday, Aug. 13, adding that the bank is focusing its expansion in the provinces.
“[It will be] across the country. For this year, we’ll stop at three branches in Metro manila, but the remaining 197 branches will be in the provinces.” — Karl Angelo N. Vidal

IMF: Slower Q2 growth still ‘respectable’

By Melissa Luz T. Lopez
Senior Reporter
ECONOMIC GROWTH remains “respectable” despite slowing sharply in the second quarter, the International Monetary Fund (IMF) said over the weekend, welcoming last week’s aggressive interest rate hike as a necessary policy step.
IMF country representative Yongzheng Yang said the Philippines’ growth momentum remains intact, even as economic expansion slowed to six percent in April-June.
However, he noted that this could prompt revisions to the IMF’s current forecasts.
“The Q2 growth number was indeed below market expectations. Note, however, that six percent is still a respectful growth rate,” Mr. Yang said in an e-mailed response to a request for comment on latest official growth data.
“Obviously we will be examining the latest numbers to see what are the implications for our whole-year growth forecast for 2018.”
Gross domestic product (GDP) growth slowed from the downward-revised 6.6% pace in the first quarter due to slower expansion in consumer spending and exports, although this was offset by a surge in state spending.
After its latest annual health check on the economy in July, the IMF projected Philippine GDP expanding by 6.7% this year, matching the pace clocked in 2017 but settling below the government’s 7-8% target.
The multilateral lender said the Philippines has been “performing well” but flagged rising inflation and a changing external environment as key sources of risks.
In separate commentaries late last week, ING Bank N.V. Manila and Fitch Solutions (formerly BMI Research) trimmed their growth forecasts to 6.3% following the soft second-quarter figures, coming from previous estimates of 6.8% and 6.5%, respectively.
REFORMS CRUCIAL
To accelerate GDP growth, Mr. Yang said significant structural reforms are needed to increase productivity, alongside scaling up infrastructure investments and on social services, particularly health and education.
The IMF has expressed support for succeeding tax reform packages, opening up more industries to foreign investments by relaxing the “negative list” of sectors restricted to foreign participation, as well as replacing import quotas for rice with regular tariffs — a step that is expected to slash retail prices by about P7 per kilogram.
IMF mission chief Luis E. Breuer has backed the Executive’s proposal to overhaul the current tax incentives regime, saying that the Philippines “does not need to resort” to giving away such perks just to invite companies to invest here.
On the other hand, Mr. Breuer also said that the government should work to maintain the fiscal deficit at 2.4% of GDP this year — versus the state’s programmed three percent — noting that the lower ratio will help contain inflationary pressures which have been hurting the economy in recent months.
HIKE NEEDED
“The BSP (Bangko Sentral ng Pilipinas) took forceful action [on Thursday] to address inflationary pressure. We welcome the move to raise the policy rate by 50 bps (basis points),” IMF’s Mr. Yang added, referring to the third consecutive rate hike announced by the central bank on Thursday last week.
The central bank fired off its strongest policy adjustment in a decade as inflation remains elevated, having hit a fresh multiyear high of 5.7% in July. Prices of widely used goods have surged by 4.5% for the first seven months, and central bank officials last Thursday hinted that inflation could remain elevated even until 2019.
The IMF had suggested the “further tightening” of policy rates to rein in inflation expectations.
The IMF sees inflation averaging 4.7% this year, which is lower than the 4.9% full-year forecast which the BSP announced last week. Both are well above the central bank’s 2-4% target range.
Several economists are betting that this might not be the last tightening move from the BSP.
“On balance, the central bank has kept the door open for further rate hikes,” ANZ Research said, as it bet another 25bp increase when the BSP’s Monetary Board convenes for its sixth policy review this year on Sept. 27.

DBM studies prospect of reenacted 2019 budget

By Elijah Joseph C. Tubayan
Reporter
THE DEPARTMENT of Budget and Management (DBM) has raised the possibility of having a reenacted budget for 2019 in order to break the impasse with lawmakers on a new spending plan that will allocate funds only for projects or tasks that can be completed within next year.
Budget Secretary Benjamin E. Diokno said that the government cannot submit another version of the 2019 budget that is “obligation-based” — or with funding good for more than a year — which has been the practice to this year.
“We have already submitted (the budget). So they have two options: to not to pass the budget or pass with amendments. We cannot change it,” Mr. Diokno said in a phone interview on Sunday when asked whether his department can go back to square one.
The following year’s budget has always been a priority piece of legislation for any administration. The proposed P3.757-trillion 2019 “cash-based” budget — which takes into consideration implementing departments’ and agencies’ limited capacity to spend — is slightly less than the P3.767-trillion obligation-based budget for 2018.
The government of President Rodrigo R. Duterte has been clearing bottlenecks and cracking the whip on implementing offices to spend, resulting lately in the state finally hitting expenditure targets. Underspending had been a key weakness of the past administration, which had focused on improving revenues while checking spending, earning investment-grade credit rating for the Philippines.
“This week, we’ll explore our options. One option is a reenacted budget,” Mr. Diokno said, referring to a rollover of 2018’s amount.
Critics have blamed budget reenactment in the past for irregularities, since — among others — such measures provide funding even for projects that have been completed.
“We’re looking at the implications, kasi kung marami pa naman disbursed or unimplemented projects na obligated but unimplemented… baka naman hindi mag-suffer ‘yung budget (because if there are still many unimplemented projects or projects whose budgets have not yet been disbursed… spending may not suffer),” Mr. Diokno explained.
“I’m looking at the flexibility of the reenacted projects,” he added.
“To me, ang gut feel ko walang (there is no) change, kasi nga marami pang undisbursed ‘yung 2017 and 2018 (precisely because there are funds that had not been disbursed in 2017 and 2018). So we will study to really digest.”
Lawmakers of both chambers, however, downplayed the possibility of a reenacted 2019 budget, saying the yearend target for enactment of a new budget should be met and that the DBM — and the Development Budget Coordinating Committee which it forms with the Finance department, the National Economic and Development Authority, the Office of the President and the central bank — has enough time to make adjustments.
Due to budget cuts for the Health, Education and Public Works departments under the proposed cash-based system, the House of Representatives Appropriations committee, chaired by Rep. Karlo Alexei B. Nograles of the first district of Davao City — Mr. Duterte’s hometown — has suspended budget hearings for now.
It has also circulated a resolution among House members to recall House Bill No. 7302 from the Senate which adopts the cash-based system and was authored by Mr. Nograles and House Majority Leader Rolando G. Andaya, Jr., among others. The House approved it in March.
Mr. Nograles sought to downplay the possibility of a reenacted budget for next year, saying there is still time to overhaul the 2019 proposal.
“When we crafted this budget schedule, we were under the assumption that we would be able to pass a 2019 General Appropriations Act by Nov. 30… (but) with this adjustment, okay lang, it’s still manageable,” Mr. Nograles said in an interview over radio station DzBB on Sunday.
“It will still be signed before December, before Christmas,” he added.
“I don’t think anybody should even discuss or think about the reenacted budget. Wala pa naman tayo d’yan (We’re not at that point yet).”
He told reporters in a mobile phone message on Saturday that “to be consistent with the position of the House to oppose cash-based budgeting, and since we will revert to obligation-based budgeting, we will give time to DBCC to make the necessary changes.”
Mr. Nograles said he was not opposed to a cash-based system per se.
“I’m saying cash-based is good; cash-based as a concept is fine…but maybe it is not the right time,” he said, noting that the new system imposes “fiscal discipline” across state offices.
“What we’re saying is baka we’re doing too many reforms too soon, hindi naka-adjust ang sistema.”
Senate finance committee chairman Senator Loren B. Legarda told reporters via text that the Senate “will continue with the budget hearings as scheduled”.
“I am confident that the House will resolve these concerns in due time.”
For Senate President Pro Tempore Ralph G. Recto, “It is the prerogative of the House to suspend hearings on the 2019 national budget.”
“We can only hope that after this pause, they can fast-forward their review so that the budget will arrive in the Senate as scheduled and will not jeopardize the traditional timetable of an enacted budget by the end of the year…,” Mr. Recto said.
“The Senate must continue with its parallel hearings on the 2019 budget.” — with Camille A. Aguinaldo and Charmaine A. Tadalan

BSP eases rules for bank fund raising via bonds

BANKS can now raise fresh capital via corporate bonds with greater ease starting this month, as new rules do away with having to secure approval from the Bangko Sentral ng Pilipinas (BSP).
Circular No. 1010, issued by BSP Governor Nestor A. Espenilla, Jr. last week, simplifies the process for universal and commercial banks looking to raise funds via bonds, aligning the industry with standards for other privately owned companies.
“The issuance of bonds/commercial papers does not need prior approval of the Bangko Sentral,” the BSP said in a statement over the weekend.
The reform forms part of streamlined rules designed to deepen domestic capital markets.
Banks still have to comply with existing rules of the Securities and Exchange Commission (SEC), which include having such debt instruments enrolled in a market supervised by the corporate regulator.
Big banks now need only to submit a certification of compliance and supporting documents to the BSP within five banking days after their boards of directors approve the bond issuance.
The BSP said this privilege is reserved to banks which are of good standing, specifically, those:

• with a score of at least 3 under the Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, and Sensitivity to Market Risk (CAMELS) rating system;

• with “no major supervisory concerns” in governance, risk management, internal control and compliance systems; and

• that have complied with directives or sanctions imposed by the BSP.

A number of banks have been tapping the capital markets in recent months as they raised more capital ahead of tighter risk management measures that will take effect on Jan. 1, 2019 under the international Basel 3 framework.
Currently, banks prefer issuing long-term negotiable certificates of deposit (LTNCDs) to raise additional funds. However, these actually entail bigger costs compared to soliciting other forms of investments, as these are actually time deposits and come with a higher reserve requirement rate.
In contrast, bonds come with a lower six percent reserve standard.
Other banks are also pursuing stock rights offers, involving the sale of additional shares to existing stockholders.
In order to observe prudence, an issuing bank and its sister firms cannot serve as market maker for the bond float “to prevent possible undue price influence and backdoor pre-termination.”
The lender must then appoint an independent third party bank to serve as underwriter. — Melissa Luz T. Lopez

Max’s Group to continue expanding in provinces

By Arra B. Francia, Reporter
MAX’S GROUP, Inc. (MGI) is following the expansion of mall operators in the provinces to further grow its brands, citing the potential to enter untapped markets in the regions.
“There’s a lot of competition in Metro Manila, and there’s a lot of untapped markets in Visayas and Mindanao and wala pa kami dun. That’s why the more we try to drive our business to regions so that they can feel our presence already,” MGI President and Chief Executive Officer Robert F. Trota told reporters at the sidelines of the 25th National Retailers’ Conference in Pasay City last Thursday.
“A lot of the retailers are also going there,” Mr. Trota added, referring to the SM and Ayala groups which have mapped out their expansion to the provinces.
The listed casual dining restaurant operator has scheduled to open 50 more stores before the end of the year, located mostly in Luzon and Visayas, with two in Mindanao.
Overseas, MGI will open around six to eight stores in the Middle East and the United States.
The new stores will carry different brands under MGI such as Max’s Restaurant, Pancake House, Yellow Cab Pizza, Krispy Kreme, Jamba Juice, Teriyaki Boy, and Dencio’s.
MGI has already opened 21 new stores in the first six months of 2018, bringing its total store count to 678 branches by end-June. Of this, 54 are located across several sites in North America, the Middle East, and Asia.
The company committed to spend P500 million in capital expenditures this year, less than half of which has already been used during the first semester.
“Most of it (the store openings) will happen on third and fourth quarter,” Mr. Trota said.
MGI grew its net income by 34% to P208.3 million in the second quarter of 2018, on the back of an 11% increase in systemwide sales to P4.9 billion during the period.
On a six-month basis, MGI’s net income was flat at P332 million, due to rising costs of raw materials. Systemwide sales meanwhile expanded by 12% to P9.3 billion for the January to June period.
The company has been implementing initiatives to have more efficient operations during the last semester through the consolidation of some subsidiaries. Mr. Trota said they have now completed the program.
“We’re done for the year, that’s just part of streamlining our operations, that’s where we get additional savings,” he explained.

MGen not keen on acquiring Ayala’s coal-fired power plants

By Victor V. Saulon, Sub-editor
MERALCO PowerGen Corp. (MGen) is not keen on acquiring the coal-fired power plants being offered by Ayala-led AC Energy, Inc., saying the company’s thrust is towards developing renewable energy.
“Personally, I’m for renewables. Ayaw ko ng (I don’t like) old technology,” Rogelio L. Singson, MGen president and chief executive officer, told reporters in a recent briefing.
He said MGen, a unit of distribution utility Manila Electric Co., shares his “personal conviction.” Should the company decide to build a new coal-fired power plant, he would prefer one that emits only steam and no particles from its smokestack.
In May this year, AC Energy announced it was looking for buyers for as much as half of its thermal energy platform and possibly raise up to $1 billion in part to support its regional expansion.
Mr. Singson also said MGen’s decision was in part because AC Energy does not hold a controlling stake in the thermal projects.
AC Energy has a 20% stake in the 632-megawatts (MW) GNPower Mariveles Coal Plant Ltd. Co.; 50% in the 668-MW GNPower Dinginin Ltd. Co.; 35% in the 244-MW South Luzon Thermal Energy Corp.; and 85% in the 552-MW GNPower Kauswagan Ltd. Co.
“Minority lang sila, hindi naman majority (They are a minority, and not a majority stakeholder),” he said, estimating AC Energy’s stake in the thermal portfolio at around 43%. “They themselves are selling because they want to shift to renewables.”
Like AC Energy, MGen has a stake in a number of coal-fired power plant projects that are in different stages of development.
Its unit Atimonan One Energy, Inc. (A1E) is building a two-unit ultra supercritical coal-fired power plant, each with a capacity of 600-MW in Atimonan, Quezon.
A1E’s PSA with distribution utility Meralco was submitted to the ERC in April 2016 and had gone through public hearings, technical working group review and assessment of the tariff.
Another unit, San Buenaventura Power Ltd. Co., is constructing a 455-MW facility in Mauban, Quezon province. The country’s first supercritical coal-fired power plant is targeted to be completed in mid-2019.
The third project, a coal-fired power plant under Redondo Peninsula Energy, Inc., has two units, each with a capacity of 300 MW using the circulating fluidized bed technology.
Mr. Singson said MGen remains keen on developing renewable power sources, including solar and wind.
In May, Mr. Singson said the company targets renewable energy to account for at least 20-30% of its attributable capacity in the coming years. He noted in the next three to four years, the company aims to develop at least 500-600 MW of renewables.
“I’ll keep it at that level,” he said, when asked if there were changes in MGen’s targets.

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