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Implementing PFRS 15: Challenges of an accounting change

ON AUG. 15, 2017, the Securities and Exchange Commission approved the adoption of Philippine Financial Reporting Standards (PFRS) 15, Revenue from contracts with customers, which became effective for annual reporting periods beginning on or after Jan. 1, 2018.

Under PFRS 15, an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to. An entity must apply the five-step model to comply with the new revenue recognition standard:

Step 1:  Identify the contract(s) with customers

Step 2:  Define the performance obligations in each contract

Step 3:  Determine the transaction price

Step 4:  Allocate the transaction price to the performance obligations in the contract

Step 5:  Recognize revenue when (or as) the entity satisfies a performance obligation

CHALLENGES
Entities in varying degrees are conducting assessments on the impact of PFRS 15 and are finding that implementing PFRS 15 is challenging. It requires more effort than what was originally anticipated, as they have to reconsider not only its accounting implications, but also its impact on multiple workstreams such as processes, information technology, legal, sales, human resources and investor relations.  These areas include:

PROJECT TEAM AND PLANNING
Entities need to form adequate project teams equipped and enabled with the requirements of PFRS 15, since effective project management is crucial to implementation. The assigned project team needs to obtain input from its business functions and stakeholders to plan and implement the PFRS 15 requirements to the various workstreams. Entities need to also ascertain that the conversion project team has adequate and appropriate governance to ensure that key judgments and decisions are appropriately vetted. Some entities find creating project teams to be particularly challenging as they need to confirm that project team members are: 1) competent on PFRS 15 requirements; 2) knowledgeable about the current revenue recognition policy and; 3) well-informed on the business functions and practices.

SETTING THE SCOPE
To determine the initial impact of PFRS 15, entities need to establish its effect on its revenue streams, including a review of its relevant contracts. Some entities have a large volume of non-homogenous contracts. Reviewing them takes a lot of time; thus, entities need to first agree on the scope for the review of these contracts (i.e., by selecting representative contracts for similar product and service offerings) and applying the five-step model to determine the revenue accounting for such contracts. Entities also need to consider additional factors such as geography, sales channels and customer types that could impact revenue streams and related contract provisions. Once the scope is set, entities can apply the requirements of PFRS 15 while considering its impact on their business functions. Thus, entities need to ensure that the scope is appropriate and complete as the assessment of the representative contracts will be the basis of the design and implementation of solutions across workstreams.

SIGNIFICANT JUDGMENTS AND ESTIMATES
PFRS 15 involves significant judgments and estimates since the new model uses broad principles rather than specific guidelines. Examples of areas requiring significant judgments and estimates include:

• Identifying a contract with customer
Entities need to identify when an arrangement will create enforceable rights and obligations as they cannot directly conclude that their current arrangements will pass the criteria of a contract in accordance with PFRS 15. Entities, along with their respective legal teams, will have to revisit the enforceability of other forms of arrangements (e.g., written, oral and implied contracts).

• Identifying performance obligations
Entities cannot directly assume that the deliverables identified in the current revenue standards will be the same as the performance obligations under PFRS 15.

An example of this is the recognition of bundled goods or services. Entities need to identify the promised goods or services within the contract and determine whether these goods or services should be considered collectively within the context of the contract as a single performance obligation. Otherwise, the promised goods or services will have to be treated as distinct and separate performance obligations. Typical questions considered by entities include:

• Is the entity fulfilling a single promise to the customer?

• Do one or more goods or services significantly modify or customize one or more of the other goods or services in the contract?

• Do two or more promised goods or services each significantly affect the other goods or services (i.e., two-way dependency between the promised goods or services)?

Entities will need to understand the facts and circumstances and apply significant judgment to determine whether goods or services are to be combined into one or treated as separate performance obligations.

Another example is the recognition of free goods or services, since PFRS 15 does not limit performance obligations that are explicitly stated in the contract. Implied promises from an entity’s customary business practice (e.g., free goods or services) can be considered performance obligations if these will create a valid expectation that an entity will transfer a good or service to the customer. Entities will need to evaluate whether these free goods or services which were previously treated as marketing incentives may qualify as identified performance obligations in the contract.

VARIABLE CONSIDERATION
Examples of variable considerations are discounts, rebates, refunds, performance bonuses and penalties.  Entities that simply recognized these amounts when cash is received will most likely be affected since PFRS 15 requires entities to estimate and update such estimate throughout the term of the contract. Under PFRS 15, recognizing revenue until the product is sold to the customer may no longer be acceptable if the only uncertainty is the variability in pricing; that is, the estimated variable consideration may now be recognized as part of the transaction price. However, there may be cases that the impact under PFRS 15 and legacy guidance (i.e., current revenue standards) will be the same if the estimated revenue will be constrained.  Constraining variable consideration prevents over-recognition of revenue (i.e., significant reversal of cumulative revenue will not occur in future periods). Entities need to use significant judgment in constraining variable consideration by considering both the probability and materiality of revenue reversal.

ALLOCATING THE TRANSACTION PRICE
PFRS 15 requires entities to determine the stand-alone selling price of all the performance obligations and allocate the transaction price based on their standalone selling prices. Entities that determined bundled goods or services which should be treated as separate performance obligations under PFRS 15, may find allocating the transaction prices challenging, particularly when the price is not currently observable.

PROCESS FLOWS AND INTERNAL CONTROL
Entities need to revisit whether they will require new/revised process flows and adjust their transaction-level controls to make sure the information used is accurate and built around the framework of sound internal control policies. Entities also need to pinpoint significant assumptions and assess their estimation methods in applying the requirements of PFRS 15. It is also critical that the new/revised processes and controls, significant assumptions and chosen methods are appropriately documented. Documentation may provide sufficient and reliable evidence to regulators and stakeholders that the management has already taken steps to consider the impact of PFRS 15.

Where are you in the journey?

It is clear that implementing an accounting change of this magnitude is a significant challenge. Entities should already be thinking about the impact and implications of PFRS 15, as proactive implementation may overcome unwanted surprises and costly mistakes. Considering the challenges of such an accounting change, how ready are companies to meet such challenges?

This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the authors and do not necessarily represent the views of SGV & Co.

Anna Maria Rubi B. Diaz is a Senior Director of SGV & Co.

Analysts’ Q4, full-year 2017 growth estimates

ECONOMISTS expect the country’s economic growth to have stayed robust and on target in 2017 on the back of higher household and government spending, albeit easing from 2016 as a widening trade deficit may have capped overall expansion. Read the full story.

Nation at a Glance — (01/22/18)

News stories from across the nation. Visit www.bworldonline.com (section: The Nation) to read more national and regional news from the Philippines.

BDO refunds victims of unauthorized withdrawals

By Melissa Luz T. Lopez,
Senior Reporter

BDO UNIBANK, Inc. has settled the account balances of depositors who have been affected by unauthorized withdrawals and purchases, its president said.

BDO Unibank President and Chief Executive Officer Nestor V. Tan told reporters late Friday that BDO “already paid in advance” depositors who lost money from spurious withdrawals from their accounts, even as the internal probe into these complaints has yet to be completed. 

“For accounts affected recently, we have been crediting back the amounts found to be unauthorized transactions,” a Jan. 17 statement from the bank’s Facebook page also read.

Although refusing to provide details, Mr. Tan said initial results of the investigations showed that the unauthorized cash withdrawals and purchases charged against the money of several depositors “came through authorized channels” of global payments platforms Visa and Mastercard.

In a Jan. 9 statement, BDO said there has been an “increased number of clients” who experienced suspicious bank transactions done without their knowledge. This mirrored an “extraordinary rise” in fraud attempts across the banking industry during the fourth quarter of 2017, the bank said.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said returning the amounts in question to depositors is an option which the listed lender can take as they look into these cases.

The central bank official said BDO’s case falls under the liability shift framework, which requires banks to shoulder losses from incidents of card skimming if the victim has not been issued the more secure microchip-based card.

“There is a process before a bank can restitute the depositor that lost the money [where] they will have an investigation. But the challenge is the investigation is taking long, and that’s where the depositors would be complaining already,” Ms. Fonacier, who heads the BSP’s bank supervision unit, said separately when sought for comment.

“There is that (provision) in the regulation where it should be that within 10 days, the bank should already be able to restitute upon report.”

Announced in December 2016, the liability shift framework transfers the burden on banks whenever a depositor falls victim to card fraud as he still uses the old magnetic strip-based cards rather than the Europay Mastercard Visa (EMV) standard now prescribed by the BSP.

Under Circular 936, complaints due to counterfeit cards need to be processed and resolved within 10 days rather than the usual 45-day standard. The same issuance requires banks to set up provisions for fraud losses, which they will use to settle amounts illegally taken from depositors.

The central bank gave all lenders until June 30, 2018 to migrate all cards, cash machines and point-of-sale terminals with microchip readers, which are deemed more secure.

Ms. Fonacier said preliminary results of BSP’s own investigation showed most of the bank cards were compromised when they were used abroad. There are roughly a hundred complaints received by the BSP, with the aggregate amount likely at P1 million “or smaller,” she added.

“You can’t blame them because even if they (BDO) are really taking steps to ensure cards won’t get skimmed, but if these cards are used as jurisdiction which is not EMV-compliant…,” the central bank official said.

In June 2017, the Sy-led bank confirmed at least 95 reports of card fraud after at least seven automated teller machines in the country were tapped into using skimming devices that stole client data and passwords.

The central bank did not impose a penalty on BDO over these incidents as they were “handled properly,” and with the bank found compliant with existing regulations.

Farm output grows slower in Q4, rebounds for the full year

VALUE of the country’s farm output grew by its slowest pace in 2017 in the fourth quarter, even as that rate marked a turnaround from a year-ago drop and enabled the sector to rebound to expansion for the full year.

October to December data released on Friday by the Philippine Statistics Authority (PSA) showed value of agricultural production growing by 2.2% in 2017’s final quarter, slowing from the preceding three months’ 2.32% though still a turnaround from the year-ago 1.09% drop.

Its slower fourth-quarter pace still enabled agriculture to grow 3.95% for the entire 2017, compared to a 2.5-3.5% annual target under the 2017-2022 Philippine Development Plan and 2016’s 1.4% drop.

Full-year 2017’s growth rate, said Rolando T. Dy, executive director of the University of Asia and the Pacific’s Center for Food and AgriBusiness via mobile phone message, “is a good record compared to PNOY’s (former president Benigno S. C. Aquino II) average of less than 1.5% a year for six years”, adding that for 2018, growth of “2.5-3.5% is attainable”.

Agriculture’s fourth-quarter growth pace likely capped gross domestic product (GDP) expansion for those three months and full-year 2017 which the PSA is scheduled to report on Jan. 23, as the agriculture, hunting, forestry and fishing sector has contributed nearly a tenth to GDP even as it has generated a fourth of total jobs. GDP grew by 6.7% in 2017’s first three quarters against the government’s 6.5-7.5% target for the full year, and Socioeconomic Planning Secretary Ernesto M. Pernia had said in mid-December that fourth-quarter GDP expansion was likely “a bit higher than 6.7%”.

LEADERS AMONG COMMODITIES
Top growth drivers among farm commodities were palay (unmilled rice), hog and chicken.

Palay, which accounted for 25.82% of total value in the fourth quarter, rebounded in value to register a 4.37% growth from a 3.62% fall a year ago.

Full-year 2017 saw palay’s performance rebound to a 6.69% increase from 2016’s 3.3% fall.

In terms of volume, palay production rebounded to a 4.37% growth in 2017’s fourth quarter to 7.318 million metric tons (MMT), compared to a year-ago 3.62% fall, similarly taking full-year performance to a 9.36% growth to 19.276 MMT from 2016’s 2.88% drop.

“This was attributed to the increases in area harvested in CAR (Cordillera Administrative Region), Cagayan Valley, Bicol and Central Visayas due to sufficient water supply during the cropping period and the recovery from damage caused by the series of typhoons in 2016,” PSA said in its report.

Growth of hog production, which contributed 14.80%, slowed to 2.75% from 3.84% for the same comparative quarters. That made full-year value of hog production grow slower by 1.49% from 5.25% in the same comparative years.

Chicken, which made up 12%, grew faster by 3.78% in the fourth quarter from 1.69% a year ago. For the full year, increase of chicken output similarly picked up to 4.26% in 2017 from a nearly flat 0.82% in 2016.

PERFORMANCE OF SUBSECTORS
In terms of subsectors, crops — which contributed 51.2% to total value of farm output in the fourth quarter — grew 2.66%, turning around from the year-ago 2.63% drop.

Besides palay, the PSA enumerated this sub-sector’s other growth drivers as banana, cassava, coconut, eggplant, peanut, rubber, sugarcane and sweet potato.

Corn, which contributed 4.76% to the total value of farm production in the fourth quarter, dropped by 5.73% by to 1.629 MMT in 2017’s final three months (compared to a 0.15% slip a year ago), although the grain managed to grow by 9.64% to 7.914 MMT for full-year 2017, turning around from 2016’s 3.99% drop.

The fourth-quarter increase brought crops’ full-year performance to a 6.69% growth in 2017 from 2016’s 3.3% fall.

Livestock, which accounted for 17.78%, saw expansion slip to 1.84% in the fourth quarter from the year-ago 3.41%. For the full year, the subsector grew by 1.12% in 2017, also slower than 2016’s 4.59%.

Fisheries, which made up 15.63%, pared its losses to a 1.18% fall in the fourth quarter from a 2.79% drop a year ago, while full-year performance similarly logged a 1.73% fall in 2017 from 2016’s 4.14% drop.

Poultry, which contributed 15.4%, saw growth pick up to 4.73% in the fourth quarter from a year-ago 1.0%, driving full-year expansion to 4.62% in 2017 from 1.39% in 2016.

PRICES BETTER
The fourth quarter also saw farmers get generally better prices for their produce, PSA reported, as average farm-gate prices grew by 6.91% in the fourth quarter from 2.56% a year ago. “All subsectors registered price increments,” PSA noted, citing crops’ 4.28% (though compared to 5.47% in 2016’s last three months), livestock’s 12.33% (from 0.43%), poultry’s 10.01% (compared to a 4.71% fall) and fisheries’ 9.08% (from 0.63%).

Prices were also generally better all year, with 2017 seeing a 4.97% increase in farm-gate prices compared to 2016’s 3.4% improvement. Full-year improvement of crop farm-gate prices, however, slowed to 2.63% in 2017 from 2016’s 6.66%, as did those of poultry at 1.2% from 2.44%. Farm-gate prices turned around for livestock (11.55% from a 1.92% drop) and fisheries (8.24% from -0.36%)

Gov’t ups Q3 GDP growth estimate; Moody’s Analytics sees Q4 slowdown

OVERALL ECONOMIC GROWTH can be expected to have picked up in the fourth quarter from a year ago, though expansion could have eased from the preceding three months, Moody’s Analytics said in a note on Friday, placing the full-year pace comfortably within the government’s 6.5-7.5% target.

The Philippine Statistics Authority (PSA) is scheduled to report fourth-quarter gross domestic product data on Jan. 23.

Economic expansion in 2017’s third quarter grew faster than initially reported, the government reported in a statement also on Friday.

The PSA said its latest estimate shows GDP — which measures the value of final goods and services produced in a country — expanded by 7.0%, slightly higher than 6.9% initially.

The slightly upgraded July-September estimate kept the average of 2017’s first three quarters at 6.7%.

Among the sectors that recorded significant revisions according to the PSA were three subsectors, namely: manufacturing (revised to 10% from 9.4%); trade and repair of motor vehicles, motorcycles, personal and household goods (7.1% from 6.8%) and mining and quarrying (6.1% from 4.6%).

In its Asia-Pacific Economic Review covering next week, Moody’s Analytics said it expects Philippine GDP growth expansion to have clocked 6.7% in 2017’s final quarter, slower than the preceding three months’ upwardly adjusted 7.0% but still faster than the year-ago 6.6%.

“Domestic demand likely remained the major driver of growth, with exports also providing lift thanks to strong demand for electronics and components,” Moody’s Analytics said in its note.

The first two months of 2017’s fourth quarter saw merchandise exports grow 4.35% year-on-year to $10.355 billion, PSA data show.

Noting that “[t]he Philippines’ economy has been a standout in recent years, underpinned by strong domestic demand and favorable demographics”, Moody’s said enactment last Dec. 19 of Republic Act No. 10963 — the first of up to five planned tax reform packages cumulatively designed to make taxation fairer and yield more revenues — provided additional impetus to growth prospects.

LandBank angles for majority in fixed-income bourse

By Elijah Joseph C. Tubayan, Reporter

THE LAND BANK of the Philippines (LandBank or LBP) is considering acquisition of a majority stake in the Philippine Dealing System Holdings Corp. (PDS) at a time the Philippine Stock Exchange (PSE) has been moving to do the same.

An unsigned Jan. 16 letter from LandBank President and Chief Executive Officer Alex V. Buenaventura to the state-run lender’s Board of Directors, e-mailed to journalists on Thursday night, said he “recommends to the Board the acquisition by Land Bank of the Philippines of a majority stake or at least 66.67% of the Philippine Dealing System Holdings Corporation.”

Mr. Buenaventura confirmed the move in a mobile phone message on Friday morning, saying the recommendation would be “submitted to the LandBank Board for approval on Jan. 23.”

”The objectives are to increase LandBank profits and to accelerate development of capital markets in the country,” he explained.

Currently, the LandBank owns 1.56% of PDS through the Bankers Association of the Philippines (BAP), according to the letter.

The state lender’s move comes amid PSE’s own steps since 2013 to acquire PDS shares in order to merge the country’s equities and fixed income bourses. Since June last year, the PSE has signed share purchase agreements with the BAP; Whistler Technologies Services, Inc.; Investment House Association of the Philippines; The Philippine American Life and General Insurance Co.; FINEX Research and Development Foundation, Inc.; San Miguel Corp. and Tata Consulting Services Asia-Pacific Pte. Ltd., giving the PSE a 61.03% total stake in PDS.

While the Philippine Competition Commission approved the agreements in November last year, they have yet to secure the green light of the Securities and Exchange Commission (SEC), which is requiring reduction of ownership of trading participants in PSE to below 20% from 27.9% currently. The SEC said last Thursday that it has given the green light for the PSE to proceed with its P3.16-billion stock rights offer next month that will reduce brokers’ ownership of the equities bourse.

”Research on the financials of comparable market infrastructure enterprises in the region and globally”, LandBank said in its letter, “indicates that… PDS is undervalued and purchasing PDS shares could be a profitable investment for LBP”.

LandBank is a government-owned and controlled corporation focused on countryside lending and was the country’s fourth-largest lender in terms of assets as of September 2017.

Its letter said that the bank would “benefit from stable recurring cash flow from the various fees PDS charges market players as the country’s central securities depository and fixed-income exchange.”

”The maturation of the domestic fixed-income market, improved financial sophistication of local investors, ASEAN financial integration, and a high growth economy underpinned on infrastructure development make PDS an attractive business model. We also foresee potential synergies with LBP’s treasury operating activities as a government securities eligible dealer.”

Hence, Mr. Buenaventura in the letter asked LandBank’s board for “authority to formally engage the Development Bank of the Philippines as the financial advisor for the transaction, pursuant to RA 9184”, or the Government Procurement Reform Act, describing this as a “vital preparatory act to initiate the acquisition process.”

Asked why LandBank made the move, Finance Secretary Carlos G. Dominguez III — ex-officio chairman of the lender’s board — recalled in a Viber message: “Around September of 2016, I told PSE to be compliant with the law with regards to the allocation of their share to groups of shareholders as a condition to SEC’s approval of their plan to acquire PDX.”

”As of now, 16 months later, they are not compliant. The development of the capital market is being slowed down by the PSE’s inability to be compliant with the law,” Mr. Dominguez added.

”The Duterte Administration will no longer tolerate private institutions thwarting the goal of achieving a robust & inclusive financial system,” he added, saying he discussed the matter “with key members of the Admin[istration]”.

PSE Chief Operating Officer Roel A. Refran declined to comment on the development as of late Friday afternoon.

‘Strong’ demand marks Duterte’s second global bond sale

THE DUTERTE ADMINISTRATION’S second global bond offer met “strong” demand, enabling the government to raise some $750 million in new money, the Finance department said in a press release on Friday.

“The strong support that this 10-year global bond float has received in the international capital markets is a testament to the deepening investor confidence in the country’s newfound status under the Duterte presidency as one of the world’s fastest-growing economies,” the statement quoted Finance Secretary Carlos G. Dominguez III as saying.

The transaction saw $1.25 billion worth of outstanding debt redeemed in a bond swap as part of liability management that reduced overall interest expense and $750 million in “new money” raised, the department added.

The new debt papers fetched a 3.0% coupon that was lower than the initial 3.3% pricing guidance.

“The capital raised from this bond float plus the additional revenue take from the newly-implemented TRAIN Law will help bankroll President Rodrigo (R.) Duterte’s ‘Build, Build, Build’ program to modernize the country’s infrastructure, sharpen its global competitiveness and sustain rapid and inclusive growth as well as financial inclusion for all Filipinos,” Mr. Dominguez added, referring to Republic Act No. 10963 — or the Tax Reform for Acceleration and Inclusion (TRAIN), the first of up to five planned such overhauls cumulatively designed to make the country’s taxation fairer while yielding more revenues.

This is the second global bond sale under Mr. Duterte, whose government sold $2 billion worth of 25-year bonds in January last year, raising $500 million in new money and swapping some $1.5 billion.

Mr. Dominguez said earlier this month that the government intends to sell yuan-denominated “panda” bonds as early as this quarter and yen-denominated “samurai” bonds “towards the end of the year.” — KANV

Cops in Arnaiz-De Guzman EJK charged

By Minde Nyl R. Dela Cruz

THE Department of Justice (DOJ) on Friday, Jan. 19, filed charges before the Caloocan Regional Trial Court (RTC) against the two policemen involved in the murder of 19-year-old Carl Angelo M. Arnaiz and 14-year-old Reynaldo “Kulot” D. De Guzman.

“After the requisite preliminary investigation conducted by the panel of prosecutors chaired by Senior Assistant State Prosecutor Ma. Emilia L. Victorio, they found probable cause to indict two of the respondents namely PO1 (Police Officer 1) Jeffrey [S.] Perez and PO1 Ricky E. Arquilita,” Acting Prosecutor General Jorge G. Catalan, Jr. said in an interview with the media.

The two cops were charged with two counts of murder; three charges of planting evidence for purportedly placing .38 caliber firearm and packets of marijuana leaves and shabu on Mr. Arnaiz; and two counts of torture for seemingly torturing Messrs. Arnaiz and De Guzman.

The charges against taxi driver Tomas M. Bagcal, on the other hand, were dismissed for “lack of probable cause.” The state prosecution noted that his participation was “involuntary due to uncontrollable fear for his life and that of his family,” the 35-page resolution reads.

Mr. Bagcal’s testimony, along with that of witness, alias Joe Daniel, formed part of the investigation to find sufficient evidence to charge Messrs. Perez and Arquilita.

According to the prosecution panel, “Treachery is attendant in this case. As attested by the witnesses, Carl Angelo was handcuffed at the time he was shot and killed by respondent-police officers, thus, there was no way for him to defend himself or even retaliate.”

The prosecution also found “conspiracy” in the commission of the crime.

“They planned and committed all the crimes with a common desire to eliminate their subjects. They even portrayed that the death of Carl Angelo was the product of a shoot-out in a legitimate police/hot pursuit in order to cover up the intended killings of Carl Angelo and Reynaldo [alias] ‘Kulot,’” the resolution read.

On Aug. 28, 2017, Mr. Arnaiz was found in a funeral parlor in Caloocan City. The police claimed he was killed in a legitimate operation for having held up Mr. Bagcal.

Mr. De Guzman, meanwhile, was found floating in a creek on Sept. 6, after missing for more than two weeks. He sustained 28 stab wounds.

Based on the claims of alias Joe Daniel, the two policemen shot Mr. Arnaiz, while he was handcuffed and kneeling, five times and placed a gun in his hand. Mr. De Guzman was apprehended with Mr. Arnaiz and was last seen in the police mobile of Caloocan police.

PPA: Cargo volume from January to November 2017 almost flat

By Patrizia Paola C. Marcelo, Reporter

TOTAL cargo volume from January to November 2017 posted flat growth, registering a 0.81% increase.

In a statement, the Philippine Ports Authority (PPA) said that total cargo volume in the country from January to November 2017 registered an almost flat growth of 0.81%, to 227.312 million metric tons (mmt) from 225.495 mmt a year earlier.

On the other hand, local traffic of cargo recorded better figures.

Domestic traffic increased by 2.3%, while foreign cargoes “registered flat growth.”

Total container traffic increased by 53% to 9.084 million twenty-foot equivalent units (TEUs) from 5.940 million TEUs last year.

Foreign container traffic recorded a 23.25% increase in container volume to 4.361 million TEUs from 3.538 million TEUs last year.

“The positive outcome in traffic was propelled heavily by the continued reliance by the sea-traveling public on Ro-Ro vessels, fast crafts, and motorized bancas as primary mode of transportation for domestic inter-island connectivity,” PPA General Manager Jay Daniel R. Santiago said in a statement.

“In addition, the positive stream in passenger traffic serviced at the ports may have also been the result of favorable response of the public to the government’s domestic eco-tourism programs encouraging leisure inter-island Ro-Ro travel to tourist destinations such as Siargao, Puerto Galera, Bohol, Coron, El Nido, and other emerging tourism sites.”

Ship calls increased by 3.27% to 410,384 from 397,397 calls a year earlier.

Government to terminate contract with airport services provider

By Patrizia Paola C. Marcelo, Reporter

THE Manila International Airport Authority (MIAA) will no longer renew its contract with Miascor Groundhandling Corp., following a reported incident of baggage theft.

MIAA General Manager Eddie V. Monreal said in a letter dated Jan. 19 to Miascor that its lease and concession agreement will no longer be renewed, adding that he had ordered the aviation services company to vacate within 60 days all premises occupied in the airport complex.

“We have issued non-renewal of license to operate. Hindi naman immediate (It’s not immediate)….We gave 60 days to wind down their operations so we have a smooth transition. Kailangan hindi sila ma-disrupt players sa airport (But other operations at the airport should not be disrupted),” Mr. Monreal said.

President Rodrigo R. Duterte on Thursday ordered the termination of the contract with Miascor following a luggage theft incident at the Clark International Airport.

“Sabihin mo talaga ‘yan sa Miascor na — gusto niyo kayo ang pumatay niyan? Kay ‘pag hindi, kayo ang bibirahin ko,” Mr. Duterte said on Thursday. (Tell Miascor — you want to kill him? Because if not, I’ll hit you.)

Passenger Jovinal dela Cruz, an overseas Filipino worker, went on social media to post about the pilferage of his belongings. Six Miascor employees assigned at Clark were terminated and now face administrative charges.

“So the President wants…to put a stop. S-T-O-P. kailangan huminto ang mga ganitong pangyayari…(These incidents should stop)” Mr. Monreal said in a press conference yesterday.

He said there were 26 reported incidents of pilfering in 2016 and seven, last year.

In a statement, Miascor Holdings, Inc. said it will appeal the decision for its employees. “We shall formally issue an appeal to the President to kindly reconsider his position on behalf of our almost 4,000 regular employees and their families who will be affected. It is unfortunate that the actions of six erring employees in Clark International Airport have negatively impacted the company,” the statement reads.

Ayala reorganizing energy holdings into thermal, renewable businesses

AYALA Corp. is restructuring its energy business by creating two wholly owned platforms to house its investments in renewable energy and thermal energy, the diversified conglomerate told the stock exchange on Friday.

AC Energy Holdings, Inc., its holding firm handling its investments in the sector, will be retained, it added.

“Ayala will retain AC Energy as its umbrella brand for its energy group of companies, which will primarily consist of AC Renewables Inc. and ACE Thermal Inc.,” the listed firm said.

In a statement, AC Energy Chairman Fernando Zobel de Ayala said: “AC Energy has scaled up rapidly over the last five years, and we believe that having these two exciting platforms will enable focused strategies and accelerate our growth.”

In its disclosure, Ayala said the restructuring will be undertaken in three steps, the first of which is the creation of a new holding company, AC Renewables. The group will then transfer its renewable assets to AC Renewables.

It also said an existing thermal holdings company will be renamed ACE Thermal Inc. Its board of directors has approved the restructuring of the Ayalas’ energy business.

John Eric T. Francia, AC Energy president and chief executive officer, said: “We recognize that renewables and conventional power are two distinct businesses that attract different types of investors. This move therefore provides AC Energy a sharper proposition and greater flexibility in the event that we broaden our investor base for our platforms.”

AC Energy targets the development by 2020 of up to 2,000 megawatts (MW) of capacity, of which 1,000 MW is targeted to come from renewable energy. The company had 1,000 MW as of 2016 from a mix of energy resources.

AC Energy has said that of the company’s roughly $1 billion investments in energy, 20% had been placed in Indonesia.

Aside from the 75-MW Sidrap wind farm joint venture project in South Sulawesi, AC Energy also acquired Chevron Corp.’s geothermal operations in Indonesia.

In the Philippines, AC Energy has a 20% stake in the 632-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.

Its 19.8% stake in the 637-MW geothermal steam and power capacity in Darajat and Salak geothermal fields along with its 75% stake in the 75-MW wind farm project in Sidrap more than doubled the company’s clean energy capacity to at least 264 MW.

In November, AC Energy secured approval from the Philippine Competition Commission for its plan to acquire Negros Island Biomass Holdings, Inc. (Islabio), which has stakes in three biomass projects.

The acquisition, through AC Energy subsidiary Presage Corp., covers Islabio’s outstanding capital stock equivalent to 50,005 common shares. Presage will gain control of Islabio and its operating subsidiaries, thus expanding AC Energy’s renewable energy portfolio to include biomass. — Victor V. Saulon

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