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Factory output picks up in January

THE Philippine Statistics Authority’s Monthly Integrated Survey of Selected Industries showed factory output, as measured by the volume of production index (VoPI), went up by 1.9% annually in January, faster than the revised 1.6% in December. — PHILIPPINE STAR/KJ ROSALES

MANUFACTURING OUTPUT picked up in January to its fastest pace in four months, the Philippine Statistics Authority (PSA) reported on Thursday.

Preliminary data from the PSA’s Monthly Integrated Survey of Selected Industries (MISSI) showed factory output, as measured by the volume of production index (VoPI), rose by 1.9% annually, faster than 1.6% in December.

However, this was slower than 7.3% in January 2023.

The sector’s output has been in positive territory for 19 straight months.

January’s VoPI growth was the fastest since 9.3% in September.

Month on month, manufacturing’s VoPI grew by 1.7%, a turnaround from the 6.7% drop in December. Stripping out seasonality factors, output fell by 0.3% from 0.1% growth the previous month.

In comparison, S&P Global Philippines Manufacturing Purchasing Managers’ Index (PMI) slid to 50.9 in January from 51.5 in December. A PMI reading above 50 shows improvement in operating conditions, while a reading below 50 shows the opposite.

Analysts attributed the year-on-year slowdown to the decline in the heavily weighted food manufacturing and base effects.

“The slowdown may be traced to the drop off in food manufacturing, which does account for a sizable portion of total manufacturing,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail.

Food manufacturing’s VoPI contracted by 4.7% in January, the 11th straight month of decline. This was worse than the 4.3% drop in December and a reversal of 6.4% growth a year earlier.

The food products index accounted for 18.7% of manufacturing activity.

“This could be due to a combination of factors, including a higher base for comparison in 2024 due to strong performance in the previous year, ongoing geopolitical tensions impacting supply chains, and other potential factors like rising interest rates and labor shortages,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in an e-mail.

In a phone interview, Philippine Exporters Confederation, Inc. (Philexport) President Sergio R. Ortiz-Luis, Jr. said he expected bigger growth in the manufacturing sector, but it was affected by geopolitical tensions.

The PSA said the growth in VoPI for January might be due to a slower annual drop in the manufacture of computer, electronic and optical products to 7.1% in January from 16.5% in December.

“The slower decline in electronics and optical products bodes well as this will likely translate to a gradual improvement in our electronics exports, although we remain cautious given the still soft global demand picture for basic electronic items,” Mr. Mapa said.

The PSA said the top three industry divisions that contributed to VoPI growth were coke and refined petroleum products (32% in January from 37.8% in December); fabricated metal products, except machinery and equipment (11.5% from -11.7%); and electrical equipment (10.5% from 40%).

Average capacity utilization — the extent industry resources are used in producing goods — averaged 74.5% in January, up from 74.4% in December and 73% a year earlier.

All industry divisions reported capacity utilization rates above 50%, with basic pharmaceutical products and pharmaceutical preparations reporting the slowest rate at 55%.

“We can expect manufacturing to possibly face challenges in the first half due to the potential impact on food items, and in turn food manufacturing, due to the El Niño weather phenomenon,” Mr. Mapa said.

He added that a rebound is likely in the second half as food production normalizes and demand for electronics improves. — Karis Kasarinlan Paolo D. Mendoza

BSP open to issuing more licenses to digital banks

MACROVECTOR/FREEPIK

By Beatriz Marie D. Cruz, Reporter

THE PHILIPPINE central bank is considering issuing more licenses to digital banks on top of the six operating now after receiving expressions of interest from several entities, its governor said.

“Once we understand more, we’re happy to open it up so that we can issue more digital licenses,” Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. told a news briefing on Wednesday. “We’re looking at what’s going on and we’re trying to understand the new business models that they bring.”

Digital banks in Asia and the world have barely disrupted their nondigital counterparts years after being allowed to operate, with many still in the red. Only two of the six digital banks in the Philippines are making money.

“I think many are interested, quite a few are interested, and they can’t wait for us to open it up,” Mr. Remolona said.

BSP Director Melchor T. Plabasan said the industry report on the digital banking sector would be released by April.

“We are expected to submit an industry report and part of that report is our recommendation on whether to, let’s say, is it going to be a partial lifting, is it complete lifting, or is it going to be an extension of the moratorium,” he told the same briefing.

The report will focus on the impact of digital banks on the overall financial system.

In 2021, the BSP capped the number of digital banking licenses to six as it monitors the development of the sector and boosts its regulatory capacity.

The six online lenders operating in the country are: Tonik Digital Bank, Inc.; GoTyme Bank of the Gokongwei group and Singapore-based Tyme; Maya Bank of Voyager Innovations, Inc.; Overseas Filipino Bank, a subsidiary of Land Bank of the Philippines; UNObank of DigibankASIA Pte. Ltd.; and UnionDigital Bank of Union Bank of the Philippines, Inc. (UnionBank).

“The reason that we have issued only six licenses for digital banks is because we want them to try different things and try to succeed in doing banking in a purely digital way,” Mr. Remolona said.

However, the BSP chief noted that digital banks continue to struggle with loan disbursements and collections.

Only two out of the six digital banks are profitable at present, the central bank said.

“The expectation is that it would take around five to seven years before a digital bank becomes profitable,” Mr. Plabasan said, noting that only 5% of online banks globally are profitable.

“We are expecting that there will be losses, but we don’t expect that some will be out of the red already, probably even before the five to seven years,” he added.

Overall, the six online banks have about 8.7 million deposit accounts, which make up 7% of the banking industry, Mr. Plabasan said.

UnionBank Chief Economist Ruben Carlo O. Asuncion said lifting the moratorium is acknowledgment that more players are needed to drive the BSP’s financial inclusion goals.

“There are a lot of rules that are in place to prevent the addition of more players in the digital banking space from causing system risks,” he said in a Viber message.

Security Bank Corp. Chief Economist Robert Dan J. Roces said lifting the moratorium on digital banking licenses would boost innovation and financial inclusion.

“Stringent licensing requirements like rigorous due diligence and robust risk management frameworks will help mitigate systemic risk, along with a phased approach with close supervision, regular stress tests, and open communication that will allow the BSP to adapt its regulations as the digital banking landscape evolves,” Mr. Roces said in a Viber chat.

Enrico P. Villanueva, a senior lecturer at the University of the Philippines Los Baños Economics Department, said the BSP should look into how digital banks can continue to offer high deposit interest rates.

“Raising deposits via high interest rate offers is easy, but can that model be sustained? Do these banks have sufficient assets and margin to pay their high deposit costs?” he said in an X (formerly Twitter) message.

All eyes on lack of storage, logistics costs as food drives Philippine inflation

Rice inflation quickened to 23.7% in February from 22.6% in January, the fastest since the 24.6% recorded in February 2009. — PHILIPPINE STAR/WALTER BOLLOZOS

By Kyle Aristophere T. Atienza, Reporter

THE MARCOS administration should work with the private sector in cutting logistics costs while building more storage facilities nationwide to ease the impact of rising prices, economists said.

An archipelagic nation like the Philippines should ensure that storage facilities for basic commodities such as rice and vegetables, as well as logistics networks, are “sufficient and working well,” Geny F. Lapina, an agricultural economist at the University of the Philippines Los Baños (UPLB), said in an e-mail.

“It will be useful to have the private sector as a partner because the government cannot provide all the logistics and storage requirements of the country,” he said.

Inflation accelerated for the first time in five months to 3.4% in February, mainly due to rising food prices. 

In particular, rice inflation quickened to 23.7% in February from 22.6% in January, the fastest since 24.6% in February 2009.

Mr. Lapina said the food-driven inflation should be addressed by ensuring the country has enough supply. He said the government is struggling to strike a balance between prioritizing local producers and using imports to address supply issues.

“Our agriculture sector is also facing El Niño, which means crops are affected differently. In the case of rice, there is a concern that palay production may be negatively affected due to less water availability,” he said.

The Philippine disaster council on Wednesday said El Niño’s damage to agriculture had already hit over P1 billion.

On Thursday, the state weather bureau said El Niño has started to weaken and that it might return to its normal condition between April and June. However, an increasing probability of La Niña may develop two months into August.

Mr. Lapina said the government has been increasing its support for agriculture but it has been mainly directed toward rice.

“A tradeoff is that we are unable to support other traditional crops that may be good for food security and help us be more resilient given climate change and multiple challenges that can affect our domestic food system,” he said.

He also called for more government funding for research as a long-term solution to farm productivity issues.

Amid the surprise reacceleration in February inflation, there have been questions on whether the central bank still needs to increase borrowing costs. The Bangko Sentral ng Pilipinas (BSP) kept its benchmark rate steady at a near 17-year high of 6.5% in February for a third straight meeting.

“The BSP implements monetary policy actions to forestall second-round effects of supply-side issues, while recognizing that this is an imperfect approach,” Bruce J. Tolentino, the private sector’s representative to the Monetary Board, said in an X (formerly Twitter)  message.

BSP Governor Eli M. Remolona, Jr. on Wednesday said it’s too early to declare victory over inflation, citing upside risks from rice prices and potential wage hikes.

On the issue of rising rice prices, Mr. Tolentino said improving farmer productivity and income as well as expanding irrigation systems are needed.

“The only sustainable way to do that is to ensure that farmers have access to, and use, improved seeds and biotechnology,” he said. “[These] programs should be started immediately and continued into the medium and long terms.”

Mr. Tolentino said domestic productivity improvements take time, so the government should focus on consumer access to “competitively priced food, and also manage inflation.”

“The moves to establish trade agreements with Vietnam and Cambodia, and also with India, are good,” he added, citing the need to remove trade barriers.

Raul Montemayor of the Federation of Free Farmers said: “As usual, one-track mind — import, import, import.”

Jayson C. Cainglet of the Samahang Industriya ng Agrikultura  lamented that the country has been under a low-tariff regime for the past three years but “prices have never gone down.”

“It does not benefit the consumers and producers, and the government is losing billions in foregone revenues, ” he said via Viber.

Mr. Marcos, who had vowed to lessen imports as much as possible early in his term, in December 2023 signed an executive order extending lower tariffs on pork, rice, corn and coal until the end of this year, saying the previous order had failed to lower prices.

Enrico P. Villanueva, who teaches money and banking at the UPLB, said the government must ensure reliable tracking and projection of supply of food and push for policies and permits that promote timely imports in amounts that do not kill the local industry.

It also needs to boost the campaign against smugglers and, as a long-term solution, train a new generation of farmers that are savvy not only in production but also in trade negotiation, he said in an e-mail.

“A country with the majority of households struggling to feed themselves, and with no surplus consumer budget, has very limited market potential, and therefore not very attractive to investors,” Mr. Villanueva said.

Hansley A. Juliano, who teaches political science at the Ateneo de Manila University, expects politicians to make populist promises to address rising food prices ahead of the 2025 midterm polls.

The public should push discussions on the impact of furthering trade commitments and imposing trade regulations on the country’s food supply and the resilience of the agriculture sector, he said in a Facebook Messenger chat.

Higher power rate looms as Meralco, ACEN jointly seek relief from ERC

Consumers may face higher electricity bills in the coming months. — PHILIPPINE STAR/RUSSELL PALMA

By Ashley Erika O. Jose, Reporter

MANILA ELECTRIC CO. (Meralco) and ACEN Corp. are jointly seeking relief from the energy regulator to recover P700 million in additional fuel costs incurred by the Ayala-led energy company in relation to its supply deals with the power utility.

“It is actually lower than initially proposed because that is the condition for the joint filing, but we have already filed,” Meralco Executive Vice-President and Chief Operating Officer Ronnie L. Aperocho told reporters on the sidelines of a Metro Pacific Investments Corp.’s (MPIC) financial briefing on Wednesday.

Initially, ACEN intends to recover over P2.5 billion additional fuel costs related to power supply deals with Meralco, citing a change in circumstances resulting in higher coal prices.

Monalisa C. Dimalanta, Energy Regulatory Commission (ERC) chairperson, did not provide a clear timeline for its decision as the petition needs to be verified for now.

ACEN’s claim covers the two power supply deals with Meralco, with the power sourced from South Luzon Thermal Energy Corp.’s coal-fired plant.

Once approved, the estimated P706.14-million claim would translate to a rate increase of about 4 centavos per kilowatt-hour (kWh).

Jose Ronald V. Valles, Meralco first vice-president and head of its regulatory management, earlier said the company is joining the petition because it wants to preserve the power supply deal.

“The reason why we’re joining the filing is we want to preserve the power supply agreements. Under the contract, if we don’t agree to file and seek the approval of the ERC for the claim, then they have a recourse to terminate the power supply agreements, which is provided for under the contract,” he said.

Meralco had proposed to recover these costs in a six-month period by about P0.04 per kWh in the February billing period, P0.04 per kWh in March, P0.04 per kWh in April, P0.03 per kWh in May, P0.03 per kWh in June and P0.04 per kWh in June.

“This is not unexpected. With the CA (Court of Appeals) supporting SMC’s (San Miguel Corp.) position that they can break their contract and pass on P5 billion in alleged losses to consumers, other companies will naturally want the same deal and increase their profits by raising prices even if their contracts do not allow it,”  Gerry C. Arances, convenor of Power for People Coalition (P4P), said in a message.

In 2022, San Miguel Global Power Holdings Corp. sought a similar claim where it filed for a rate increase to recover P5 billion of P15 billion in losses it incurred due to change in circumstances.

The ERC denied SMC’s petition, saying its power supply agreement with Meralco had no basis because the contract is a fixed-rate deal. SMC filed an appeal with the ERC, and later at the Court of Appeals (CA).

The CA later issued a decision favoring SMC, allowing it to terminate its contract with Meralco.

“We hope that the Energy Regulatory Commission will reject that claim as they did with San Miguel, for the same reason — they have to abide by their fixed-price contract,” Mr. Arances said.

Meralco’s controlling stakeholder, Beacon Electric Asset Holdings, Inc., is partly owned by PLDT Inc.

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has an interest in BusinessWorld through the Philippine Star Group, which it controls.

Enhancing online experiences with fiber internet’s blazing speed

From simple tasks such as updating spreadsheets to seamless communication with clients and stakeholders, individuals and businesses heavily rely on their internet providers to support their daily operations. In today’s fast-paced business environment, a reliable internet connection is no longer a luxury but a necessity.

Hailed by Ookla, the global leader in mobile and broadband network intelligence, as the fastest and most awarded provider in the Philippines, broadband internet service provider Converge ICT Solutions, Inc. (Converge) continues to lead the country’s telecommunications sector in transforming industries for economic growth.

According to Ookla’s Speedtest Awards, Converge outpaced all competitors delivering top download speeds of 457.56 Mbps and upload speeds of 448.15 Mbps surpassing the national top download and upload speeds of 365.19 Mbps and 357.99 Mbps in the third and fourth quarters of 2023. Ookla also recognized Converge as the best internet gaming and video experience with scores of 88.27 and 86.58, respectively. Whether streaming in 4K, engaging in high-stakes gaming battles, or video conferencing with colleagues around the Metro, Converge ensures seamless, lag-free connectivity.

“As more customers turn to our solutions for their internet needs, we stay rooted to our commitment towards exceptional service as shown by our wins in the Ookla Speedtest Awards,” Converge CEO and Co-Founder Dennis Anthony Uy said during the company’s lighting ceremony of its Manila headquarters on Feb. 22.

BOOSTING INTERNET SPEEDS

Furthermore, in celebration of its clean sweep of Ookla’s Speedtest Awards, Converge is expressing its gratitude by enabling its two million subscribers to experience even faster internet connections through their #Boostmode campaign.

Through this program, the telco company is once again showing its unwavering commitment to customer experience and satisfaction as it boosts its FiberX plans by as much as 600 Mbps for free to its existing clients. This nationwide and automatic speed boost requires no additional cost, criteria, or sign-ups to avail.

“This speed upgrade is our way to say we are in full #BoostMode in ensuring our customers can enjoy a much better online experience with us as their connectivity partner,” Mr. Uy said.

From Feb. 22 to March 31, Converge’s flagship FiberX 1500 plan will receive an upgrade boosting the internet speeds of subscribers from 200 Mbps to 300 Mbps. Despite being the company’s most basic plan suitable for Filipino households, FiberX 1500 comes with no data cap allowing families to stream, share, and scroll with fast speeds and no restrictions.

FiberX Plan 2000, FiberX Plan 2500, and FiberX Plan 3500 will also get speed boosts as part of the celebration. The said plans can now reach bandwidths of up to 500 Mbps, 700 Mbps, and 1 Gbps, respectively.

Meanwhile, Converge’s award-winning Time of Day plan will receive faster internet speeds as well. The setup allows individuals with work-from-home and learn-from-home arrangements to receive fast bandwidths in their downtime and even faster speeds during work.

Subscribers of this plan will experience a speed boost of up to 1 Gbps which will enable them to receive double their subscribed bandwidth from 7 a.m. to 6:59 p.m. for the Day Plan, and from 7 p.m. to 6:59 a.m. for the Night Plan.

In addition, the first fixed pure-fiber broadband plan in the country dedicated for gamers and gaming enthusiasts will similarly receive a speed boost to further enhance subscribers’ gaming experience. Aside from high prioritization access, low latency, and low jittering, Converge’s GameChanger plan will automatically get a speed boost of at least 500 Mbps up to 1 Gbps.

“Converge has always been about amazing customer experience and our awards prove that. The annual speed increase that we gift to our more than 2 million subscribers is just one of our pledges to our customers,” said Converge EVP & Chief Commercial Officer Benjamin B. Azada.

POWERING BUSINESSES WITH FIBER

Converge remains committed to extending connectivity to the farthest and least developed areas of the Philippines through groundbreaking technology and affordable plans. The telco company exceeded two million residential subscribers last year after deploying nearly 7.9 million fiber ports, which covers approximately 77.85% of the country’s population.

The broadband service provider also boasts a fiber footprint spanning over 682,000 kilometers with further investments in the Bifrost Cable System, the first trans-Pacific cable connecting Southeast Asia to the west coast of North America; and the SEA-H2X Submarine Cable System, the direct trans-Asia cable connecting the Philippines to Hong Kong and Singapore, and Hong Kong to Singapore.

These investments are expected to make the Philippines’ fastest and top-rated internet provider even faster and even better in the coming years.

Anchored on the dream of digital democracy, Converge also has tailor-made digital fiber solutions for individuals, small businesses, and corporations. Already mentioned above are Converge’s GameChanger and Time of Day plan, which cater to gamers and work-from-home individuals.

Likewise, the company offers the Homebase plan that empowers startups and home-based businesses by providing affordable and reliable internet connection for their daily operations, online transactions, and other office requirements.

Small and medium enterprises (SMEs) can benefit from Converge’s flexiBIZ plan as well. Aside from faster bandwidths based on the business’ preferred time of day, the internet provider also offers value-added solutions that can help grow emerging companies.

Furthermore, SMEs can optimize their operations through Converge Workplace Solutions. Through the plan, the company offers automated HR and payroll features such as automated payroll management, government reports and filing management as well as timekeeping and attendance keeping.

Converge Workplace Solutions also offers companies cloud-based hotel management software, which will allow them to avail services such as property management solutions, online booking engines, and channel managers.

The plan also comes with easy-to-use business productivity devices such as the FiberX Share WiFi Router for faster internet, Fiberscope HD CCTV Camera ensuring safety, and a Seamless WiFi Mesh Router which eliminates office signal dead spots.

Converge also offers the Direct Internet Access plan dedicated to enterprises ensuring smooth internet browsing through premium connection to the global public internet backbone delivered via multiple routes and diverse fiber optic submarine cable.

While being considered the youngest end-to-end fiber network in the Philippines, Converge has been at the forefront of digitalization in the country in recent years, empowering all Filipinos and businesses and reaching the farthest and least developed areas of the Philippines.

 

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Uncapping the Philippines’ renewable energy potential

Photo from Pixabay

Renewable energy is quickly becoming integral to the future of economic development, not only because of concerns about mitigating the effects on climate change, but also as a sustainable and efficient means to meet the ever-increasing energy needs of a developing world.

In fact, the International Energy Agency (IEA) found that countries all over the world added as much as 50% more renewable capacity in 2023 than in 2022, predicting that the pace will accelerate over the next five years until it has hit a peak.

“The world’s capacity to generate renewable electricity is expanding faster than at any time in the last three decades, giving it a real chance of achieving the goal of tripling global capacity by 2030 that governments set at the COP28 climate change conference,” the IEA says in a new report.

According to Renewables 2023, the IEA’s annual market report on the sector, the amount of renewable energy capacity added to energy systems around the world have pushed it to almost 510 gigawatts (GW), with solar PV accounting for three-quarters of additions worldwide.

China saw the most increase, commissioning as much solar PV in 2023 as the entire globe did in 2022. At the same time, it also added 66% more wind power to its grid. All-time highs were also reached by the expansions of renewable energy capacity in Brazil, the US, and Europe.

The IEA noted, however, that a lack of financing for emerging and developing economies is a key issue that will hinder renewables’ growth if left unaddressed.

“The new IEA report shows that under current policies and market conditions, global renewable capacity is already on course to increase by two-and-a-half times by 2030. It’s not enough yet to reach the COP28 goal of tripling renewables, but we’re moving closer — and governments have the tools needed to close the gap,” said IEA Executive Director Fatih Birol.

“Onshore wind and solar PV are cheaper today than new fossil fuel plants almost everywhere and cheaper than existing fossil fuel plants in most countries. There are still some big hurdles to overcome, including the difficult global macroeconomic environment,” Mr. Birol added.

He also emphasized the most pressing challenge for the international community at large was “rapidly scaling up financing and deployment of renewables in most emerging and developing economies, many of which are being left behind in the new energy economy.”

“Success in meeting the tripling goal will hinge on this,” he said.

Photo from Pixabay

Fortunately for the Philippines, the renewable energy (RE) sector has been picking up steam. The country recently placed fourth place in the Climatescope report issued by BloombergNEF, which analyzes clean energy progress and investment attractiveness across 110 developing economies.

The report pointed to the Philippines’ green energy auctions, feed-in tariffs, net-metering programs, tax breaks, and aggressive RE targets as the factors that pushed the country to break into the top five for the first time. The Department of Energy (DoE) wants to see a rise in the percentage of renewable energy to 35% by 2030 and 50% by 2040.

Endowed with a diverse array of natural resources and a burgeoning commitment to sustainable development, the Philippines is slowly gaining worldwide attention with its renewable energy potential. Key sectors such as geothermal, solar, wind, hydropower, biomass, and emerging technologies like marine renewables are ripe for investment from both local and foreign firms.

In 2023, the country also saw renewable energy commercial projects with awarded service contracts rising by 26%, led by solar technology, according to data released by the DoE. RE projects for the year totaled 1,220 with a potential capacity of 134,813.79 megawatts (MW), higher than the 965 recorded in 2022 with a capacity of 80,396.61 MW.

Of the total, there are 434 solar projects in the country with a 28,913.78-MW potential capacity. This was followed by 428 hydropower projects with 18,902.96 MW and 252 wind power projects with 85,692.964 MW.

In addition, there are also 58 biomass projects with 206.88 MW; 39 geothermal projects with 1,063.20 MW; and nine ocean energy projects with 34 MW.

Moreover, the Maharlika Investment Corp. (MIC), which governs the Maharlika Investment Fund (MIF), the sovereign wealth fund instituted by the Marcos Jr. administration, identified the RE sector to likely be the first target sector to receive investment.

“I can only talk about sectors because we’ve got non-disclosure agreements with those who we’re speaking with. So, we’re aiming for… energy sector would be the first, I think. Then you’ve got infrastructure and agriculture,” MIC President and Chief Executive Officer Rafael Consing, Jr. was quoted as saying, adding that energy security is one of the MIC’s sectors of focus.

In particular, the MIC is focusing on the RE sector as a means to find new sources of electricity to diversify supply and create price stability, grid modernization, and distribution.

“In my opinion, in terms of the amount we will commit for the year, I think a big portion of it really will be coming from energy,” he said. “Well, the reasons are quite obvious, right? I mean, you and I, we pay for very high electricity costs, right? And it takes a bit of time to build up that electricity.”

On the consumer side, the majority of Filipinos are open to welcoming RE into their lives, as most see the need to increase the Philippines’ sources of energy, according to the results of a survey conducted by Pulse Asia Research, Inc. released November last year.

The survey, which was done between Sept. 10 and 14 with 1,200 participating adults nationwide, found that 85% of Filipinos think that using more RE sources is “truly important.” This is likewise the prevalent opinion across all socioeconomic classes.

According to the results, the vast majority of Filipinos have felt the consequences of climate change within the previous three years.

Ronald Holmes, president of Pulse Asia, stated that the data clearly shows that Filipinos are part of the global movement toward renewable energy sources.

“This is a sentiment in terms of favoring renewable energy sources, a sentiment that is shared by many Filipinos,” Mr. Holmes had said. — Bjorn Biel M. Beltran

Moody’s: Economic growth, rate cuts to boost Philippine lenders

PHILIPPINE STAR/MIGUEL DE GUZMAN

By Beatriz Marie D. Cruz, Reporter

SOLID ECONOMIC GROWTH and the potential for interest rate cuts are expected to boost lenders in the Asia-Pacific region this year, Moody’s Investors Service said, as it kept a “stable” outlook for 13 banking systems in the region including the Philippines.

“We maintain a stable outlook for the Philippines’ banking system,” the rating company said in a report. “Solid economic growth and the potential for rate cuts in the second half of 2024 will support economic recovery and limit asset quality stress.”

A “stable” outlook means Moody’s assessment of rated local lenders is likely to be steady in the next 12 to 18 months. The debt watcher rates eight lenders in the country whose total assets accounted for 67% of the sector’s total as of end-September.

Moody’s expects the Philippine economy to grow by 5.9% this year and by 6% in 2025, behind the government’s target of 6.5-7.5% this year and 6.5-8% from 2025 to 2028. Economic growth was 5.6% last year, short of the state’s 6-7% target.

“Strong domestic consumption underpins growth, and this insulates against the impact of subdued growth of large global economies,” it said.

Inflation quickened to 3.4% in February due to rising food and transport costs, from 2.8% a month earlier and 8.6% a year ago.

In the report, the credit watcher said it expects Philippine banks’ profitability to remain stable in the first half as depositors shift to more expensive term deposits amid elevated interest rates.

“Upward repricing of loans will also be limited due to higher loan competition amid soft credit demand,” it added.

Net interest margins will then gradually expand in the second half as lenders begin to expand into retail and small and medium enterprises (SME).

Moody’s said this could increase returns but also loan loss provisions as the retail and SME sectors face asset quality risks due to high interest rates.

The credit watcher also expects the Philippine central bank to “gradually” cut interest rates by the second half, saying this would likely not affect margins due to lagged effects.

The asset quality of loans to the corporate sector will also remain stable as companies expect earnings to improve alongside the country’s growth. The expected rate cuts by the BSP are expected to support the industry’s overall asset quality.

Philippine banks’ net income rose by 14.95% to P356.49 billion last year amid higher interest income and trading gains, according to central bank data.

BSP Governor Eli M. Remolona, Jr. has said the central bank is unlikely to cut benchmark interest rates in the near term due to inflation risks.

The Monetary Board raised the key rate by 450 basis points to a near 17-year high of 6.5% from May 2022 to October 2023.

The banking industry’s nonperforming loan (NPL) ratio fell to 3.23% in December — the lowest in a year — as borrowers paid their debts amid low unemployment rates and slower inflation.

Lenders’ gross NPLs stood at P446.99 billion, rising by 12.09% from a year earlier but down by 1.6% from end-November.

“Banks’ loan loss coverage and capitalization will remain strong, with internal capital generation keeping pace with loan growth,” Moody’s said. “Funding and liquidity in the banking system will remain robust.”

LOAN GROWTH
Capital buffers would remain high due to strong shareholder support amid sustained profit and loan growth, it added.

Moody’s expects the industry’s loan growth at 10% this year, dampened by elevated rates in the first half before slightly picking up in the second half once the BSP begins cutting rates.

“We expect the impact of declining interest rates on the valuation of banks’ holdings of fixed-rate government securities to be positive in 2024,” it said.

Deposits are expected to grow in line with loan demand due to high interest rates, resulting in stable loan-to-deposit ratios.

Moody’s said rate cuts later in the year would result in “a turnaround in growth trends for deposits and loans.”

The BSP is expected to provide liquidity to the financial system in case of any sudden change in economic conditions.

Moody’s expects the government to support rated banks. “It is unlikely to adopt a bail-in regime in the next 12 to 18 months,” it said.

Banks in the Philippines and 12 other countries got a stable outlook, while China, Hong Kong, Korea received a negative outlook.

The Philippines has a “Baa2” sovereign rating — a notch above minimum investment grade — with a stable outlook from Moody’s, affirmed in September last year.

PLDT expects core income to surpass P35 billion this year

BW FILE PHOTO

PLDT Inc. on Thursday said its core net income may exceed P35 billion this year, higher than the previous year’s P34.3 billion.

For 2023, PLDT’s attributable net income more than doubled to P26.61 billion from P10.49 billion previously on lower expenses and higher top line, the company said in a statement.

PLDT’s total revenues grew by 3% to P210.95 billion from P204.36 billion in the same period in 2022, while the company’s gross expenses declined by 24% to P158.47 billion from P209.43 billion previously.

Service revenues accounted for the bulk of PLDT’s top line for the period at P201.83 billion, its financial statement showed.

“PLDT is aiming not just for higher profits but to return PLDT and Smart to their premier positions. This requires a commitment to excellence all around — encompassing the quality of our network, the efficiency of our installations and repairs, the innovations we pursue and the speed of our services,” Manuel V. Pangilinan, chairman, president, and chief executive officer of PLDT said.

For this year, PLDT expects its core net income to exceed P35 billion, while its service revenues may experience mid-single-digit growth, said Danny Y. Yu, PLDT’s chief financial officer and chief risk management officer.

PLDT’s telco core income, which excludes the impact of asset sale and  Maya Innovations Holdings, formerly Voyager Innovations Holdings, reached P34.3 billion, up by 3% from P1 billion in 2022. 

“We are giving you the outlook for the consolidated service revenues at around mid-single-digit for the full year 2024,” Mr. Pangilinan said.

The company is allocating between P75 billion and P78 billion for its capital expenditures (capex) for 2024, which will be allocated for upgrading cell sites, expanding home broadband ports, developing data centers, and investing in submarine cables.

Its capex for the year is 9% lower than its P85.1 billion capex spending in 2023. This year’s capital spending will be funded by fresh capex and carry over capex from the previous years.

The company said it is in talks with a foreign entity for the asset management of ePLDT, Inc.’s data centers. 

Proceeds from the plan will help reduce the company’s debt, Mr. Pangilinan said.

“Just the data centers, because there are two parts of [ePLDT], the IT and managed services part which provides solutions to enterprises and the data centers, if you may like real estate,” he said.

“We’re keeping a substantial majority for each other. Well, that is the discussion, 50-50 (stake),” he added. 

At the local bourse on Thursday, shares in the company closed P12 or 0.93% lower at P1,278 apiece. 

Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls. — Ashley Erika O. Jose

Rivermaya, DonBelle love team inducted into Eastwood City Walk of Fame

RIVERMAYA MEMBERS Mark Escueta, Nathan Azarcon, and Kakoy Legaspi on the red carpet — BRONTE H. LACSAMANA

STARS adorn the sky, and more now adorn the marble ground beneath our feet in Eastwood City in Bagumbayan, Quezon City, as the German Moreno Walk of Fame Foundation added 20 more stars to the area’s Walk of Fame attraction.

Original Pilipino music (OPM) band Rivermaya — represented by three of its members Mark Escueta, Nathan Azarcon, and Kakoy Legaspi — were all smiles at the induction ceremony. They thanked longtime Filipino fans for their continuous support over the years.

“Coming from our reunion concert, it’s heartwarming to feel all the love and appreciation,” Mr. Escueta said on the red carpet during the March 6 ceremony at the Eastwood Central Plaza.

Celebrity love team Donny Pangilinan and Belle Mariano were two other personalities who were chosen to have their names immortalized on star-shaped plaques embedded in the sidewalks of the mall property.

“It’s always been a dream of mine to have a star here and I’m so glad to be able to enjoy this with everyone here,” said Ms. Mariano to the press after her star was unveiled.

For Mr. Pangilinan, his excitement comes from the fact that he shares the distinction with his late grandfather Antonio D. Laxa, better known by his stage name, Tony Ferrer, who was given a star in 2014.

“Thank you to all of our supporters for always cheering us on,” he said.

Much like the iconic Hollywood Walk of Fame, the 18th edition of the Eastwood City Walk Fame aims to honor personalities who have made outstanding contributions in the fields of television, movies, radio, news and public affairs, music, theater, and social media.

“We are thrilled to extend a warm welcome to this year’s newest inductees, each of whom brings a unique and remarkable talent to our esteemed roster,” said Federico Moreno, president of the German Moreno Walk of Fame Foundation, in his opening speech.

With the inclusion of the 20 additional stars, the current count has reached 364, distributed throughout the area.

According to the foundation, the tradition of inducting stars every year not only pays homage to the contributions of these individuals, but “serves as a source of inspiration for future generations.”

GMA Network chief executive officer Felipe Gozon was also among the inductees. He told the press that he never would have expected to have his own star, since his work is more behind the scenes.

This is only natural, however, said actor and TV host Luis Manzano on the red carpet. “It’s not simply the star; it’s a way of thanking people in the entertainment industry, both in front of and behind the camera,” he said.

Acclaimed film director Brillante Mendoza dedicated the distinction to all the people he has worked with over the years, including the late Jaclyn Jose, who won Best Actress at Cannes for her role in his award-winning 2016 film Ma’ Rosa. She had received a star back in 2009.

“This is dedicated to all the people I’ve worked with and to the industry as a whole that recognizes our talents,” Mr. Mendoza said. — Bronte H. Lacsamana

 

Here is the full list of inductees for the 2024 Eastwood City Walk of Fame:

News & Public Affairs
Cathy Yang
Lhar Santiago

Radio
Joel Reyes Zobel

Television
Felipe Gozon
Belle Mariano
Donny Pangilinan
Johnny Manahan
Luis Manzano
Michelle Dee
Richard Yap
Sanya Lopez
Wilson Y. Tieng

Movies
Baron Geisler
Brillante Mendoza
Tony Y. Reyes
Vic Del Rosario

Theater
Menchu Lauchengco-Yulo

Music
Rivermaya
The Dawn

Social Media
Small Laude

Insurers told to make financial reports more transparent

INSURANCE.GOV.PH

THE INSURANCE COMMISSION (IC) is requiring covered companies to apply a new set of accounting policies that will make financial reports more transparent and universally comparable starting Jan. 1 next year.

Companies must use Philippine Financial Reporting Standard 17 (PFRS 17) by then, the regulator said in a March 1 circular posted on its website.

“Companies may opt to adopt PFRS 17 in the preparation of their annual financial statements starting Jan. 1, 2023,” it said.

PFRS 17, based on International Financial Reporting Standard 17 (IFRS 17), includes policies on how to disclose insurance contracts that provide a detailed calculation of the amount of insurance reserve liabilities and how these relate to solvency.

PFRS 17 uses a single accounting approach unlike the standard now, which is intermediary and allows insurers to apply local accounting principles.

IFRS 17 had a mandatory effectivity date of Jan. 1, 2023.

Companies that adopt the PFRS 17 early must submit IC-specific disclosures in a separate report from their financial statements for periods ending on and after Dec. 31, 2023.

Nonlife insurance and professional reinsurance companies must submit premiums due and uncollected, amounts recoverable from reinsurers, funds held by ceding companies and funds held for reinsurers.

Life insurance companies must also submit these in addition to policy loans and segregated fund assets and liabilities.

Meanwhile, companies who will not yet adopt PFRS 17 must note the new reporting requirements in accounting policies, changes in accounting estimates and errors for their financial statement notes for the years ending 2023 and 2024.

The IC will also assess the impact of PFRS 17 on the financial condition and position of local insurance companies.

The regulator said it would issue another advisory for the assessment. The IC will also issue another circular for an actuarial valuation report. — Aaron Michael C. Sy

The role of natural gas in the Philippines’ energy mix

Photo from Freepik

The Philippines has a looming energy crisis. The Malampaya gas field, currently supplying 20% of Luzon’s electricity requirements, is expected to be commercially depleted by 2027 despite President Ferdinand “Bongbong” R. Marcos, Jr.’s efforts to boost its production amidst a new 15-year contract.

Formidable electricity production challenges such as an increasing demand due to an ever-increasing population require the Philippines and the Department of Energy (DoE) to find new sources of energy that will not only fill the void that Malampaya will leave but also be sustainable for the environment.

According to the International Trade Association, the Philippine Energy Mix as of 2022 is made up of coal (31%), natural gas (4.2%), renewable energy (32.7%), and oil-based solutions (32.2%). Meanwhile, the DoE’s Philippine Energy Plan 2020-2040 predicts that 50% of the country’s energy will be renewable, 26.6% natural gas, 23.1% coal, and the rest for oil-based and biomass sources in the next two decades.

The noticeable increase in power supply generated from renewable energy and natural gases is expected to reduce greenhouse gas emissions by 35% or around 119 million tons of carbon equivalent by 2040.

This only highlights the role of natural gas as a “bridge” fuel in a transitional energy system towards a low-carbon economy.

“Natural gas, therefore, is seen as a suitable transition fuel by which the private sector investments in this technology will be facilitated as a way to enable the viability of large renewable energy capacity additions and ensure the reliability and security of the power system,” the DoE said.

However, the country’s only source of indigenous natural gas, the Malampaya gas field, is slowing down production while several Gas Sales Purchase Agreements (GSPAs) have likewise started expiring in 2022.

“Although the current supply can go as far as 2027, the volume may not be enough to supply the requirements of the existing natural gas-fired power plants as well as to support future expansion of natural gas application,” the DoE states on their Natural Gas Development Plan.

To address this dilemma, the DoE has pipelined six liquefied natural gas (LNG) Terminal Projects estimated at P69.23 billion. These projects started operation in 2022 and will end in 2025. The terminals are projected to ensure the continuous operations of power plants supplied by Malampaya and bring about energy security.

In relation to this, the energy department greenlit the construction of a $67-million LNG terminal project in Mariveles, Bataan in January last year. The new terminal has the capacity to import 200,000 to 400,000 tons of LNG annually and is expected to be operational during the first semester of this year.

Similarly, three of the country’s top energy firms also partnered to form a large-scale integrated LNG facility in a deal valued at $3.3 billion recently. AboitizPower, Meralco, and San Miguel Corp. agreed to invest in the 1,278-megawatt (MW) Ilijan power plant and a new 1,320-MW facility set to start operating by the end of the year.

Aside from these developments, the House of Representatives also approved a measure outlining the development path of the downstream natural gas industry in August 2023. House Bill (HB) No. 8456 or the Philippine Downstream Natural Gas Industry Development seeks to promote natural gas as an energy fuel, position the Philippines as an LNG trading and transshipment hub within the Asia-Pacific region, and promote and speed up the exploration and development of indigenous natural gas resources and facilities.

Additionally, the bill incorporated provisions encouraging stakeholders to invest in LNG. Under the proposed law, the sale of natural gas will be subject to a zero percent VAT.

Converting facilities from oil and coal to gas will also be deemed as eligible capital expenditures under Section 294 (C) of the National Internal Revenue Code. Furthermore, local purchases of goods, property, and services needed for LNG terminals, downstream natural gas transmission, and other distribution systems will be entitled to zero-rated VAT as well.

LNG presents a promising solution to address the looming Philippine energy crisis while simultaneously reducing greenhouse gas emissions. Despite the lack of local sources, the versatility, abundance, and relatively low environmental impact of natural gas make it a compelling and more sustainable “bridge” fuel.

With advancements in technology and infrastructure, LNG is poised to play a significant role in the transition to a more sustainable Philippines. — Jomarc Angelo M. Corpuz

SMGP seen to rely on parent firm for funding — CreditSights

SAN MIGUEL Global Power Holdings Corp. (SMGP) is expected to be primarily dependent on its parent company San Miguel Corp. (SMC) for funding support,  financial research firm CreditSights said on Thursday.

“We believe [SMGP] will primarily rely on parental support from SMC to plug the refinancing gap,” CreditSights said in an outlook report authored by analysts Lakshmanan R, Jonathan Tan Jun Jie, and Nicole Chua.

The firm maintained its “underperform” recommendation on the company. This follows SMGP’s announcement of its plans with the subsidiary of Manila Electric Co. and Aboitiz Power Corp. (AboitizPower) to develop an integrated liquefied natural gas (LNG) facility in Batangas valued at $3.3 billion.

Meralco PowerGen Corp. and AboitizPower, through a joint venture, will acquire 67% stake in SMGP’s gas-fired power plants: the 1,278 megawatt (MW) Ilijan power plant and the 1,320 MW combined cycle power plant.

The three companies will also invest in LNG import and re-gasification terminal owned by Linseed Field Corp.

CreditSights expects “strong near-term parental funding support and fresh asset/stake sales to cover the [US dollar perpetual bond] redemption up until May 2025.”

“While we acknowledge [SMGP’s] healthier FY24 credit outlook aided by an improved cost pass-through contractual mix, lower FY24E input thermal coal costs, and contribution from new capacities… we expect its free cash flows to remain firmly negative amid still-high capex towards the Batangas power project construction,” it said.

The firm said that the refinancing of US dollar perpetual bonds “is trickier” despite the refinancing of existing bank loans or local bonds due to “limited additional appetite towards [SMGP].”

SMC’s funding support could sufficiently cover only up to its power arm’s perpetual bond for April and May with the conglomerate’s capital expenditure needs for its “own sizable airport” and infrastructure. 

“Although we welcome [SMGP’s] plans to sell 67% stake apiece in its Ilijan and Batangas power plants that would raise fresh cash… we note the company also plans to acquire a 33% stake in a large LNG terminal, and we are unsure of the net cash flow impact amid the lack of concrete details,” the firm said.

On Thursday, SMC’s shares went down by P0.50 or 0.48% to close at P103.30 apiece. — Sheldeen Joy Talavera

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