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Greater use of GSP program driving exports growth to US, DTI says

PHILIPPINE exporters are learning to maximize their use of a Generalized System of Preferences (GSP) arrangement with the US, resulting in increased exports overall to that country, the Department of Trade and Industry (DTI) said.

Exports to the US rose 15.83% in 2018 to $1.73 billion, with exporters filling about 72% of the available $2.41 billion that could have been taken in by the US. In 2017, the corresponding usage rate was 67%.

In an e-mail, Assistant Secretary of the DTI’s Industry Development and Trade Policy Group Allan B. Gepty said that the increase in exports was due to the inclusion of a number of travel goods categories for export to the US starting July 2017.

“Philippine exports to the United States under the US GSP scheme continued to increase. One of the major reasons for this is the increase in exports of travel goods (e.g. handbags, travel, sports and similar bags, cases, bags and containers) which were included in the coverage beginning July 1, 2017.”

Some travel goods were among the top exports to the US in 2018, with handbags with plastic sheeting placing fourth ($64.24 million), handbags with leather composition placing fifth ($62.95 million), travel and sports bag eighth ($47.98 million) and cases, bags and containers placing ninth ($44.97 million).

The top export to the US under the GSP arrangement in 2018 was pneumatic radial tires for motor cars, amounting to $119 million, up from $113.7 million a year earlier.

“It was also noted that exports of electric motors, insulated electric conductors, and telescopic sights significantly increased in 2018,” Mr. Gepty said in the e-mail.

Telescopic sights were the number two export to the US in 2018 at $96.17 million, up 9% from a year earlier. Insulated electric conductors amounted to $64.33 million, up 10%.

“Other” cane sugar products, however, declined 42.24% amounted to $60.82 million.

“One of the reasons for the decrease was due to the reduction of allocation for the US market as a result of an increase in the domestic demand for sugar,” said Mr. Gepty.

The DTI is optimistic on the outlook for US trade relations. In 2018, trade with the US was worth $18.7 billion, accounting for 10.3% of total trade. He expects the growth to be “sustained.” — Katrina T. Mina

Supra natural sports car

Text and photos by Kap Maceda Aguila

THE FIRST-EVER SUPRA to be retailed in the Philippines is here — taking its place as the flagship sports car of Toyota.

The all-new, fifth-generation Toyota GR Supra — also known as the A90 or Mk. V — also marks Toyota’s entry into the so-called specialty passenger car segment, which is currently able to move 60 to 85 units a month, per TMP.

Significantly, the new Supra earns a “GR” prefix, which stands for Gazoo Racing. This “embodies Toyota’s commitment to overcoming every limit to make even better cars by forging new technologies and solutions under the extreme conditions of motorsports,” according to a company release.

In a speech, TMP President Satoru Suzuki said that “only a limited number of units will be available through 16 certified GR Performance dealerships nationwide,” and expressed confidence that “the Philippine market will be receptive, considering how (TMP has) steadily recovered for the first half of 2019.” The executive shared that TMP has already sold a total of 73,454 vehicles across its portfolio, and considers the GR Supra “the perfect bookend to our three decades of meaningful partnership that has set the standards for the entire automotive industry,” as the company nears its 31st anniversary this August.

Meanwhile, TMP Supervisor for Product Planning Jovie Roqueza posited to BusinessWorld that the niche the GR Supra enters is one fraught with uncertainty, while bearing potential for high rewards. “This segment is made up of non-cyclical buyers. Other segments are pretty easy to forecast because every five years, these people tend to replace their classic cars.”

Toyota is hoping to recreate its past success in the 86 when it debuted in 2013. “The segment grew 500% higher than the actual monthly demand. We can also foresee the Supra creating this type of segment-shaking impact, but the exact number we cannot disclose since we’re still doing pre-selling,” Mr. Roqueza said.

In a release, TMP First Vice-President Cristina Arevalo averred, “Bringing the legendary Supra here is something we have always wanted to do, and we are positive that there are countless Toyota fans out there who share the same enthusiasm.”

The new-generation Supra arrives after a lengthy 17-year hiatus, and first debuted globally in Detroit, USA in January. All units come direct from the Magna Steyr plant in Graz, Austria. Toyota reported that the GR Supra is “true to its Japanese DNA, which hailed from early grand tourers like the A40 to the futuristic concept car FT-1.”

To be sure, there is much talk about the fact that the Supra shares its engine and platform with the BMW Z4. And a Car and Driver article said that “Supra loyalists weren’t shy in expressing their indignation about the union… that a co-developed car was destined to be viewed by history as nothing more than a Toyota badge slapped onto a BMW.”

But while an in-line 3.0-liter six-cylinder B58 heart from BMW resides in the Supra’s engine bay, and both have the same transmission, dampers, and steering rack, to say that they’re siblings or even twins is erroneous.

“In the Supra, we partnered with another brand because the straight in-line six is an engine not existing in the Toyota lineup,” reported Mr. Roqueza. “For Toyota to develop its own in-line six would cost a lot of money, and that will defeat the whole purpose of the Supra as being a possible or attainable pure sports car.” He shared that the Toyota and BMW co-development stopped “four to five years ago because BMW saw the Z4 moving one way, and our Supra another.”

Mr. Roqueza maintained, “The key message is that they’re totally different — shifting patterns, gear ratios, tuning, how the engine performs.”

That’s indeed a main raison d’être for the Supra — to make a pure sports car just a little more affordable for the market, while channeling the legend of the storied Toyota nameplate. When compared to the 86, the Supra, according to Mr. Roqueza, “is a different concept.”

He maintained, “Of course, the 86 is looking at the AE86. That being its heritage, it’s geared towards mid-speed cornering and drifting. The Supra itself (is about having) driving resonance… it’s basically unifying the driver intention with the vehicle feedback. Designers wanted to make the driver feel that he’s in full control of the vehicle, and not have the vehicle control him.”

There was much at stake in the development of the Supra, with no less than Toyota Motor Corporation President Akio Toyoda himself scrutinizing the goings on. “The Supra is actually the car that he grew up driving, so this fifth-generation Supra is his brainchild, his baby,” explained Mr. Roqueza. “So, it was all hands-on deck in Toyota, especially the GR team. They had a lot of expectations and big name to live up to.”

The new GR Supra’s athleticism is clear from the get-go as it is stands low and wide, a look that Toyota engineers call “condensed extreme.” A large grille is flanked by large air intakes, and character lines extend to the flared spoilers and trapezoidal bumper with dual exhaust pipes and diffuser. It runs on large 19-inch forged aluminum wheels with custom-made Michelin tires. The headlamp assembly features six-lens LEDs integrating daytime running lights and turn signals, while the rear lamps combine turn, tail, and stop into one main ring. Dot-type LED backup lamps are located in the center of the lower bumper. A Follow-Me-Home lighting feature is also available.

The cabin is rendered in black with muted carbon accents. Alcantara sports seats are equipped with lumbar support and eight-way power memory adjust. The three-spoke leather steering wheel has both manual tilt and telescopic adjustment. A narrow, sectioned dashboard helps to facilitate forward visibility. Advanced heads up display (HUD), paddle shifters, 8.8-inch TFT-LCD touchscreen multi-information display, Bluetooth and USB connectivity, dual-zone push-type air-conditioning, and a 12-speaker high-fidelity surround sound system powered by JBL complete the accoutrements within.

The all-new Toyota GR Supra is priced as follows: P4.99 million (Prominence Red), P5.05 million (Lightning Yellow, Deep Blue Metallic, White Metallic, Silver Metallic, Ice Gray Metallic, and Black Metallic), and P5.09 million (Matte Storm Gray Metallic) and is available at Toyota Alabang, Toyota Commonwealth, Toyota Makati, Toyota Manila Bay, Toyota Otis, Toyota Pasong Tamo, Toyota Quezon Avenue, Toyota Bacoor, Toyota Batangas, Toyota Calamba, Toyota La Union, Toyota San Fernando, Toyota San Pablo, Toyota Cebu, Toyota Mabolo, and Toyota Davao City.

Energy efficiency group identifies priority tasks

By Victor V. Saulon
Sub-Editor

THE Philippine Energy Efficiency Alliance (PE2) will have to bolster its partnership with the government for at least four priority tasks, including making the organization the sector voice of market stakeholders as the Energy department crafts the implementing rules and regulations (IRR) of Republic Act No. 11285.

These tasks are among the immediate action plans of PE2, which claims to be the biggest group involved in energy efficiency in the country, after the passage of RA No. 11285 “An Act Institutionalizing Energy Efficiency and Conservation, Enhancing the Efficient Use of Energy, and Granting Incentives to Energy Efficiency and Conservation Projects.”

In an e-mail interview, PE2 President Alexander Ablaza said his group seeks to be the sectoral voice of energy efficiency market stakeholders — whether energy efficiency end-users, investors or providers of energy efficiency technology, solutions or services.

RA No. 11285 was signed on April 12, 2019, with the Department of Energy (DoE) tasked to issue an IRR in the next four months.

Congress, for its part, has expanded the scope of the Joint Congressional Power Commission (JCPC) to reflect the expansion of its oversight powers to the entire energy sector. JCPC will be renamed the Joint Congressional Energy Commission (JCEC) in line with the passage of RA No. 11285.

“Next, PE2 would have to complement government’s efforts in increasing awareness of the law among market players, especially those which now have new obligations under the law,” Mr. Ablaza said.

“Third, it would have to assess the baseline market competencies and mobilize resources toward building capacities in the energy service company (ESCO) sector, and toward the training and certification of professionals tasked to perform energy management, measurement and verification and other ESCO specialists,” he added.

Lastly, Mr. Ablaza said PE2 would need to ensure that the new law will be implemented and enforced without delay and that the intent of legislation would have to be preserved through the next decade and beyond.

He said the market would be catching up with the new law and its IRR through the first two years.

“After switching back to mandatory implementation from a 29-year voluntary market regime, stakeholders will be adjusting to the obligations under the new law, staffing up with energy efficiency expertise, identifying energy efficiency project opportunities and seeking sources of capital to finance these new projects,” he said.

He expects the first “real market momentum” to be experienced only from years three to five after the passage of the law, even though several, smaller, and “lower-hanging” project opportunities could be accelerated for implementation in the first two years.

Mr. Ablaza said PE2 believes that two-thirds of the P12-trillion capital requirement for energy efficiency investments for the country to meet the DoE’s energy efficiency and conservation roadmap targets by 2040, would have to be mobilized from non-traditional self-financed or debt-financed means.

He said about P8 trillion would have to flow through off-balance sheet channels such as ESCO performance contracts, public-private partnership transactions and other large-scale bulk procurement and distribution programs for the government and residential sectors.

“PE2 hopes that the [IRR] will effectively make such non-traditional capital flows commercially viable, as Government is not expected to afford to bridge the capital gap through its annual budget appropriations,” he said.

He said PE2 hopes that fiscal incentive guidelines would fully respond to the needs of third-party investors, and allow an unrestricted range of technologies and solutions backed by detailed energy audits to be performed by DoE-accredited ESCOs.

“PE2 is likewise hopeful that the IRR would open the doors for more innovative procurement guidelines for the public sector to allow private capital and energy savings to finance energy efficiency retrofits in government facilities through multi-year performance contracts,” he said.

Less than half of 131 PEZA-approved IT projects to seek palace OK

LESS than half of the 131 information technology (IT) projects in Metro Manila approved by the Philippine Economic Zone Authority (PEZA) are expected to move forward with their applications for economic zone status, following the freeze on economic zone applications for locations in the capital.

Administrative Order (AO) No. 18 or “Accelerating rural progress through robust development of special economic zones in the countryside,” which took effect in June, intends to strengthen economic growth in the countryside and suspended the processing of applications for economic zones in Metro Manila.

Exceptions to the moratorium include applications without requirement deficiencies already lodged with the Office of the President (OP), and applications that address requirement deficiencies within thirty days.

In a letter dated July 1, PEZA Director-General Charito B. Plaza told the Office of the President that 131 IT projects as of June 2019 were PEZA board-approved but have not yet been endorsed to the OP, which must issue the final economic zone proclamation.

According to PEZA, 121 of these projects are IT Centers while 10 are IT Parks, generating investment of about P159.44 billion in total.

Half of these, according to PEZA, might not be able to complete the requirements for the application even with a three to six-month transition period. PEZA asked for six months to comply, while the Trade Department said it will request three months.

PEZA also said that the IT locations in Metro Manila are most likely already occupied and profitable even without PEZA status. PEZA does not grant incentives to IT economic zone developers in Metro Manila and Cebu City.

The Philippines currently has 278 IT parks and centers in operation, 167 of which are located in Metro Manila. Makati hosts 45 followed by Quezon City with 35 and Pasig with 24.

PEZA requested in the same letter to exclude the cities of Manila, San Juan, Marikina, Las Piñas, Malabon, Caloocan, Pateros and Valenzuela, which have little to no presence of IT parks and centers. — Katrina T. Mina

Mindanao farmers issue wish list for crop dev’t

By Carmelito Q. Francisco
Correspondent

DAVAO CITY — Mindanao farmers, including agrarian reform beneficiaries (ARB), have put together a list of expected government interventions needed to boost the agricultural sector, highlighting high-value crops.

At the first Mindanao Farmers Conference held in Davao City on July 13, members of the Ugnayan ng mga Nagsasariling Lokal na Organisasyon sa Kanayunan–Mindanao (UNORKA-Mindanao) identified the crops for which development assistance is needed as cacao, Cavendish banana, fruits, coconut, oil palm, and rice.

UNORKA-Mindanao, composed of some 3,000 ARBs and farmer cooperatives from all the regions of Mindanao, is among the first beneficiaries of the Technical Assistance for Fairtrade Compliance provided by the Mindanao Development Authority (MinDA) through its Mindanao Collective Trademark (MCT) program.

“Product certification is just one of the many types of assistance that the ARBs need, if there is one thing evident from what we have gathered on the ground, it is the need for inter-agency support to really uplift the quality of lives of these farmers,” said MinDA Officer-in-charge Chairman Nathaniel D. Dalumpines in a statement.

At the end of the conference, organized by UNORKA-Mindanao with support from the European Union, the farmers turned over a list of resolutions to Davao del Norte 2nd District Rep. Alan R. Dujali, Sen. Christopher Lawrence T. Go, and representatives of various agencies.

The resolutions for specific agencies include the following:

• Department of Trade and Industry (DTI), Department of Agriculture-High Value Crops Development Program (DA-HVCDP), and other agencies; to provide support in order to sustain the cacao industry’s position in the international market for high-quality beans;

• DA and other agencies — to help improve the farm productivity of ARB Cavendish growers;

• Department of Science and Technology, the DA-HVCDP, and other agencies — to mentor fruit farmers in order to advance production in the value chain;

• DTI — to lead and coordinate other programs that will help promote entrepreneurship among ARB coconut growers, including oil palm farmers;

• DA — to consult Unorka–Mindanao in the drafting and implementation of the rice industry roadmap.

Romeo V. Ticon, UNORKA-Mindanao project officer, said the resolutions, which come from the workshop outputs of farmer groups, reflect the “needs of the farmers, their status in life and their hopes.”

Mr. Ticon said they are also aiming to access support windows not just from government but other groups and institutions.

“We know that farmers have problems in production, problems in post-harvest facilities and that these need to be addressed,” he said.

He said during a workshop in Cotabato City, rice farmers claimed that while they can already maximize production, the absence of post-harvest facilities like mechanical driers and warehouses have become the main challenges.

Mr. Ticon also said that issues relating to certificate of landownership awards (CLOA) persist.

“We want DAR (Department of Agrarian Reform) to ensure that ARBs with CLOA are installed in the lands given them,” he said.

UNORKA Secretary-General Leoderic P. Luzenada, meanwhile, said about 30% of the organization’s small farmer members — located in Davao del Norte and the Agusan provinces with a one-hectare allocation each — have yet to receive their CLOA. — with a report from Maya M. Padillo

Swan Style: Cinco designs for Ballet Philippines gala

FASHION and dance both serve the same purpose: to glorify the human body and display it at its zenith. Keeping in mind this goal, Ballet Philippines, for its 50th anniversary gala on Sept. 29, will feature a 50-piece couture collection in a fashion show from renowned Filipino designer Michael Cinco alongside a new dance by Alden Lugnasin, inspired by the Swan Lake ballet. The show will be held at the Marriott Hotel Grand Ballroom.

The idea came when Michael Cinco met Cultural Center of the Philippines chair and former Ballet Philippines president (and former Miss Universe) Margie Moran Floirendo in Paris. Ms. Floirendo then asked Mr. Cinco to do a collection for the upcoming gala, and Mr. Cinco obliged.

Mr. Cinco is known to have dressed various international celebrities, among them Beyoncé. The collection will be inspired by Swan Lake, with Mr. Cinco saying, “I think it’s one of the most beautiful ballets I have ever seen.” Mr. Cinco will also design the costumes for the production.

Another one of the dresses.

The collection was shown in a preview at the Marriott last week, and BusinessWorld saw intricate beading taking the forms of swan feathers on intricate gowns with full trains. Another favorite was a pastel-hued number with a resemblance to a ballerina’s costume, with sleeves arching outward as if a swan preparing to take flight. The collection will be brought from Dubai (where Mr. Cinco is based), and Mr. Cinco was proud to say that the collection was executed by Filipinos living in Dubai.

Ms. Floirendo and Alice Reyes, National Artist for Dance and Artistic Director of Ballet Philippines both shared their thoughts of the same goal of dance and fashion.

“Of all the designers I’ve met, the detail that he does is the same as the detail in dance,” said Ms. Floirendo. “Fashion is an art.”

Ms. Reyes, meanwhile, said, “There is a perfect harmony in partnership between fashion and dance.”

“It’s the magic of theater. And then there’s the reach for perfection. Michael’s works reach for perfection; Ballet Philippines reaches for perfection.” — Joseph L. Garcia

DoLE taps UP to study regional wage-setting system

THE Department of Labor and Employment (DoLE) will partner with the University of the Philippines to study the current wage-setting system after receiving calls to abolish the wage boards.

Labor Assistant Secretary Joji V. Aragon told reporters that the study will be conducted by the National Wages and Productivity Commission (NWPC) in collaboration with the UP School of Economics.

The study will focus on analyzing the current system of salary determination, under which the Regional Tripartite Wages and Productivity Boards (RTWPB) are responsible for issuing wage orders.

“(T)he NWPC has engaged the University of the Philippines School of Economics to undergo a six-month study on these issues,” she said.

In December, NWPC Director Maria Criselda R. Sy said that the NWPC will carry out the study to evaluate the current wage-setting system, as per instruction by Labor Secretary Silvestre H. Bello III.

The study is expected to be completed by the end of the year.

“We have been hearing a clamor (to) increase the minimum wage (and then) abolish the regional wage-fixing system and the abolition of the RTWPBs and abolition of the NWPC,” Ms. Aragon said, adding that this is what pushed the labor department to study the wage system.

The RTWPBs are authorized under Republic Act 6727 or the Wage Rationalization Act. Legislation may be required to abolish the system and alter the wage determination process.

Later this month, Ms. Aragon said that there will be separate consultations with the labor and management sectors on this matter. — Gillian M. Cortez

China Bank looking to offer peso green bonds

CHINA BANKING Corp. (China Bank) is looking to offer peso-denominated green bonds to support demand for environmental and sustainability projects.

China Bank Chief Financial Officer Patrick D. Cheng said on Wednesday that the Sy-led lender is “looking into” offering green debt papers.

“We’re looking into it, but we actually had a $150-million IFC (International Finance Corp.) green bond. That’s being used for…some of the green projects we have,” Mr. Cheng told reporters on the sidelines of China Bank’s bond listing ceremony.

In October 2018, the lender raised $150 million from its maiden green bond offer, with World Bank Group-member IFC as its sole investor.

China Bank said the amount raised will be used to fund “climate-smart projects, increasing the company’s climate portfolio to more than $200 million,” or roughly P11 billion. These include investments in renewable energy, green buildings and water conservation projects.

“There is demand for (green) projects like these. As these come in scale, another green bond would be appropriate depending of course on the size and the scale that comes before us,” Mr. Cheng said.

The bank executive added that China Bank is looking for green projects, as some of its big borrowers are involved in environmental and sustainability projects.

“Some of our big borrowers, a lot of them, especially on the energy side and maybe some on the housing side, have projects that are green in nature because these are really important for us to sustain development.”

Local banks have been moving to ramp up funding for green projects. In December 2017, IFC also subscribed to BDO Unibank, Inc.’s green bond offer to raise $150 million.

Yuchengco-led Rizal Commercial Banking Corp. likewise raised P15 billion from 1.5-year peso green bonds in January, upsized from the P5 billion planned initially.

Meanwhile, Ayala-led Bank of the Philippine Islands established a green finance network last month to serve as a basis for future fund-raising activities for environmental projects.

China Bank booked a P1.9-billion net income in the first quarter, up 24% year-on-year, driven by robust expansion of its core businesses.

Shares in China Bank closed at P27.45 each on Friday, up 30 centavos or 1.1%. — K.A.N. Vidal

High Rollers at the Goodwood Festival of Speed

Words and photos by Manny N. de los Reyes

GOODWOOD, UK — Count on Rolls-Royce to make everyone attending the annual Goodwood Festival of Speed to feel right at home. Goodwood, after all, is literally the Home of Rolls-Royce, the iconic luxury automaker having made this tranquil English estate in the Sussex countryside its headquarters since Jan. 1, 2003.

The bespoke English brand served a highly contemporary presence at the recently concluded Goodwood Festival of Speed, presenting a spectacularly faithful recreation of the Grand Courtyard at the Home of Rolls-Royce.

No less than 14,000 cobbles and 50 tons of sand were employed to authentically recreate the picturesque Nicholas Grimshaw-designed entrance to Rolls-Royce Motor Cars on the Festival of Speed’s Laundry Green where highly bespoke displays of the brand’s full product portfolio were presented to the public.

The Phantom, the marque’s flagship, was presented front and center, reflecting its standing as the rarest and most desired object in the luxury world.

During the development of the new Phantom, many clients informed Rolls-Royce that they often drive their Phantom rather than employ a chauffeur; they enjoy its commanding stature on the road and, by taking the wheel, they can further absorb themselves in the experience that they had curated through Bespoke design.

This shift in user case has led clients to more vibrantly express the marque, often displaying a refreshing irreverence towards the expected codes of automotive luxury. Conveying both the rebellion and tradition that exists at the heart of Rolls-Royce, a head-turning Salamanca Blue exterior is balanced by Scivaro Grey leather with Cobalto Blue accents.

Following its global launch in the peaks of the Grand Tetons, Wyoming, the Cullinan ultra-luxury SUV has embarked on a remarkable Bespoke journey with the brand’s patrons who continue to create truly personal expressions of their lifestyles. An exclusive Cullinan has been curated in recognition of this extraordinary adventure.

The commission boldly reconciles the distinct notions of luxury and utility that Cullinan embodies. The brand’s hallmark high-gloss paint finish is rendered in Dark Indigo, while Selby Grey with contrasting Tailored Purple interior appointments represent a more playful expression of the brand. In addition, natural Open Pore Blackwood veneer is jeweled with a bespoke timepiece and highly polished aluminum bespoke audio speaker grilles, referencing the technical capability of Rolls-Royce’s proprietary audio system.

Since the introduction of the marque’s family of Black Badge models, younger, more dynamic patrons of luxury have responded by progressing the marque’s bold alter ego through their own highly personal Bespoke commissions. For the 2019 Festival of Speed, Rolls-Royce presented three powerful visions informed by the taste patterns of this new breed of owners.

A Magma Red exterior finish was selected to signify the dramatic intent of the Ghost Black Badge commission. Beyond the marque’s hallmark nine-coat paint finish is a Mugello Red leather interior that is emboldened by a Starlight Headliner with 1,340 individual red fiber optic lights, confidently underscoring the interior’s theme.

A Wraith Black Badge, meanwhile, was presented in heavy metallic Dark Emerald coachwork with a deep gloss black hood. The exterior colorway is extended to the interior: black textured Natural Grain leather is discreetly highlighted with fine cotton Dark Emerald monogramming to the headrests.

The dynamic substance of Dawn Black Badge is sensationalized by Galileo Blue coachwork and a modernist Selby Grey interior, complemented by the marque’s carbon fiber Aero Cowling, trimmed in Selby Grey, creating the elegant silhouette of a two-seat roadster.

A visceral demonstration of the most assertive expression of the marque, a Wraith Black Badge ascended the rigorous Hillclimb course at Goodwood during the Festival’s Supercar Run. It was driven by a House Driver from Rolls-Royce’s Black Gloves Program, a bespoke driving curriculum for Black Badge patrons who wish to exploit the full dynamic potential of their motor car.

The Course Director’s car at the Festival of Speed is recognized as the vehicle that carries celebrities, dignitaries and media guests throughout the event. The marque’s flagship, Phantom, was selected for this honor and was a regular presence on the course.

Last but not least, taking every Festival-goer utterly by surprise, a completely stock Cullinan took to the track for an improbable flat-out run — the huge automobile hurtling through the high-speed curves and corners supremely confident and composed, despite all four tires squealing. It was an absolutely surreal sight — and one that marked Rolls-Royce not just as a bespoke brand of luxury, but one of genuine driving excitement.

Energy dep’t seeking comment on smart grid policy circular

THE Department of Energy (DoE) is asking interested parties to comment on a draft circular that provides a national policy framework for smart grids and a “roadmap” for distribution utilities.

The move comes as distribution utilities have come up with their own initiatives to introduce smart grids that use innovative technologies to modernize the electric grid infrastructure.

The DoE said it saw a need to transform the Philippine power sector into “a secure, stable, flexible, sustainable, digitally enabled and interoperable system that provides reliable, efficient, and quality energy towards grid modernization and consumer empowerment.”

Under the proposed circular, the department has adopted several criteria for transitioning the power system into a smart grid by 2040: safety/reliability; efficiency; flexibility/sustainability; resiliency; and consumer empowerment.

The DoE said it hopes the Philippines will reach a level of smart grid development capable of “self-healing” and responding to recent policy issuances on Retail Competition and Open Access (RCOA); Renewable Portfolio Standards (RPS); Green Energy Option Program (GEOP); and Net Metering.

The department defines a smart grid as modernized electrical grids that use innovative technology with two-way and/or multi-way communication technologies, real-time monitoring and control systems.

The proposed policy framework anticipates the emergence of smart homes or buildings that are capable of monitoring and control of electricity and energy usage within their premises.

The grid reform plans also come amid the introduction of smart appliances and devices that allow real-time, automated, interactive technologies.

The DoE also expects the greater use of smart meters, or electronic real-time energy-measuring devices that are capable of remote connect/disconnect switching with two-way communication between the meter and the power utility.

Smart meters record consumption of electric energy in intervals of an hour or less, and communicate the information back to the power utility for monitoring and billing.

The proposed circular applies primarily to distribution utilities, including grid-connected, micro-grids and off-grid systems.

The DoE said if needed, it would coordinate with other government agencies to establish new incentive mechanisms for smart grid development.

It is enjoining the Energy Regulatory Commission (ERC) to promulgate, within six months from the effectivity of the circular, guidelines and to ensure proper and timely implementation of the policies to be set forth.

The proposal instructs the National Electrification Administration to provide concessional loans to smart grid projects of electric cooperatives. — Victor V. Saulon

Third telco license boosts Chelsea’s prospects

AFTER Dito Telecommunity Corp. (formerly known as the Mislatel consortium) received its operating license last week, major shareholder Chelsea Logistics and Infrastructure Holdings Corp. was one of the most actively traded stocks last week.

A total of P687.2 million worth of 83.3 million shares exchanged hands on the trading floor from July 8-12, data from the Philippine Stock Exchange showed.

Chelsea shares closed at P7.87 apiece on Friday, down 0.76% from the previous day and 8.38% week on week. However, the stock is up 22.4% year to date.

“The value turnover of Chelsea… soared last week. Last Monday, the market reacted on news that the Mislatel consortium received its permit to operate as the country’s third telecommunication player,” A&A Securities, Inc. trader Jeng T. Calma said in a phone interview.

Dito Telecommunity was formerly known as the Mislatel consortium, which is composed of China Telecommunications Corp., Udenna Corp. and Chelsea. It received a certificate of public convenience and necessity (CPCN) after complying with the P25.7-billion performance bond for their commitments as the new major telco player, Chelsea confirmed in a disclosure last Tuesday.

Through this CPCN, the National Telecommunications Commission assigned the radio frequency bands of 700 megahertz (MHz), 850 MHz, 2100 MHz, 2010 MHz, 2.5 GHz, 3.3 GHz, 3.5 GHz, and 10.5 GHz to Dito Telecommunity. This will make the group an official competitor to industry incumbents PLDT, Inc. and Globe Telecom, Inc.

A&A Securities’ Ms. Calma noted that Chelsea shares’ price reached a 30-day high of P9.36 apiece on Tuesday, but immediately pulled back midweek.

“Investors were fast to take profits on the stock, bringing its price to [last week’s] lowest at P7.20 per share on Thursday,” Ms. Calma said.

“Every time Chelsea’s stock price reaches a high, it usually corrects immediately, as investors would quickly sell, bringing its price lower. Meanwhile, every time the stock’s price drops, it becomes an opportunity to buy as investors prepare for the official onboarding of subscribers of Mislatel in the fourth quarter,” she added.

AP Securities, Inc. research analyst Roberto Miguel B. Ong said most investors were just waiting for the Mislatel consortium to comply with the required performance bond.

For Unicapital Securities, Inc. technical analyst Cristopher Adrian T. San Pedro: “[The] [m]arket is always forward-looking, and the investors already anticipated the awarding of the CPCN last month. Therefore, the result was a sell-on-news scenario which happened the day after the awarding of the permit to operate to the Mislatel consortium,” he said in a separate e-mail.

“The volume was unusually high due to the fact that some investors and short-term traders who accumulated last month below P7 per share decided it’s time to take profits.”

Commercial launch of Dito Telecommunity is scheduled in the second quarter of 2020.

The consortium committed to render a minimum broadband speed of 27 Megabits per second (Mbps) in its first year of operations and 55 Mbps in the succeeding years. It also committed to having a 37.03% coverage of the national population within its first year and 84.01% cumulative coverage in five years.

If it fails, the government must recall the CPCN and frequencies awarded to Dito Telecommunity and will keep its performance bond of P25.7 billion.

AP Securities’ Mr. Ong noted that for the year, Chelsea’s fundamentals remain strong although it is mostly driven by its shipping and logistics businesses as its telco unit is expected to start generating income next year.

“As a whole, the company’s structure is diverse. Earnings wise, its logistics and infrastructure segments could generate more revenues but are capital-intensive, and would greatly impact its balance sheet,” he said.

The listed firm led by Davao-based businessman Dennis A. Uy reported a net income of P139 million in the first quarter, up 21% from the same period last year with a bulk of its revenues coming from its shipping business.

In another development, Unicapital’s Mr. San Pedro noted a “bounce play” on the stock’s price during the latter part of last week brought partially by Chelsea’s latest shipping business expansion.

Last Friday, Chelsea disclosed the launching of the M/V Trans-Asia 20, a bed/seat “ro-ro” (roll-on, roll-off) type passenger ferry held at Kegoya Dock Co., Ltd.’s Japan shipyard on July 5. The ferry is a 98-meter vessel that can carry a total of 740 passengers, 22 buses and 6 trucks. M/V Trans-Asia 20 is scheduled to be delivered in October this year.

Next week, analysts expect Chelsea’s stock to continue its price action.

“The stock will probably continue its movement depending on further news and development on Mislatel,” A&A Securities’ Ms. Calma said.

She pegged the stock’s support at P7.5 apiece and resistance at P9.35 apiece.

For Unicapital’s Mr. San Pedro, “I expect the stock to consolidate between P7.20 [per share] support and P8.04 [per share] resistance in the short term. A bullish scenario is for the stock to test P8.28 [per share] and P8.54 [per share] resistance levels if it stays above P7.70 [per share]. The stock can also test the next support levels at P6.95 [per share] and P6.70 [per share] if it falls below P7.20 [per share] to confirm a dead cat bounce scenario (or a short-term rebound in the price of a declining stock).”

In a separate phone interview, a technical analyst from AP Securities said Chelsea’s stock price will continue to consolidate before another run-up following last week’s sharp decline with the company’s telco license through Mislatel remaining a catalyst for investors.

The technical analyst placed the stock’s support and resistance at P6.85-P7.2 per share and P8.05-P8.4 per share, respectively. — Carmina Angelica V. Olano

Major grain traders face one-two punch from US floods, trade war with China

CHICAGO — Severe US weather likely dented earnings for large grain companies including Archer Daniels Midland Co and Bunge Ltd for a second straight quarter, adding to headwinds from a still-unresolved US-China trade war, analysts and economists said.

ADM and Bunge, as well as peers Cargill Inc [CARG.UL] and Louis Dreyfus Co [LOUDR.UL], known as the ABCD quartet of global grain trading giants, faced processing-plant downtime, rail and barge shipping delays and other supply uncertainty this spring as historic floods ravaged the central United States.

The weather woes are heaping more pain on the battered US agricultural sector already hard-hit by a years-long crop supply glut and the US-China trade war now entering its second year. The tariffs China imposed on soybean exports from the United States in retaliation for US duties on Chinese goods curbed shipments of the most valuable US export crop.

The excessive rains and flooding could also have a lasting impact on the grain merchants, whose latest round of quarterly earnings will start this week. ADM and Cargill are viewed as particularly vulnerable due to their outsized US footprints. Reduced US corn and soybean plantings will likely cut available crop supplies in the United States, potentially driving up raw material costs and squeezing margins.

“They thrive on volumes and margins and both of those are going to be depressed in the coming year with the bushels being smaller and the margins likely not being there,” said Kevin McNew, chief economist with Farmers Business Network. “Export business is just going to fall off the cliff, especially for corn.” The US corn crop was more affected by floods than soybeans, because soy can be planted later in the season.

WEAKER RESULTS
The first of the companies scheduled to report is privately held Cargill, which announces fiscal fourth-quarter earnings on Thursday.

The results will cover the March-to-May period, when flooding disrupted grain movement, including export shipments, and the year’s second “bomb cyclone” blizzard temporarily shuttered at least six Cargill grain handling facilities and a beef processing plant.

Cargill and ADM both own barge companies that haul grain and other products on the Mississippi River and its tributaries. Grain barge movement so far this year is down about 37% from a year ago, according to US Army Corps of Engineers data, due largely to prolonged river closures triggered by floods.

Cargill is expected to report weaker results compared with the very strong earnings of the year-ago quarter, due partly to expected lower profit in its origination and processing unit, said Bill Densmore, senior director of corporate ratings at Fitch Ratings.

Bunge and ADM will follow, with second-quarter results covering April, May and June scheduled for release on July 31 and Aug. 1, respectively. Privately held Louis Dreyfus is expected to issue interim first-half results in the autumn.

Shares of publicly traded ADM and Bunge are hovering just above three-year lows notched this spring as mounting concerns about US plantings and trade fueled investor nervousness.

UNEVEN IMPACTS
With its concentration of assets in the United States and its large US ethanol business, ADM was likely hit harder by adverse US weather than Bunge, analysts said.

ADM cited poor US weather for a nearly $60 million drop in operating profit in its first quarter and warned in April that lingering weather impacts would cut second-quarter earnings by $20 million to $30 million. Some analysts expect ADM to post as large a hit to second-quarter earnings as in the first quarter as adverse weather stretched through the spring season.

“ADM’s first-quarter estimate of $50-60 million seems like a good starting point” for the second-quarter impact, said Seth Goldstein, analyst with Morningstar.

ADM’s soy processing, ethanol and sweeteners and starches units may post lower margins, and smaller corn and soybean crops will hurt its grain origination business, said Heather Jones, founder and senior analyst with Heather Jones Research LLC.

The price of corn, the most common feedstock for US ethanol makers, has surged as US farmers struggled to plant the 2019 crop due to a historically soggy spring. Cash corn premiums in parts of the eastern Midwest, where planting delays were most acute, are at a six-year high. Soybean prices hit a one-year top last week.

“Bunge is less exposed, but higher bean costs would squeeze soy crush margins in the US,” Jones said. Bunge is the world’s largest soybean processor. — Reuters

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