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Infrastructure: Our fifth leg

Last October, Erramon I. Aboitiz (EIA), AEV President and Chief Executive Officer, announced that the Aboitiz Group was now officially in the business of infrastructure.

“Infrastructure will be our fifth business leg and we will seek to invest in this sector by participation in the PPP (public-private partnership) process and by pursuing selective M&A (merger and acquisition) opportunities in the sector,” EIA said.

Why infrastructure?

Identifying infrastructure and infrastructure-related businesses as the fifth leg of our core businesses was a very strategic decision as this sector is highly compatible with our existing growth requirements. Infrastructure meets our growth criteria by being scalable, diversifying income streams, tapping existing core competencies and providing AEV with strong recurring profits and cash flow.

We are very optimistic of the potential gains this new business will bring to the Group, amid the huge demand for infrastructure in both the local and emerging markets across Asia. We foresee huge public and private investments in the sector over the next 10 to 15 years and we intend to play an active role in the many opportunities in this space.

Our infra projects: challenges and opportunities

In just a few months, our strategy and business development teams have made great strides in jumpstarting our infrastructure business. Last March, APO Agua, our first business unit under our infrastructure business, signed an agreement with the Davao City Water District to supply the city with up to 300 million liters per day of potable water. This will entail building the country’s largest private bulk water supply facility, with a fully renewable energy-powered water treatment plant.

Team Trident, our partnership with Ayala, SM, and Megaworld, has prequalified to bid for the government’s largest PPP project, the Laguna Lakeshore Expressway Dike. This involves the construction of a 47-kilometer (km) expressway and a 45-km flood control dike, and the reclamation of 700 hectares of land.

The Aboitiz-SMRT Transport Solutions Consortium has also prequalified for the 13.8-km Light Rail Transit Line 2 O&M (Operations and Management) project.

We are also looking at the airports which will be privatized, namely the operations, maintenance, and expansion of the Bacolod-Silay, Iloilo, Davao, Laguindingan, Puerto Princesa, and New Bohol airports.

Looking ahead

While AEV is supportive of the government’s PPP program, the company also intends to explore selective acquisition opportunities and greenfield project developments. We are not only going to focus on PPP projects, but we are also on the lookout for private acquisition opportunities in the infrastructure sector.

For example, last May, we announced a new joint-venture partnership with CRH.  AEV and CRH entered into an exclusivity agreement to invest in the acquisition of the majority of Lafarge’s successful Philippine cement operations. The Philippines’ need for quality cement will continue to grow in line with its resurgent economy and infrastructure sector. This is an exciting venture that will bring momentum to our thrust in creating a more diversified income stream for AEV.

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As always, the Group’s four strategic pillars remain highly relevant to the direction we intend to pursue. As we move forward in this new industry, we will remain grounded on our commitment to grow and expand our business, increase stakeholder engagement, build human capital, and carry on execution excellence in everything we do.