Infrastracture: Results of Operations

ABC Story: Bayanihan, resilience, and #OneAboitiz

October 6, 2021

The spirit of the Aboitiz Group’s enduring 100-year legacy resonates in the tremendous resilience of Aboitiz InfraCapital and Republic Cement in 2020. We stand ready to support the government by investing in the development of sustainable infrastructure projects and growing our industrial estates. We believe public and private sector collaboration will be crucial in helping rebuild our economy from the impacts of the COVID-19 pandemic.

Cosette V. Canilao President and CEO, Aboitiz InfraCapital

0 PHP Million Income Contribution to AEV

0 Square Meters Gross Leasable Area of Commercial Retail Spaces in Cebu & Batangas

0 Meters of Pipes Laid for Apo Agua's Davao City Bulk Water Supply Project

0 Jobs Generated Across Central Visayas & Southern Luzon through IECs

0 Hectares Industrial Business Parks Currently Being Operated

0 Man-hours for Republic Cement

In 2020, Aboitiz InfraCapital (InfraCap) was set to harvest the seeds it planted in previous years with a number of projects expected to either launch operations or receive final approval from the government. However, like much of the Aboitiz Group and many other companies, we faced a number of headwinds largely caused by COVID-19.

Amid the challenging period for economies and businesses around the world, we remained true to our commitment to uplift lives by continuing to push for enabling infrastructure. We quickly shifted gears by activating the Business Continuity Plans of our operating business units and reviewing our project proposals to ensure viability in the next few years. Leveraging existing Aboitiz Group assets, we also launched a new business unit to support telecommunication companies (telcos) and Internet Service Providers (ISPs) at a time when people rely on the internet the most.

Keeping the water flowing

Along with other Aboitiz business units in Southern Luzon, Lima Water Corporation (LWC) experienced disruption at the onset of 2020 with the eruption of the Taal Volcano in January. Operations at the LIMA Technology Center (LTC) were limited during the immediate aftermath as the Aboitiz teams worked together to clear the industrial park of ash fall and offer assistance to the affected communities. Less than two months later, the national government imposed Enhanced Community Quarantine (ECQ) in Luzon, which further impacted operations at LTC. LWC continued to operate during this period to ensure continuous water supply for all the skeleton workforce at LTC.

While LWC’s average billed volume dipped in the first half of 2020, it has since posted pre-ECQ levels by the third quarter as locators recovered losses from the first half of the year. To offer relief and convenience to locators, we extended initial payment due dates and introduced new alternative payment channels during the lockdown.

In June 2020, LWC was officially accredited by the Department of Environment and Natural Resources (DENR) as one of its Recognized Environmental Laboratories and the first and only industrial park water services provider to become such. This license allowed us to extend laboratory services to locators in LTC in September and, later, to locators from nearby industrial parks. During the lockdown, we also took the opportunity to implement production efficiency programs to improve power usage in our deepwell facilities.

Meanwhile, the lockdown in Davao City meant Apo Agua Infrastructura, Inc. (Apo Agua) had to temporarily suspend construction activities for the Davao City Bulk Water Supply Project (DCBWSP), our joint venture with J.V. Angeles Construction Corporation (JVACC).

Construction eventually resumed in mid-May, with JVACC working on the Raw Water Facility, Water Treatment Plant, and Treated Water Pipeline. Our focus centered on ensuring workers’ health and well-being amidst the pandemic as JVACC imposed work clustering, social distancing protocols, and other safety measures in accordance with government guidelines. To mitigate dire impact, JVACC has been implementing an aggressive manpower ramp-up, simultaneous work and extended hours on different worksites, and subcontracting works. Round-the-clock pipe fabrication supplements all these efforts to fast-track the project. While we are continuously reassessing how COVID-19 affects our construction program, we remain focused on achieving first drop of water by December this year.

InfraCap maintains its minority stake of 15.94% in Balibago Waterworks Systems, Inc. (BWSI), allowing us to further participate in serving the water needs of over 235,000 households spanning 11 regions.

Enhancing PH’s digital infrastructure

Our mission to help improve the country’s digital infrastructure continues especially with the pandemic underscoring the increased demand for cellular and internet access. We have ongoing discussions with mobile network operators Globe Telecom, DITO Telecommunity, and PLDT-Smart for the lease of build-to-suit tower sites and other passive telecommunications infrastructure. Onsite surveys and acquisitions restarted following the lifting of ECQ. In September 2020, we were granted our provisional registration as an Independent Tower Company by the Department of Information and Communications Technology (DICT).

Heeding the government’s urgent call to help improve the country’s information and communications technology infrastructure by the end of the year, we started to offer our existing small cell sites in key urban cities to telcos and ISPs, officially launching it as InfraCap’s newest business unit. We soon entered into partnership agreements with Globe Telecom and DITO Telecommunity for the deployment of their small cell attachments in Cebu and Davao.

A small cell network is a series of small low-powered, short-ranged antennas that provide coverage and capacity, meant to work in conjunction with macro cell towers. Small cells are expected to play a key role in the deployment of 5G, which requires antenna density to deliver larger quantities of data at higher speeds.

We are looking at growing our small cell sites footprint as we anticipate increasing demand within the next two years. We are most keen on expanding in other key cities in Visayas and Mindanao where network congestion is a primary issue that hampers service quality.

A gateway to recovery

In the face of the unprecedented impact of COVID-19 on the air travel and airport business, we remain committed to pursuing our unsolicited proposals for the Bohol Panglao International Airport and Laguindingan Airport. We believe that these projects are vital to reviving the economy and are aligned with our objective to support regional growth centers outside of the National Capital Region. InfraCap’s discussions with the government continue to take place, both parties assessing the most prudent way to move forward with the projects.

Harnessing natural synergies

With great challenges also came new opportunities. In September 2020, AEV made a strategic decision for InfraCap to take over the industrial and commercial business units (ICBU) of AboitizLand. Apart from allowing AboitizLand to focus on its residential portfolio, this move supports InfraCap’s approach in expanding the various businesses and projects around the Group’s existing assets and resources, thereby harnessing inherent synergies seamlessly.

The resilient financial performance of ICBU or the Aboitiz Integrated Economic Centers throughout the year was driven by the recognition of 36 hectares of industrial lots. The industrial business’ performance tempered the decrease in revenue contribution from the commercial business, despite rental concessions extended to tenants throughout the pandemic.

We are fortunate that disruption to industrial operations last year was kept to a minimum with a majority of our locators remaining operational through the Taal Volcano eruption and the strictest periods of the lockdown. To ensure continuous operations during the ECQ, we quickly implemented strict COVID-19 protocols at all facilities. We also hold regular virtual meetings with locators and tenants regarding procedures on reporting systems, contact tracing, infection control, and other COVID-19-related matters.

As expected, the local shopping mall industry has been severely challenged by the ongoing pandemic. To support our tenants, we have provided rental concessions in The Outlets at Lipa and Pueblo Verde. We have also instituted programs that leverage the open-air format of these malls, which is deemed safer for shopping and dining. These programs include providing alternative purchasing channels, allowing the use of alfresco areas free of charge, and providing safe events for the community, such as outdoor movies, drive thru markets, and a drive-in mass. While foot traffic and tenant sales have begun to do better, we foresee that shopping malls will continue to face challenges in 2021.

To ensure the safety of our mall visitors, strict COVID-19 measures are enforced such as social distancing, hand sanitization, wearing masks and face shields, and technology-aided contact tracing.

Despite the pandemic, exciting things are in store for the Aboitiz Integrated Economic Centers. Capitalizing on the demand for industrial spaces in Batangas and Cebu, we will expand and transform our three economic zones into smart integrated economic centers, supported by a complete ecosystem of infrastructure and the latest digital technology.

Testing cement’s resilience

Construction was among the industries heavily affected by the COVID-19 crisis. Coming from a strong start in early 2020, construction activities in Luzon and parts of Visayas and Mindanao stopped for two months during the ECQ. Stricter health protocols and limited transportation availability also contributed to the slowdown. In response, Republic Cement has put in place rigid procedures to mitigate the spread of COVID-19 in the workplace. These include health screening, social distancing, sanitation of work areas, and strict observance of PPE.

Despite the challenges brought by COVID-19, Republic Cement completed and commissioned new mills, adding 2 million tons of capacity to its existing 7.5 MTPA (million tons per annum) capacity. We have also benefited from the kiln debottlenecking done in 2019, which improved cost competitiveness and reduced dependency on imported clinker.

To address challenges in waste management, we officially launched ecoloop, Republic’s resource recovery group. To date, ecoloop has partnered with more than 30 LGUs and FMCG companies, with a common goal towards promoting plastic neutrality in the Philippines.

Republic Cement remains focused on serving its key markets throughout the country with high-quality products, while improving efficiencies and reducing costs. Production costs remained in control following the implementation of operational excellence initiatives. In addition, Republic Cement has put in place several cost-cutting and cash optimization measures.

Looking forward, the construction outlook for 2021 is positive. The government is allotting a sizable chunk of the 2021 national budget for infrastructure. Various economists are also projecting the economy to bounce back and grow by over 6%. The economic recovery would drive demand for residential and non-residential segments. Downside risk pertains to the lingering effects of the pandemic on the economic activities, which would also impact construction demand.

Despite this, we will continue our record-breaking performance at Republic Cement in line with our commitment to meet the demands of the local building and construction industry. We will also continue to staunchly support the Philippine government’s Buy Lokal, Go Lokal! programs, as an industry leader and proud manufacturer of the country’s best quality cement used in building a safer, greener, and stronger Republic.

The next 10 years

Aboitiz InfraCapital has a clearer path forward as we head into 2021. While the pandemic impacted mobility and key industries including transport and retail, it presents a huge opportunity for digital infrastructure initiatives and the integrated economic centers to play key roles in the country’s economic recovery and sustainability. Water also remains a vital need for growing communities all over the country.

Our sights are set for the next 10 years. We will build on our water portfolio, further explore the exciting opportunities in digital infrastructure, pursue our transport projects, including our airport proposals, and expand our IECs. With our renewed focus and the support of our team members, we are confident that Aboitiz InfraCapital can steadily grow in 2021 and beyond.

Infrastructure Initiatives

Today, we continue to pursue key initiatives to support the government in implementing strategic infrastructure programs and deliver on projects that provide value-adding facilities and services to Filipinos. Amid the challenging period for economies and businesses around the world, we remained true to our commitment to uplift lives by continuing to push for enabling infrastructure. We quickly shifted gears by activating the Business Continuity Plans of our operating business units and reviewing our project proposals to ensure viability in the next few years. Leveraging existing Aboitiz Group assets, we also launched a new business unit to support telecommunication companies (telcos) and Internet Service Providers (ISPs) at a time when people rely on the internet the most.

MILESTONES

Smooth implementation of new business processes and allowing work from home without business interruptions and continuously servicing customers, even throughout the lockdown.
LWC’s Laboratory Unit received accreditation by the DENR as one of its Recognized Environmental Laboratories, becoming the first and only industrial park water services provider to be granted such accreditation.
Apo Agua construction in full swing following lockdown with simultaneous construction activities, extended work hours, and specific 24/7 works.
Conducted barangay roadshows in the second and third districts of Davao City to raise awareness about the project, build relationships with the barangay officials, and source local manpower for construction work.
Launched Small Cell Sites Business with MNOs Globe and DITO as first partners.
Launched KonnectTayo with Globe to deploy WiFi sites in underserved communities in Cebu and Davao.
Granted provisional registration as an Independent Tower Company by the DICT.
Welcomed Advance Catamaran to WCIP as its third shipbuilder, strengthening Balamban’s position as the Shipbuilding Capital of the Philippines.
Digitalization of industrial estates through virtual tours and e-brochures for contactless selling.
Embarked on master planning efforts for LIMA Estate, Mactan Economic Zone II, and West Cebu Industrial Park’s transformation into fully integrated economic centers.
Republic Cement continued to champion health & safety initiatives within the industry with stringent protocols to help mitigate the spread of the COVID-19 virus as well as promoting related best practices among its partners, collaborators, and customers through pioneering events such as the first Virtual Safety Guild and webinars such as RISE UP: Adapting to the New Normal.
Republic Cement’s completion and commissioning of new mills, adding 2 million tons of capacity.
Republic Cement benefitted from kiln debottlenecking done in 2019, which improved cost competitiveness and reduced dependency on imported clinker.
Officially launched ecoloop, Republic Cement’s resource recovery group in order to address the nation’s challenges in waste management through co-processing. To date, Republic has partnered with more than 30 LGUs and FMCG companies to its goal towards promoting plastic neutrality in the Philippines.
Republic Cement launched and completed the first year of the TIBAY Innovation Program to promote innovation and ingenuity across the company, providing full support and recognition to the top ideas every quarter. Ideas range from small to big, directly impacting its bottom line (like the relaunch of aggregates line) while promoting cost savings, employee welfare, collaboration, and creativity among teams.
Republic Cement also provided crucial relief during the height of the pandemic to communities most hard hit by COVID-19 as well as disaster struck Taal and Bicol, amounting to over PHP8.8M in relief.

OUTLOOK

Begin rollout of pilot sites for Common Towers.
Expand footprint of Small Cell Sites.
Secure government approvals for regional airport proposals.
Upgrade of LWC’s wastewater facility to comply with new DENR standards.
Reap rewards of LWC’s power efficiency programs.
Complete construction at Apo Agua and achieve the first drop of water by 2021.
Operate one of the country’s largest bulk water facilities and first water-energy nexus system, utilizing renewable energy to power the water treatment process train in Apo Agua.
104-hectare expansion of LIMA Estate for additional industrial lot inventory and the transformation of its 30-hectare commercial business district.
The 30-hectare expansion plan of West Cebu Industrial Park to create more opportunities for Western Cebu.
Republic Cement to continue staunch support of the government’s Buy Lokal, Go Lokal programs.

ABC Stories

Bayanihan, resilience, and #OneAboitiz

At the start of 2020, the lives of residents of Calabarzon Region and Metro Manila were disrupted by the eruption of Taal Volcano, which resulted in damage to property, forced evacuations, suspension of work, classes, and flights, and worse, more than 30 deaths.

At LIMA Estate, which is about 20 kilometers from the volcano, industrial operations were temporarily ceased the day after the eruption to give way to facility clearing activities. While we were focused on quickly resuming normal operations, LIMA Land coordinated relief efforts for affected team members and communities.

In partnership with Aboitiz Foundation and its locators, LIMA Land donated relief goods, alcohol, and N95 masks to our eight host barangays in Lipa and Malvar who also received evacuees from other towns (i.e San Lucas, Plaridel, Bugtong na Pulo, San Andres, San Fernando, Bagong Pook, Santiago, and Luta Sur.)

We also rolled out the Co-Host Evacuees and Adopt a Colleague Programs, a donation drive at The Outlets at Lipa, and a KINDer fundraising campaigns.

In the true spirit of #OneAboitiz, our Cebu team members donated cash to fellow employees who were impacted by the calamity. We also extended assistance through donations to the Office of the Provincial Governor.

For InfraCap HR Manager Bernadette Magmanlac, helping her fellow Batangueños was a no brainer. Apart from coordinating the CSR efforts of LIMA Land, she was also among those who temporarily adopted evacuees from a neighboring town. These were 40 people she did not know but gladly helped out. “More than just giving back to our community, I believe helping our neighbors in times like these is the true essence of bayanihan and #OneAboitiz. We’re not just here for our host communities in times of joy and success, but we’re especially there for them in times of need,” she emphasized.