Analyst: Energy, infra to benefit from economic growth

The sectors energy and infrastructure are expected to benefit most from the foreseen faster economic growth this year, an analyst said. “The supply and demand dynamics for electricity remains favorable to power producers. Infrastructure will also be a good long-term bet because it’s an area the country needs to build," said Steve Sevidal, who helps manage $800 million at United Coconut Planters Bank. Sevidal said that energy demand would increase by 4.5 percent at constant supply, particularly in the Luzon grid. Based on available data from the Energy department, the 2008 system peak demand for the entire country totaled 9,054 megawatts, with Luzon making up 73.7 percent, Visayas 12.9 percent, and Mindanao 13.29 percent. In the same period, Luzon still led in terms of consumption at 45.31 million megawatt-hours (MWh). Mindanao and Visayas consumed 7.97 million MWh and 7.53 million MWh, respectively. From 2002 to 2008, Luzon grid’s total generation rose by almost a fifth to 44.2 million MWh. Sevidal pointed out that producers who can easily sell to the spot market would benefit from the tight market. “They could take advantage [of] any sudden surge in prices as what happened to us during the past few months," he added. Sevidal noted that Aboitiz Power Corp.’s 2009 revenues had benefited from a similar situation. Last year, 82 percent of its earnings, which amounted to P4.7 billion, came from power generation. Its January to March 2010 net income, meanwhile, amounted to P7.43 billion. Construction activities, meanwhile, are expected to pick up with the economic growth, Sevidal said. He pointed out companies whose property development projects focus on middle-income markets would likely benefit most. Sevidal cited the case of DM Consunji, Inc., a holdings company with construction, real estate, mining and water units, whose first quarter net income was propelled by its construction business. DMCI earned P1.41 billion — 82 percent higher than the 2009 figure — from January to March this year. “We also like port operators doing business in emerging markets. We believe that recovery and growth will be faster in emerging markets as compared to developed ones," said Sevidal. International investment company Barclay’s Capital has raised its forecast for the annual growth of the country’s Gross Domestic Product — the total value of products and services produced in the country — to 6 percent from 4.3 percent. The GDP grew by 7.3 percent in thew first quarter, the highest first quarter growth in three decades. —With Nikka Corsino/VS, GMANews.TV