AC Energy Philippines, Inc.

FRI 27 AUG 2021

ACEN expands domestic solar power

generation capacity
ACEN expands domestic solar power generation capacity. ACEN’s executive
committee yesterday announced that it has approved the capital expenditure (capex)
budget for 2 new solar power projects. Without disclosing the amount of the capex, the
HOLD
company has set the capex for the proposed ~ 288MW of solar project in Buguey and
Lal-lo in Cagayan, as well as the budget for 275MW expansion of its Gigasol Palauig solar TICKER: ACEN
in Zambales. The timetable for the completion of these projects has not yet disclosed. FAIR VALUE: 5.06
In addition to the capex for the 2 new solar projects, the executive committee has also
approved to enter into a joint venture with an affiliate of German solar firm Ib Vogt CURRENT PRICE: 9.20
GmbH to develop solar projects in the country with an initial 300MW of capacity. UPSIDE: -45.00
The proposed 288MW Buguey and Lal-lo Solar Project has not yet been factored-in to
our forecast as this was the first instance that the company discussed about the project.
Meanwhile, the 275MW expansion of the Palauig Solar Project is an upgrade in terms of SHARE PRICE MOVEMENT
ABSOLUTE PERFORMANCE
capacity compared to our earlier estimated capacity of 75MW. Together, the two projects
will boost ACEN’s attributable capacity by 563MW, representing 22% of ACEN’s current 1M 3M YTD
attributable capacity, and positions ACEN in line to achieve its goal of attaining 5,000MW ACEN 15.58 24.32 57.00
in attributable capacity by 2025. We estimate that the new projects could contribute ~
Php800Mil in earnings by 2024, representing 6.3% of ACEN profits. PSEi 4.05 1.82 -4.95

Reiterate HOLD rating. We are raising our FV estimate for ACEN by 3.1% to Php5.06/sh
after factoring-in the two new solar projects into our forecast. We are maintaining our MARKET DATA
HOLD rating on ACEN. We continue to like ACEN given the rapid growth of its power
generation portfolio and its focus on renewable energy. From ~2,589MW currently, the Market Cap 351,833.37Mil
company plans to grow its attributable capacity to 5,000MW by FY25, and the capital
raised from the recent FOO should help the company achieve this goal. However, Outstanding Shares 38,242.76Mil
valuations are no longer attractive as the positives are priced in. At Php9.20/sh, ACEN is 52 Wk Range 2.55 - 11.28
trading at 36.3X FY22E P/E, which is significantly above the 13.6X average 22E P/E of local 3Mo Ave Daily T/O 205.49Mil
power companies.
FORECAST SUMMARY
Year to Dec. 31 2017 2018 2019 2020 2021E 2022E
Sales 17,020.2 15,123.4 15,306.7 20,439.5 17,592.8 17,592.8
% change y/y 10.0 (11.1) 1.2 33.5 (13.9) 0.0
EBIT 451.4 (108.2) (399.8) 5,332.1 9,557.0 12,620.3
% change y/y (66.8) (124.0) 269.7 N/A 79.2 32.1
EBIT Margin (%) 2.7 (0.7) (2.6) 26.1 54.3 71.7
EBITDA 831.6 276.2 427.0 6,848.7 11,549.9 14,620.8
% change y/y (53.1) (66.8) 54.6 1503.8 68.6 26.6
EBITDA Margin (%) 4.9 1.8 2.8 33.5 65.7 83.1
Net Profits 353.8 (560.5) (416.9) 3,753.8 6,602.9 9,702.9
% change y/y (74.8) (258.4) (25.6) N/A 75.9 46.9
NPM (%) 2.1 (3.7) (2.7) 18.4 37.5 55.2
EPS (Php) 0.07 (0.11) (0.06) 0.27 0.173 0.254
% change y/y (75.9) (257.1) (49.6) N/A (37.0) 46.9

RELATIVE VALUE
P/E(X) 131.4 -83.6 -166.0 33.6 53.3 36.3
P/BV(X) 38.8 42.3 43.3 17.6 4.2 3.9
ROE(%) 3.9 -6.7 -3.8 17.6 7.8 10.5 George Ching
Dividend yield (%) 0.9 0.4 0.0 0.0 0.4 0.4 Senior Research Manager
BVPS(P) 0.24 0.22 0.21 0.52 2.17 2.38 george.ching@colfinancial.com
*So urce: COL estimates

Disclaimer: All content provided in COL Reports are meant to be read in the COL Financial website. Accuracy and completeness of content cannot be guaranteed if reports are viewed outside of the
COL Financial website as these may be subject to tampering or unauthorized alterations.
 EARNINGS ANALYSIS I ACEN: ACEN EXPANDS DOMESTIC SOLAR POWER GENERATION
CAPACITY

FRI 27 AUG 2021

AC Energy Philippines, INCOME STATEMENT (IN PHPMIL)

Inc. (ACEN)
2017 2018 2019 2020 2021E 2022E
Revenues 17,020 15,123 15,307 20,439 17,593 17,593
% Growth 10.0 (11.1) 1.2 33.5 (13.9) -
COMPANY BACKGROUND EBIT 451 (108) (400) 5,332 9,557 12,620
% Growth (66.8) (124.0) 269.7 N/A 79.2 32.1
Company description. AC Energy
EBITDA 831.6 276.2 427.0 6,848.7 11,549.9 14,620.8
Philippines, Inc, (ACEN), formerly PHINMA % Growth (53.1) (66.8) 54.6 1,503.8 68.6 26.6
Energy Corporation and Trans-Asia Oil and Interest Expense (513.6) (433.6) (882.0) (1,879.9) (2,914.3) (2,877.7)
Energy Corporation, is one of the power Other Income/Expense 105.6 120.3 716.1 908.0 1,019.3 1,019.3
Pretax Income 43.5 (421.6) (565.7) 4,360.3 7,662.0 10,762.0
generation subsidiaries of AC Energy
Tax Expense (303.7) 171.6 (148.8) 490.8 1,059.1 1,059.1
Inc, which is the holding company of the Net Income 353.8 (560.5) (416.9) 3,753.8 6,602.9 9,702.9
Ayala Corporation’s (AC) investments in % Growth (74.8) (258.4) (25.6) N/A 75.9 46.9
power generation business. The company EPS 0.1 (0.1) (0.1) 0.3 0.2 0.3
% Growth -75.9% -257.1% -49.6% NA -37.0% 46.9%
has interest in coal, wind, geothermal and
thermal power generation plants with a BALANCE SHEET (IN PHPMIL)
total attributable capacity of ~1,00MW, 2017 2018 2019 2020 2021E 2022E
representing ~ 4% of the country’s total Cash & Equivalents 1,301 1,022 8,582 5,135 42,426 51,880
capacity. Trade Receivables 2,738 2,627 2,728 6,095 3,058 3,058
Inventories - - - - - -
REVENUE BREAKDOWN Other Current Assets 3,184 1,516 1,371 2,924 2,924 2,924
PPE 6,130 5,761 21,564 31,838 29,965 28,085
0.10% Other Non-Current Assets 7,405 7,998 5,476 17,583 70,186 70,186
Total Assets 20,759 18,925 39,721 63,575 148,560 156,133
Accounts Payable 2,759 2,269 3,788 6,539 1,683 1,683
ST Debts - 400 34 285 285 285
Other Current Liabilities 285 294 652 10,294 749 749
LT Debts 6,622 6,071 20,192 21,683 58,171 57,571
Other Non-Current Liabilities 1,953 1,519 3,951 3,419 3,419 3,419
Total Liabilities 11,619 10,553 28,616 42,220 64,307 63,707
Total Equity 9,140 8,371 11,105 21,355 84,253 92,426
Total Liabilities & Equity 20,759 18,925 39,721 63,575 148,560 156,133
BVPS 0.2 0.2 0.2 0.5 2.2 2.4

99.90% CASHFLOW STATEMENT (IN PHPMIL)

2017 2018 2019 2020 2021E 2022E
Net Income 354 (560) (417) 3,754 6,603 9,703
Power Sales Others Depreciation & Amortization (561) 482 1,061 1,517 1,993 2,000
Other Non-Cash Exp (Gains) - - - - - -
Interest Expense (Income) 514 434 882 1,880 2,914 2,878
Decrease (Increase) in Working Cap -531 -925 -728 7,722 -11,364 -
Operating Cash Flow -739 -1,004 -83 12,992 -2,768 11,703
Capex -125 -119 -81 -120 -120 (120)
Other Investments 2,138 1,777 2,696 -12,107 -52,603 -
Investing Cash Flow 2,014 1,657 2,614 -12,227 -52,723 (120)
Proceeds (Payment) Debts -171 -115 3,261 1,491 36,488 (600)
Payment of Cash Dividends -270 -193 0 1,530 1,530 1,530
Others 71 -627 1,769 4,414 54,765 (3,059)
Financing Cash Flow -370 -935 5,030 7,435 92,783 (2,130)
Change in Cash 905 -279 7,559 7,954 37,291 9,454

COL Financial Group, Inc. 2

 EARNINGS ANALYSIS I ACEN: ACEN EXPANDS DOMESTIC SOLAR POWER GENERATION
CAPACITY

FRI 27 AUG 2021

INVESTMENT THESIS: KEY RATIOS

2017 2018 2019 2020 2021E 2022E
AC Energy Inc. to focus on turnaround of
GPM (%) - - - - - -
ACEN
EBITDA Margin (%) 4.9% 1.8% 2.8% 33.5% 65.7% 83.1%
Following the acquisition of a majority
OPM (%) 2.7% -0.7% -2.6% 26.1% 54.3% 71.7%
stake (currently at 72% stake) by AC Energy
NPM (%) 2.1% -3.7% -2.7% 18.4% 37.5% 55.2%
Inc. in June of this 2019, the company said
Times Interest Earned (X) 0.9 (0.2) (0.5) 2.8 3.3 4.4
that it is committed to the turnaround Current Ratio (X) 2.4 1.7 2.8 0.8 17.8 21.3
of ACEN. This involves consolidating of Net D/E Ratio (X) 0.6 0.7 1.0 0.8 0.2 0.1
some of AC Energy Inc. assets into ACEN, Days Receivable 58.7 63.4 65.1 108.8 63.5 63.5
mitigating and reducing pricing mismatch Asset T/O (%) 82.0% 79.9% 38.5% 32.1% 11.8% 11.3%
for ACEN’s RES contracts, focusing ACEN’s ROAE (%) 3.9% -6.4% -4.3% 23.1% 12.5% 11.0%
diesel portfolio on ancillary and energy
markets, and increasing plant availability MAJOR CORPORATE DEVELOPMENTS (5-YEARS)
and capacity of its power plants.

AC Energy Inc. acquires a 51% stake in PHEN for Php6.3Bil Sep-19

Recent activities to more than triple
ACEN’s attributable capacity
ACEN is well on its way to grow its AC Energy Inc. acquires a 15% of PHEN's outstanding shares from minority
attributable capacity from ~1,000 MW shareholders
currently to ~3,300 MW by 2024. The
AC Energy Inc. announced injecting key Philippine assets into ACEPH in
upcoming property-for-share swap Oct-19
exhange for 6.185Bil shares
between ACEN and AC Energy International,
Inc. or ACEIC, which is the holding company AC Energy Inc. announced injecting Presage into ACEPH in exchange for
for AC Energy’s international power projects, Mar-19
16.7Bil shares
will increase the company’s attributable
capacity by 300MW or 30%. Meanwhile,
its recently completed stock rights offering
and the upcoming investment from Arran
will raise another Php17.25Bil in fresh
capital, paving the way for the company to
complete another 2,000MW of attributable
capacity based on its pipeline of projects in
the next three years.

Capital boost from the FOO to support

long term expansion plan
We believe that the FOO will further boost
ACEN’s equity and support the company’s
long term growth plans. Following the FOO,
ACEN’s book value will increase by 29% to
Php48.2Bil, while its D/E ratio is expected
decrease to 0.55X from 0.72X. While
ACEN’s D/E ratio appears to be at the low
end of the industry average of 0.5X-0.7X,
we believe that this is necessary since the
company is embarking on an aggressive
expansion plan. Note that the company
plans to increase its attributable capacity
by from 1,000 MW currently to 5,000MW
in FY25. ACEN previously estimated that
it will require a total capital expenditure of
~Php87Bil-Php97Bil in the next four years
to achieve this goal.

COL Financial Group, Inc. 3

 EARNINGS ANALYSIS I ACEN: ACEN EXPANDS DOMESTIC SOLAR POWER GENERATION
CAPACITY

FRI 27 AUG 2021

Valuation NAV COMPUTATION

Methodology Value (PhpMil) Value (Php/Sh) % of GAV % of NAV Valuation Methodology

ACEN domestic assets 121,320 3.2 45.1% 62.6% DCF
Presage Assets 58,679 1.5 21.8% 30.3% DCF
Total Operating Assets 179,999 4.7 67.0% 92.9%
Add: Investments and other assets 88,849 2.3 33.0% 45.9% Cost/Market value
Total Assets 268,848 7.0 100.0% 138.8%
Less: Debt 75,173 2.0
Equity Value 193,675 5.1
Less: Holding Company Discount 0 0.0
FV Estimate 193,675 5.1

COL Financial Group, Inc. 4

 EARNINGS ANALYSIS I ACEN: ACEN EXPANDS DOMESTIC SOLAR POWER GENERATION
CAPACITY

FRI 27 AUG 2021

I MP OR TA NT R AT ING DEFINITIONS
BUY
Stocks that have a BUY rating have attractive fundamentals and valuations based on our analysis. We expect the share price to outperform the market in the
next six to 12 months.

HOLD
Stocks that have a HOLD rating have either 1) attractive fundamentals but expensive valuations 2) attractive valuations but near-term earnings outlook might
be poor or vulnerable to numerous risks. Given the said factors, the share price of the stock may perform merely in line or underperform in the market in the
next six to twelve months.

SELL
We dislike both the valuations and fundamentals of stocks with a SELL rating. We expect the share price to underperform in the next six to12 months.

I MP OR TA NT DISC L AIM ER
Securities recommended, offered or sold by COL Financial Group, Inc. are subject to investment risks, including the possible loss of the principal amount invested.
Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and said information may
be incomplete or condensed. All opinions and estimates constitute the judgment of COL’s Equity Research Department as of the date of the report and are
subject to change without prior notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of
a security. COL Financial and/or its employees not involved in the preparation of this report may have investments in securities of derivatives of the companies
mentioned in this report and may trade them in ways different from those discussed in this report.

C O L R E S EAR C H T EAM

APRIL LYNN TAN, CFA

CHIEF EQUITY STRATEGIST
april.tan@colfinancial.com

CHARLES WILLIAM ANG, CFA GEORGE CHING RICHARD LAÑEDA, CFA

HEAD OF RESEARCH SENIOR RESEARCH MANAGER SENIOR RESEARCH MANAGER
charles.ang@colfinancial.com george.ching@colfinancial.com richard.laneda@colfinancial.com

JOHN MARTIN LUCIANO, CFA FRANCES ROLFA NICOLAS JUSTIN RICHMOND CHENG, CFA
SENIOR RESEARCH ANALYST RESEARCH ANALYST SENIOR RESEARCH ANALYST
john.luciano@colfinancial.com rolfa.nicolas@colfinancial.com justin.cheng@colfinancial.com

ADRIAN ALEXANDER YU KERWIN MALCOLM CHAN

SENIOR RESEARCH ANALYST RESEARCH ANALYST
adrian.yu@colfinancial.com kerwin.chan@colfinancial.com

C O L F INANC IAL G R O UP, I NC.

24/F EAST TOWER, TEKTITE TOWERS,
EXCHANGE ROAD, ORTIGAS CENTER, PASIG CITY
PHILIPPINES 1605
TEL NO. +632 636-5411
FAX NO. +632 635-4632
WEBSITE: www.colfinancial.com

COL Financial Group, Inc. 5