Ayala Corporation Builds Renewable Energy Portfolio with Run-of-the-River Hydroelectric Power Projects

Ayala Corporation through its wholly-owned subsidiary Michigan Power Inc. (MPI) entered into a joint venture (JV) with Sta. Clara Power Corporation (SCP) for the development of run-of-the-river (ROR) hydroelectric power projects across the Philippines.

MPI will take a 70% stake in the JV and has committed an initial equity infusion of about PhP 600 million.

The JV follows the company’s recent partnership with Mitsubishi Corporation for solar power and its acquisition of 50% of the iconic Northwind project in Ilocos for wind power. These are all in line with Ayala’s campaign to augment the country’s power supply primarily through renewable and clean energy.

ROR hydroelectric power plant operation involves “borrowing” some river water to turn its kinetic energy into electricity, and returning the same unpolluted water back into the river. It is “green” because it does not produce harmful emissions. Like other renewable power technologies, it is economical as it depends on the “free” energy of nature as fuel.

Ayala Corporation President and Chief Operating Officer, Mr. Fernando Zobel de Ayala said, “This venture builds on our current portfolio of renewable energy assets, which focuses on solar, wind and hydro power technologies. This is an important component of our plan to create a portfolio of power assets over the medium term that blends conventional and sustainable energy sources and contribute to the country’s energy requirements.”

Ayala Corp is one of the largest Philippine conglomerates with diversified business interests including investments in real estate, banking, telecommunications, water infrastructure, electronics, automotive, information technology, business process outsourcing and, recently, renewable energy.

Sta. Clara Power is a power generation company that focuses on ROR hydropower. It is majority-owned by Sta. Clara International Corporation, a construction company with local and overseas projects. Among Sta. Clara Power’s holdings, which will not be part of the JV, are stakes in Loboc hydro, Amlan hydro, and Bakun IPPA.

Ayala Group Raises CAPEX by 21% to P79 Billion in 2011 for Domestic Businesses and Investments in Power and Infrastructure

In its annual stockholders’ meeting held April 18, 2011, Ayala Corporation chairman and chief executive officer Jaime Augusto Zobel de Ayala revealed its group companies are raising capital expenditures to P79 billion in 2011, 21% higher than what it spent in 2010. The bulk of these investments are directed to its domestic businesses, particularly in real estate, telecommunications, water, and banking units as well as new investments in the power and infrastructure sectors.

Zobel said, “The Ayala group is maintaining its focus on its domestic businesses and is looking to maximize growth by broadening customer reach and expanding to new growth centers across the country. The Philippine macro-economic environment has shown positive trends and we intend to participate in a number of the growth opportunities that have emerged.”

Ayala’s businesses have been successful in its traditional markets, which continue to grow and maintain a significant presence. Last year, earnings of its real estate, banking, water, and auto businesses reached new highs, while performance of its telecom business rebounded in the fourth quarter of 2010 posting its highest quarterly service revenues on record.

Zobel pointed out, “Our domestic businesses will continue to be a major source of growth given their compelling market positions, healthy cash flows, high profitability and ability to consistently deliver strong returns to shareholders.” Ayala delivered total shareholder return of 31% in 2010 and consolidated net income of P11.2 billion, up 37% from prior year.

Ayala’s businesses are increasingly tapping customers beyond the mainstream market with product and service innovations that are attuned to this segment. Its real estate unit, Ayala Land, Inc. launched Amaia, a new brand serving the economic housing segment to meet the growing demand for housing at much lower price points. Ayala’s mobile microfinance venture with Bank of the Philippine Islands and Globe Telecom, which is a first in the country, was also launched in 2010 and has since extended P1.1 billion in microfinance loans to 40 microfinance institutions that reach out to 200,000 microfinance customers. Its water unit, Manila Water is reaching out to over 1.6 million customers in low-income sectors under its “Tubig Para Sa Barangay Program”.

Parallel to these, Ayala is eyeing investments in the power and infrastructure sectors. In 2010 Ayala formed a joint venture with long-time partner Mitsubishi Corporation under PhilNewEnergy, Inc. to develop solar power plants in select sites in the Philippines. Early this year, it also acquired a 50% effective stake in Northwind Power Corp. which operates a 33-megawatt wind farm in Bangui, Ilocos Norte, the first wind farm ever established in Southeast Asia. Mr. Zobel envisions Ayala to assemble a portfolio of power assets over the medium-term comprising both renewable and conventional energy sources that balance the cost of energy delivery alongside sustainable practices.

Ayala president and chief operating officer Fernando Zobel de Ayala said, “The company is in an excellent position to invest in sizable projects, without impairing value-enhancing initiatives such as our on-going buy-back program, dividend pay-outs and meeting our funding requirements. We have kept a healthy cash level which as of year-end 2010 amounted to P29B.”

Ayala continues to expand overseas, albeit selectively. Its water unit, Manila Water Company, Inc. recently submitted a bid for a water distribution and non-revenue water reduction project in Bangalore, India. It also continues to explore water projects in Vietnam in partnership with Mitsubishi Corporation. Its electronics business, Integrated Micro-Electronics, Inc. (IMI) opened its sixth manufacturing plant in China and continues to explore acquisitions to build on its current capabilities. Meanwhile, its business process outsourcing unit under LiveIt continues to explore other high growth sectors.

In the same meeting the company’s shareholders approved the declaration of a 20% stock dividend on common shares and an increase in the company’s authorized capital stock from P37 billion to P56 billion as well as the creation of 40 million preferred shares.


Ayala Corporation’s Business Process Outsourcing (BPO) investment company, LiveIt Investments Ltd., announced today that its investee company HRMall, which provides outsourced IT-enabled HR services out of Manila, has entered into a definitive agreement to acquire IQ BackOffice, LLC of Los Angeles, California, which delivers high quality, software-enabled, real-time, SAS70 Type II-certified finance and accounting BPO services to mid-sized companies in the U.S. IQ BackOffice targets companies with annual revenues of $50 million to $1 billion, but its business includes clients with revenues up to $10 billion.

The combined companies are valued at approximately $15 million. The management team of IQ BackOffice LLC, including David Schnitt, its founder and CEO, will purchase a 17.5% ownership interest in HRMall. LiveIt will own the balance of 82.5% of the company and will support the company’s strategy to accelerate its growth in its current markets in the U.S. and Asia.

HRMall will now be able to provide a complete suite of low-cost, best-in-class HR, finance and accounting services to the underserved mid-sized enterprise sector in the US and Asia, through a combination of proven technology, proprietary software and processes, deep domain expertise in multiple industries, and efficient outsourced operations that enable its clients to gain world-class back office capabilities while achieving 30% to 50% annual cost reduction. HRMall’s clients will now include over 30 US companies in the manufacturing and distribution, restaurant, hotel and hospitality, retail, professional services, property management, financial services and other industry sectors, as well as members of the Ayala group of companies (including Ayala Corporation, Ayala Land, Bank of the Philippine Islands, Globe Telecom, Manila Water and IMI). The Company will operate as HRMall in Asia and IQ BackOffice in the US, and will employ a total of over 300 employees out of its centers in Manila, Chennai, Mumbai and Los Angeles.

David Schnitt, who before starting IQ BackOffice had previously co-founded NASDAQ-listed professional services firm Resources Global Professionals, will be appointed Chief Executive Officer of HRMall, while Gilbert Santa Maria, a senior adviser to LiveIt who had previously headed eTelecare Global Solutions’ (now Stream Global Services) Philippines operations and global M&A, will be appointed chief operating officer and chief finance officer. Both will be based in Los Angeles, California. The management team of IQ BackOffice in the U.S. and India will be combining with the Manila-based HRMall leadership team.

IQ BackOffice’s founder and CEO, David Schnitt said: “I believe that HRMall’s existing HR services such as payroll are very complementary to the services we provide to our existing clients in the US, and that the Philippines greatly complements our service delivery capabilities from India and the US. Furthermore, LiveIt’s investment strategy and philosophy are very much in alignment with our operating philosophy, and its leadership team has the knowledge and experience to help us achieve our growth plans. I am very much looking forward to working with HRMall and the Ayala group of companies to create significant long-term value for our clients, associates and shareholders.”

John Philip Orbeta, chairman of HRMall, stated, “The combination with IQ BackOffice will allow us to achieve our vision of offering a full range of highly efficient, market leading back office solutions to medium-sized clients around the world. We warmly welcome the IQBackOffice team into the Ayala family.”

Fred Ayala, CEO of LiveIt, added, “This acquisition by HRMall adds a high growth, high margin and very complementary business to HRMall, with numerous cross selling and operating efficiency opportunities, and is expected to create significant value for LiveIt.”

All of the stockholders of HRMall and IQ BackOffice have approved and signed the sale and purchase documents. The transaction is subject to customary closing conditions, and is expected to close before April 30, 2011.

About HRMall
HRMall, Inc. is a BPO company focused on providing Human Resource related services – including outsourced payroll – to clients in the Asia Pacific region. Its processing and data centers are located in Manila, Philippines. It implements, deploys, hosts and processes technology-enabled HR systems, including Peoplesoft HCM, to its clients. It also provides talent management solutions, allowing human resources professionals to strengthen and personalize employee experiences, resulting in a more motivated and engaged workforce. HRMall provides outsourced services to clients across a wide variety of industry sectors including telecommunications, banking and financial services, utilities, BPO, real estate, retail, construction, property management, resort management, management services, cooperative, and high-tech manufacturing. It currently services clients with employee counts from 100 to 12,000, and has the capability for full-scale ERP implementations or pre-configured SaaS-type requirements. Additional information is available at www.HRMall.com.ph.

About IQ BackOffice
IQ BackOffice is a comprehensive Finance and Accounting BPO provider to the underserved segment of Mid-Sized Enterprises in the US with annual revenues between $50 million and $1 billion. It is headquartered in Los Angeles, CA with operations in Los Angeles, Chennai and Mumbai. Services include accounts payable, accounts receivable, payroll and complete general accounting outsourcing. IQ BackOffice leverages its proprietary software platform to enable IQ BackOffice and its clients to manage processes at world-class levels across the enterprise. IQ BackOffice is SAS70 Type II certified. It has over thirty public and private company clients across multiple industry verticals, including restaurants, manufacturing and distribution, hotels, entertainment, property management, financial services and other industries. IQ BackOffice employs over 200 people in the US and India and has an experienced management team with deep finance and accounting domain expertise. Additional information is available at www.IQBackOffice.com.

The above statement was based on the disclosure made today, April 18, 2011, to the Securities and Exchange Commission and Philippine Stock Exchange, by Ayala general counsel and compliance officer, Solomon M. Hermosura.