MANILA, December 10, 2005
 (STAR) By Zinnia B. Dela Peña - Signalling its seriousness to go into the power sector, conglomerate Ayala Corp. has formed Michigan Power Inc. as the corporate vehicle for its proposed power ventures.

In a disclosure to the Philippine Stock Exchange, Ayala said it has already filed with the Securities and Exchange Commission the incorporation papers of Michigan Power.

Ayala is eyeing entry into the power sector through the possible acquisition of some assets of the National Power Corp. (Napocor) that are to be privatized.

Ayala, the oldest business conglomerate in the country, is into real estate and hotels, banking and finance, telecommunications, water distribution, electronics, and insurance, among others.

The Power Sector Assets and Liabilities Management Corp. (PSALM), the agency handling the privatization of Napocor’s power assets, is selling power production and distribution facilities. It has so far sold five hydroelectric and one coal-fired plant, and is working on auctioning the 25-year concession agreement for National Transmission Corp. (TransCo), which has taken over the Napocor transmission assets in preparation for privatization.

The Ayala group is also monitoring developments in the yet-to-be-implemented wholesale electricity spot market to prepare for possible implications on its overall business in the event it enters the power sector.

Ayala Corp. reported a 48 percent growth in its net income in the nine months ending September this year to P5.1 billion, mainly driven by the strong performance of its real estate, banking and water disribution units which offset lower equity earnings from its telecommunications business.

Ayala owns two-thirds of the country’s biggest property firm, Ayala Land, more than a third of the second-biggest lender, Bank of the Philippine Islands, and 35 percent of number two phone firm Globe Telecom.

It also has interests in car dealerships and the Burger King franchise in the Philippines.

Peso extends gains, closes at 29-month high By Des Ferriols The Philippine Star 12/10/2005

The peso continued to rally yesterday, rising to its highest level in 29 months on the back of strong dollar remittances from overseas Filipino workers.

At the Philippine Dealing System (PDS), the peso finished at 53.42 to the dollar, its best close since July 10, 2003 when the local currency ended at 53.41 to the dollar.

The peso has been Asia’s best performing currency this year, surpassing even the Chinese yuan, with recent gains supported by heavy remittances from eight million Filipinos working overseas.

"The peso improved further on a continuous influx of (overseas Filipino workers’) remittances and export receipts and in the absence of significant corporate dollar demand," Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said.

President Arroyo’s Cabinet Secretary Ricardo Saludo also attributed the peso’s gains to remittances by overseas Filipinos, who traditionally send the bulk of their earnings to their families during the Christmas season.

However, he said investors are also responding positively to Mrs. Arroyo’s recently passed tax reform package, including raising the value added tax rate by two percentage points to 12 percent by next year.

"Further gains are expected with the implementation of the reformed value added tax and the expected upgrade in outlook for the Philippines’ credit ratings in the months ahead," Saludo said.

With the government also borrowing less to cover its shortfall after successfully trimming its deficit, the "peso has become the strongest currency in Asia," he said.

Market analysts said sentiments continued to soar as investors took a more possible outlook on the country’s economic prospects as a result of on-going financial and economic reforms.

Traders said the BSP had intervened to smoothen market sentiments but officials said they step in only when volatility is sharp.

"If we’re doing anything, you won’t see it," said Tetangco. "Our job is to ensure that exchange rate fluctuations are not too steep."

From the standpoint of simple supply and demand pressures, however, Tetangco said the appreciation of the peso should not be surprising since OFW remittances are reaching record levels and corporate demand for dollars is slowing down.

The market estimated that around $20 million worth of remittances from OFWs was going into the market every day as the country draws closer to the holidays.

The BSP has forecast that remittances would hit a record of about $10.3 billion this year, up about 21 percent from $8.5 billion in 2004.

However, actual numbers so far indicate that OFW remittances would go up by as much as 28 percent and hit $12 billion for the whole year.

The strengthening of the peso would have a downside on exporters whose dollar earnings would be worth less but Tetangco said the appreciation has been gradual enough to give them time to adjust.

"The important thing to monitor is the movement of the peso takes place in an orderly fashion and volatility is controlled," Tetangco said. "Since the volatility has been minimal and we have not seen sharp movements, this gives the affected sectors time to move with the flow."

Tetangco has already projected that the peso could go up to as high as 53:$1 in 2006, especially if positive market sentiments are sustained by economic reforms.

Tetangco said the peso was packing enough momentum to outdo its performance this year provided that economic reforms are not stalled.

Chief News Editor: Sol Jose Vanzi

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