Green Dream Team - Semifinals Entry

Introduction

Executive Summary
SeaCo, one of the largest conglomerates in the Philippines, comprising
EnergyCo, CementCo, and PropertyCo, is currently reassessing its business
strategy to reverse a trend of stagnant growth in revenues and profits
during the past three years. Recognizing the importance of sustainability
in meeting both corporate and national climate goals, SeaCo aims to
integrate a robust sustainability strategy into its core business
operations, avoiding past pitfalls of greenwashing.

Company Overview
EnergyCo:
With 2,000MW of installed energy generation capacity, EnergyCo is the
cash cow of SeaCo, yet faces challenges as a highly commoditized and
capital-intensive business. The industry is transitioning towards
renewable energy, presenting opportunities for transformation.

CementCo:
Operating two cement plants with 2Mt per annum capacity, CementCo is a
key player in a concentrated industry. Although domestic demand is
steady, CementCo needs to consider sustainable practices to align with
global trends.

PropertyCo:
Engaged in residential and commercial properties, PropertyCo faces
challenges in defining the future of commercial properties.
Post-pandemic, the residential market is booming, and office leasing
space is in high demand.

Operational Inefficencies
Lack of Clear Sustainability Strategy

SeaCo has encountered difficulties in establishing a clear and authentic

sustainability strategy. Past ESG initiatives were perceived as
greenwashing, negatively affecting the public's perception of SeaCo. This
undermines the credibility of the conglomerate in its sustainability
efforts.

Without a robust sustainability strategy, SeaCo may struggle to align with

broader environmental goals, attract environmentally conscious
stakeholders, and differentiate itself in an increasingly eco-conscious
market.

Commoditization and Capital Intensity in EnergyCo

EnergyCo, while being the most profitable segment of SeaCo, operates in a

highly commoditized and capital-intensive industry. This poses
challenges in terms of differentiation and sustainable growth.

The commoditized nature of the energy sector may limit the potential for
margin expansion and hinder the pursuit of innovative and sustainable
energy solutions.

Stalling Plans in PropertyCo

Disagreements on the future of commercial properties have led to stalling

plans for PropertyCo. This indecision is impacting the overall revenue
stream, particularly in a post-pandemic environment where demand for
residential and commercial properties is increasing.

The stalling of plans may result in missed opportunities to capitalize on

the recovering real estate market, hindering revenue growth and market
share expansion.

Decision-making inefficiencies

Lack of Innovation in CementCo

CementCo, one of SeaCo's subsidiaries, has not shown a clear intention to

innovate or significantly expand, despite favorable conditions such as
government bans on low-grade cement imports.

The lack of innovation may result in missed opportunities to capitalize on

the domestic demand created by government policies, limiting the market
share potential of CementCo.

Uncertainty in EnergyCo's Future Energy Mix

EnergyCo has plans to install additional capacity but lacks a clear energy
mix. This uncertainty may hinder long-term planning and optimal
investment decisions.

The lack of clarity in the energy mix may impede the transition towards
more sustainable and profitable energy solutions, affecting the
competitiveness of EnergyCo.

Operational Challenges at PropertyCo:

PropertyCo encounters internal discord hindering the expansion of its
commercial portfolio, stemming from disagreements on the future of
commercial properties. These internal conflicts not only impede strategic
planning but also pose challenges to market competitiveness.

Additionally, being positioned as a 'second-tier' developer presents

challenges in consumer preference, particularly in the residential sector,
impacting market share and overall competitive standing.

Market positioning

EnergyCo - Cash Cow

EnergyCo is described as the most profitable part of SeaCo, indicating a

high market share in the energy generation sector.

Despite being a capital-intensive and commoditized industry, the energy

generation sector is likely stable and generates consistent profits for
EnergyCo.

As a cash cow, EnergyCo is a reliable source of revenue for SeaCo,

generating consistent cash flows.

CementCo - Dog

The cement industry being a duopoly run by Cemex and Holcim, two
international companies with Philippine subsidiaries, shows the difficulty
to chip out market share from

Strategic Decisions: SeaCo needs to evaluate whether to invest in turning

CementCo into a Question Mark or consider divestment if it doesn't align
with long-term strategic goals.
CementCo huge potential to increase market share

EnergyCo's advantage to more renewable mix

Future of residential and office space and its potential impact on

PropertyCo

Repositioning PropertyCo toward sustainability

Commercial Real Estate Overview:

● Vacancy Rates: In Q4 2022, the commercial real estate market in

Metro Manila faced challenges, with vacancy rates expanding to
17.8%.
● Contributing Factors: Increased vacancies were influenced by
reduced activities from Business Process Outsourcing (BPO)
companies, rightsizing efforts, and the introduction of new
property supply.
● BPO Resilience: Despite challenges in Metro Manila, the BPO sector
in Metro Cebu remained resilient, comprising 87% of total
transactions, demonstrating its continued influence.
● Occupancy Composition: Manila's commercial spaces exhibited
diverse occupancy, with 70% attributed to Owner and Operator
arrangements, 28% to corporate occupiers, and 2% to flexible
workspace operators.
● Investment Dynamics: Commercial property investment entails
higher initial costs and management complexities. However, it
offers potential for higher Return on Investment (ROI) due to
longer-term leases with businesses.

Residential Real Estate Overview:

● Housing Backlog: The Philippines faces a substantial housing

backlog, estimated at nearly 6 million units from 2001 to 2018,
primarily concentrated in socialized, economic, and low-cost
segments.
● Production Challenges: The average annual production of housing
units is around 230K to 240K, indicating a prolonged timeframe
required to address the existing backlog.
 ● Leasing Sector Growth: Positive indicators in the residential real
estate leasing sector point to steady growth, with a projected
revenue of US$77.79 billion in 2023, predominantly driven by
house leases.
● Market Trends: The nationwide residential real estate price index
saw a 7.7% increase in 2022, signaling positive trends in the
housing market.
● Condominium Dynamics: While condominium units experienced a
robust annual price increase of 12.9%, a quarter-on-quarter decline
of 4.9% was observed in Q4 2022.

Given the challenges and opportunities in both commercial and

residential real estate, there is a compelling argument for prioritizing
residential development in the Philippines. We recommend addressing the
significant housing backlog aligns with social needs, economic stimulus,
and positive market dynamics, offering long-term stability and growth
prospect

More financially accessible green condominium projects

Mixed-use development projects for an attractive office development

Sustainable operational reform on CementCo

Currently, the cement industry could be improved on dramatically, as

there are not many opportunities for the companies to grow, due to the
oligopoly.
In summary, this recommendation focuses on

- by introducing products that r high quality and renewable, we’re giving

consumers a choice

- basocally these products can be cheaper- sell direct to the consumer (kill
the middle man, lower costs to make high quality materials)—> the profits
used will be used to invest in better “heat waste management” to lower
the operation costs to maintain the doc

eco bricks: there r several cement companies in the ph -> they partner w
the ph govt to collect waste to make cement

Doubling-down on the low-grade cement market

Sustainable energy-sourcing with EnergyCo

Cement plant retrofitting with heat and carbon capture technology

Establishing constant revenues with PropertyCo

Leveraging EnergyCo’s Sustainable Distribution Networks to provide competitive energy prices for Residential and
Commercial sectors
Average generation costs from renewable power plants are comparable to
those from conventional power plants. Purchased renewable energy has an
average generation cost of 4.6087 Php/kWh, lower than the 4.6481
Php/kWh average for fossil fuel energy.

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Contributors

Green Dream Team

● Albert Matt Alejo
● Juan Miguel Angeles
● Miguel Paolo Buenaseda
● Enzo Go
● Louella Jade Suarez