Philippine-based marine services provider Harbor Star Shipping Services, Inc. (HSSSI) is spending almost P1 billion this year in order to expand and diversify its business operations locally and overseas.
HSSSI is allocating $8 million, or almost P400 million, mainly to acquiring more tugs for domestic operations, group chairman and president Geronimo Bella, Jr. said on the sidelines of the company’s annual stockholders meeting. Up to P400 million more is allotted for its regional operations, Bella said.
The budget will be funded through bank loans and the company’s follow-on offering that is scheduled for the fourth quarter and expected to raise P1 billion.
Present in almost all major ports in the country, HSSSI still keeps an eye out for more local tug and barge work opportunities, Bella said. The company is expecting a new tug to be delivered in July for its new operations in Iloilo, and will provide tug and barge services to the new Cavite Gateway Terminal that is expected to start operations in January next year.
Bella said they are looking north of Manila as well, such as in Subic and La Union, and to the Visayas, where HSSSI is eyeing a small tug and barge service. Bella said that with the country as an archipelago, “there are islands that are not being served well so we saw opportunities to operate a small tug and barge there.”
While opportunities exist, Bella noted too the “unfair competition” in the sector, specifically that posed by some pilots that require shipping lines to use pilots’ tugs to avail of pilotage services. In most other countries, having pilots operate their own tugs and barges is considered as conflict of interest, said Bella, adding that pilots “should not be engaged in tugboats.”
The HSSSI executive said they have raised this concern with the Philippine Ports Authority and Maritime Industry Authority, both of which are entertaining the issue.
Domestic shipping lines have asked the government to amend Executive Order No. 1088, which was issued in 1986 and which makes pilotage compulsory for all government and private ports. Shipping lines said the law adds to shipping costs, with some pilots allegedly levying exorbitant fees.
With the competition in the tug and barge industry, Bella said they are focusing more on their diving and marine maintenance business for now.
Exploring overseas projects
Meanwhile, HSSSI is looking at opportunities in other Asian countries such as Malaysia, Indonesia, and Myanmar. It is talking to a power plant operator in Malaysia that wants to charter four to six tugs, and to the port authority of Myanmar and another company in Indonesia for possible projects.
Further, the company recently signed an agreement to be the exclusive provider of lighterage services to Palau Sea & Air Transport Agency, a venture that can bring in P100 million in earnings, said Bella.
On plans to venture into the construction business, HSSSI is eyeing to be a subcontractor for the Cebu-Cordova bridge and also to provide barge and crane services. The newly inaugurated bridge will connect Mactan island and Cebu City.
Another possible venture is for an LNG project by renewable energy company First Gen Corp.
In addition, Bella bared plans to further diversify into the renewable energy industry, particularly in solar and hydro power plant operations. Bella said they are holding dialogues with possible foreign partners, one from Germany, and one from China, who wants to operate renewable energy plants in the Philippines. He said they hope to finalize a deal by the end of the year.
The Securities and Exchange Commission approved on May 11 the incorporation of HSSSI’s wholly owned energy unit, Harbor Star Energy Corporation (HSEC). HSEC will generate, distribute, and store electric power derived from solar energy, other renewable energy sources, and fuels, for wholesale to private electric utilities, electric cooperatives, the spot market, and other consumers.
The marine services provider has been expanding its business portfolio, which includes a new diving and marine maintenance unit; the further development and strengthening of its new wholly owned subsidiary Harbor Star Subic Corporation, which offers marine-related ancillary services within the Subic Bay Freeport Zone; and establishment of a joint-venture company to operate several floating dry-dock facilities in the Philippines.
Bella said a floating dry dock is currently being refurbished and work is slated to be finished by the end of the year. He said they have applied to have the dry dock set up at Subic Freeport Zone to service US military vessels, as well as foreign and local ships.
As of December 2016, Harbor Star has established operations in 15 base ports all over the country, providing services to about 10,549 ships. Major ports being served include the Manila International Container Terminal, Bataan, Batangas, Cagayan de Oro, and Davao. HSSSI also owns 45% of Peak Flag Sdn Bhd, a Malaysian tug company.