Outlook 2018 - Power

Power

AboitizPower Outlook 2018

Heading into the storm

 

A few years ago, we set out to achieve two goals by 2020: 4,000 MW in net attributable capacity and 7 TWh of energy sales to the Open Access market by 2020.

 

 

As of end 2017, we are almost 3,000-MW strong and, this year, we expect to add 536 MW more into our generating portfolio with our hydro plants Maris Canal and Manolo Fortich plus our baseload plants Pagbilao 3 and Therma Visayas coming online. Based on our project pipeline, we are confident that we will hit our 4,000-MW goal by 2020.

Open Access remains a big challenge for us but we believe that our portfolio has given us a distinct advantage alongside the relationships we have built with our customers. Our Distribution group is, likewise, riding on the economic growth of their franchise areas. We are constantly looking for ways to improve how we are doing things so we can serve our customers better.

 

 

But going to 2020 will not be smooth sailing, so to speak. We need to focus on issues, which we feel are current and, shall we say, upon us.

Based on our analysis, we are in an oversupply situation, which is a common theme in the Luzon, Visayas, and Mindanao grids for the next 5 to 7 years. This is obviously good for the consumers. The improved supply situation has led to low selling prices in the spot and Open Access markets, clearly, a win as envisioned in the EPIRA law.

However, this poses tremendous pressure on private power players. Competition is very tough, prices are declining resulting to lower margins. Our Generation and Distribution groups continue to look for ways to improve efficiency, reliability, and availability. We simply have to compete smartly by being the best operators in this low-margin environment.

The power industry is, likewise, under turbulence. It started with questions on Open Access, followed by congressional investigations, Supreme Court cases, and, lately, the suspension of four ERC commissioners. While this is an example of democracy at work, the industry is somewhat paralyzed as contracts and necessary permits to operate expected power plants are all put on hold. We have called on the national leadership to resolve this soon to get work done at the soonest possible time.

 

Our biggest competitive advantage has always been our team and our relationships with our stakeholders. Now more than ever we must work together as 1AP alongside our partners and stakeholders not only for the success of our organization but for the betterment of the communities where we belong.

 

Being an essential utility, we expect public and government focus and scrutiny, we must continue to operate responsibly and be conscious of the impact we have on people and environment. Our power plants are economic drivers in our host localities, our distribution utilities are hand-in-hand with the economic progress of the communities they serve, our customers whose businesses we support employ thousands of Filipinos.

While we manage issues, we also look forward to positive notes. The International Monetary Fund (IMF) projects a bullish 6.8% to 7% GDP growth for the Philippines from years 2017 to 2022.  This is a very positive indicator of growth in energy sales. Demand for electricity is about 0.7 – 0.8% of GDP, so this translates to about 700 MW in new annual power plant requirements.

 

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AboitizPower will continue its Balance strategy — developing a mix complementing technologies that will allow us to deliver energy reliably, reasonably, and responsibly. Our portfolio has given us advantages in both fuel mix as well as geographical spread. We will pursue renewable energy and it is our intention to actively participate in the RE market.

We are also increasing our efforts internationally and, to my mind, this is no longer optional. This raises challenges of what, where, and how. Operating in another country, even in ASEAN, is a whole new ball game.  Culture, rules, laws, practices are all different. We need to tread with caution but we have to move forward.

 

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As complex as this industry becomes, look at our biggest source of competitive advantage – our team. Our 1AP initiatives in the past touching on processes, systems, competencies, and structure, while may seem to have been overambitious, were necessary to allow us to “clean the back of the house” so we can move forward as a cohesive unit in terms of collaborating, thinking, planning and executing.

 

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Our biggest competitive advantage has always been our team and our relationships with our stakeholders. Now more than ever we must work together as 1AP alongside our partners and stakeholders not only for the success of our organization but for the betterment of the communities where we belong.

We are indeed heading into the storm but like what has been said, storms do pass, but in the meantime, we have to hunker down and make sure we are the best at what we do.

 

Antonio R. Moraza
President and COO
AboitizPower

 

 


 

Always A Better Way

Exec Quote - EVRMore than just delivering ample, reliable, and cost-effective energy, AboitizPower generation facilities drive business and economic progress for our customers as well as our host communities.
So in 2017, we embarked on an effort to secure Integrated Management System (IMS) certification for QMS, EMS, and OHSAS. We aim to operate world-class facilities with the culture of safety embedded in all our employees. We did this while further improving our levels of availability and reliability.

And we will never stop looking for ways to be better. We want our operations, including maintenance work, to be proactive, and data-driven to improve the predictability of our plants. By monitoring our plants real- time, we can effectively protect our asset, simulate scenarios and optimize our operations for the benefit of our customers.

 

Emmanuel V. Rubio
EVP and COO
AP Generation Business Group

 

 

 

 

Closer to World-Class Standards

Exec Quote - JJAIn 2017, Visayan Electric Company (VECO) and Davao Light & Power Co. (Davao Light) secured our ISO 9000-2015 certifications. This year Cotabato Light and Power Co.(CLPC) and our four Enerzones, Subic, Balamban, Mactan, and Lima will also go for the same ISO certification. Meanwhile, VECO and DLPC will go for Environment Health and Safety (EHS) ISO certification. This gives us further confidence that our practices, processes, and facilities are standardized and harmonized which will lead to higher service deliveries and a better customer experience.

Our quest to improve will not stop. We will continue to challenge ourselves by improving key performance indices through process innovation and technology that will bring faster and more reliable service delivery. We are embracing social media and technologies that will make it easier for our customers to engage with us and receive our services. We will also continue bringing service centers and adding more third-party payment agents making it easier for our customers to apply and pay for our services.

Jaime Jose Aboitiz
EVP and COO
AP Distribution Business Group

 

 

 

 

More customers, more efficiency

Exec Quote - LMAYear 2017 was eventful. The number of open access customers increased, but so did competition. We anticipate more customers will be added in 2018. To cope with increasing volumes, we implemented a Customer Relationship Management (CRM) system. We also started a system that will integrate trading, billing and, contract management. This will take time to implement fully, but it will make us efficient. In this high-competition market, only the efficient will survive.

We expect several industry changes in 2018. WESM will implement a New Market Management System (NMMS). We prepared our team and are developing new strategies to operate under the new system. We also expect Mindanao WESM to begin this year. We have run several simulations and devised strategies to operate under the new environment.

Across the organization we implemented a Greenhouse Gas (GHG) accounting system to keep track of our direct and indirect CO2 emissions. To reduce costs, we put together a team of procurement managers to aggregate PHP956 million of purchases resulting in some PHP75 million in savings. In 2018, we will implement Information Security Management System (ISMS) and Data Privacy Compliance.

Ultimately, our role is not only to deliver power but to create solutions for our customers so they can focus on what matters most — growing their business, powering their communities, energizing their lives.

 

Luis Miguel Aboitiz
EVP and COO
AP Corporate Business Group

 

 

 

 

 


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