AP Management Conference 2019 Notes
Enrique Aboitiz Mendieta
01 18 2019
Good evening to all of you.
Before I start, I would like to request a moment of silence to celebrate the life of Jon Aboitiz.
Nothing mattered to Jon more than our name. Nothing matters to any of us more than our name, our word, and our reputation.
At Aboitiz, we have changed leaders, and we will continue to change leaders, but we do not change leadership.
We are all led by the same principles that have brought us to where we are today and where we will go.
I will not repeat what Montxu so clearly expressed in his New Year’s message. I must, however, stress how much it matters how we work as one to assure that succession is not felt even if styles alter.
Let me comment on yesterday.
Yesterday’s “Future Proof” direction¹ – which I understand, Jojo, was your contribution – I find to be short, easy to remember, and, more importantly, powerful.
In the conversation of Montxu yesterday, the one of culture is of particular interest. It is culture that drives win or lose. Mikel sent me a quote: “Culture trumps strategy always.”
Culture evolves and values drive. Values used to be more permanent in the world of right and wrong.
Morality is a Christian invention – be guided by right and wrong.
We are playing in a world where it is about win or lose and no longer about right and wrong – but we are about right and wrong. What values do we need to develop to be both right and still win among more who think only of win in a world less and less rules based?
Sabin spoke about families and family sizes. He was really speaking of competing commitments in a very demanding world. Maybe the solution is to keep the amusement park open and shutting down the factory as we balance recreation and procreation. Robert is a bad example – he kept the factory open as he enjoyed the amusement park.
It was encouraging to hear Tristan talk about failure. My Israeli friends see failure as fertiliser for the future. Debriefs enhance the value of that fertilizer.
Let me comment on the math of LEQ. From .76 to 1.5 is doubling. A 7% compounded improvement is necessary to double in 10 years – and ten years is too long.
Like in all things, the 80/20 rule applies, 20% of your efforts contribute to 80% of your improvements. We are a company of lots of feel good conversations, warm glow – this is wonderful, however, if I may, we are here for cash flow.
Constructive conflict was discussed. Things are too complex to win without it. In our culture, is it just simply speak your informed mind and do not take things personally?
Let us go to today.
The presentations this year have been not only better, most are superb. They are engaging, brief, ambitious and possible. The themes have been appropriate.
I am sure I speak for the entire Board – Montxu and team – congratulations.
Governance and support from your Board, without understanding the intimacy of a complex and changing business, is difficult. The presentations get better, which gives us confidence that more and more of us understand the intricacies of our business better.
Squeezing more juice out of our oranges is not as important as to how we invest for the future, it does matter.
Why is this intimacy so necessary?
THE ANSWER IS IN A PREMISE AND A PERSPECTIVE THAT I AM SUGGESTING TO YOU.
THE PREMISE IS THAT we play in a 24 x 60 x 60 by seven world.
Attention and engagement are our single most substantial assets while unintended consequences are our single most significant threat.
Our most valuable people, those who deliver extraordinary value, are those who are engaged totally and have their antennas tuned in 24 x 60 x 60 by seven.
In addition, they have the competence, the endurance, the fortitude, and ability to handle any unintended consequences with the support of a Board that is continually learning and working together with management to assess what may be coming around the corner.
Post-WW2, post-Bretton Woods, and the international order that was created were about rules – rules that all agreed to follow for various reasons, most of which were American economic, military, and social power and influence. This is waning. The new and increasingly dominant player, China, has different ideas and different rules. In that struggle, the non-rules based world is taking its forward course.
We live in an economy that is chaotic but functions. We have laws that are malleable because they are mere suggestions. Our political institutions are as weak as our conglomerates are strong. My guess is that we will attract the non-rules players of the Chinese entrepreneurial sector because of our legal malleability.
We will thrive in this atmosphere only if we understand that only the “get it done” attitude matters.
In my increasing personal involvement with Israel, the start-up nation, I have learned that excellence is just not good enough. We have to be different. Traditional ways of doing things in a world that is geometrically advancing and changing in all areas is no longer an ingredient to thrive with.
We are not here for just sustainability. We are not here merely to survive. We are here to thrive. We are not here solely to win.
WE ARE HERE TO BE THE WINNER, THE WINNER OF THE MARATHON, NOT THE WINNER OF THE 100-METER DASH.
Opening by EIA
Our Chief opened with Business Unusual. We are in the storm we were headed towards last year. Both themes are real and they support the Future Proof red lights.
Montxu stressed how it matters that all of us know what is going on.
Involvement drives commitment, commitment drives engagement, hence, our investment of all this time today.
Doing things differently – excellence is just not good enough. We have to be different. Innovation and difference are twin sisters.
He talked about EPIRA as he always does – the large picture has to be clear to all of us.
The challenge of power prices below long-range costs.
Disruptors – competition, regulation, technology, and customer sophistication.
Solar and its increasing competitiveness – embrace it. Capital will retreat as the nadir deepens.
The uncertainty of Malampaya and the gas situation.
Regulation is the new left – the left, post-USSR, are moving to government. Now, there is opportunity – our economy will double twice over the next two decades. That is a 1.2-trillion-dollar economy that is increasingly addicted to energy. We have to be the dealer.
Luis Miguel Aboitiz
Get ready for dip and bounce –clear, simple, and probably dead on.
All throughout the day we see conversation about the dip and the bounce and how to mitigate the dip and how to maximise the bounce.
Miguel showed us how the dip will look like and the opportunities and cautions of the bounce.
Oversupply in Luzon and Visayas and, more seriously, for Mindanao.
Capital will retreat and when it responds in the bounce, the government will attempt to control that bounce. We can probably count on that.
Now, oversupply does create demand.
Our ROP culture will unintentionally temper capital response with more regulation.
The economics of coal and gas were explained. The situation on Malampaya is appreciated. The rhetoric of self-interest influencing policy is real.
Coal and batteries – who would have said this 10 years ago? Who designed batteries for coal?
How we improve our scenario planning skills to model the bounce will matter significantly. The technical assumptions of experts is invariably wrong. For some reason, they always fail to account the power of culture.
We are Latin, we have no sense of urgency . We are Catholic, we have no sense of accountability . This has to affect the dip and the bounce, how well we predict that effect will separate us.
Will get worse before it gets better – hopefully at the end
Regulatory nightmare as the future
Solar and batteries and their promise ; LNG (liquefied natural gas) not competitive unless stars align.
Dennis De La Serna
Clearing the regulatory path , clean up the mines faster than they plant them .
Dennis, shave your head already so we do not see the white and grey. Learn from Robert.
Dennis showed us the field – Generation, Distribution , Retail.
He reviewed previous disruptors – EPIRA and the RE law.
We rode those waves close to the peak in the past. We must repeat that ride.
Regulation and legislation
Conflicting interests fueled by all kinds of erroneous self-serving media and false news – Dennis learn from Trump to counter this
Conflicting positions and policies and the ever-changing regulatory landscape
Generators and national grid tensions
Government creating being busy – busy bee leftists; Legislation – solar sa bayan
New disruptors – solar rooftop
Demand-side Management Law
Again, the assets we have to counteract
Attention 24 x 60 x 60 by seven engagement
So far, we have been better than them – 6% growth in GDP is the score. They are catching up, 15% of GDP today and for the past decades. That is OK, service charge. They want to go to 19% next year. The French are at 57%.
Do you think that we are the only ones that have growth targets? So do all our politicians.
We have a wealth of experience and expertise. Mine it. Dennis reminds us so valuably.
The realm of possibility is a trillion-dollar economy by, maybe, 2035.
Lee Hazel Balangue
Project Development and Execution
The Role of PDE
I will tell you what Hazel means later.
Our memory is about large coal plants. Our dream is multiple projects for scale .
Now, the milieu is more complex and more complicated but with a better team – not letting the Hedcor intellectual capital go to waste. Milk the talent to support the Group, be it Pilmico or Apo Agua, 1AP, and 1AEV as 1Aboitiz.
More difficult to build
Land – PPP, our land density is increasing by the day because of so much recreation around procreation. PPP of land – price, population, and price.
For a dream to expand our RE capacity in 2019
Realizing the effect that execution has on returns
The H in Lee’s middle name, Hazel – more like “hazard” instead of Hazel. We do not want anyone awake at night. We want you to dream.
Sales and Trading
Becoming Customer Centric
In your creativity, Sandro, Apple reminds us not about wants and needs but about what we want the customer to want and need to give it to him, creating demand and supply. Rome invented this: create the demand – sins, create the supply – confession. Genius.
Sandro stresses buyers market. Suppliers rising at a rate faster than customers. That will hopefully change.
Stressing service and its effects without forgetting price
I never forget listening to O’Leary of Ryanair. Once, AT THE TOP OF HIS VOICE, HE TELLS A FEW HUNDRED: “PEOPLE AND MEDIA… I do not give a s***… about the customer, I will give him the lowest price and he will come.”
Your FedEx example, I am sure there is a lot to learn , but FedEx service centers on time.
Power is about a commodity, a ubiquitous commodity. Hence, price matters most. Hence, lowest cost producer.
So maybe we look at the five things that matter to our customer: price, price, price, service, and solutions. I am sure this is what you meant, Sandro.
IOT – Innovate, Operate, Thrive
It’s encouraging to hear the world thrive, not just sustain and survive but thrive. The word “innovation” is becoming more and more common in our conversations. Conversation, the missionary and the apostle of culture.
As a photographer, I think Fujifilm’s success was vivid film versus Kodak’s softer film. Velvia, I have shot thousands of rolls of Velvia, it was a better film. Shooting film, listening to vinyl records, and writing with a fountain pen – it is about a balance between the digital and the analogue to enhance and enrich life. Your most precious asset, life and your children – does the memory mean so little to you that you want to record with an iPhone?
Full digital is philosophically about efficiency. There are three components to getting things done and they each have a purpose.
1. Efficiency is for business.
2. Effectiveness is for the military and wars.
3. Enrichment is for life, your life.
Demographics, together with geography, define much of circumstance and chance. Age, however, has nothing to do with a number. Age is an outlook. Adrian Zecha defined age for me once : Old is when your memories are larger than your dreams. Young is when your dreams are larger than your memories. We see this all over 1AP today .
Our memories are shown a little, to learn from and the excitement to build and sell.
In our efficiency, there is a difference between 100% and 76% to 96%. There must be billions in between.
Lino, does your facility function 76%? Everyone here is curious.
Lino and team, is turning all this percentage differentials into a billion of incremental cash a dream?
Safety, keep emphasising it. I learned a long time ago in ASC, if you think safety is expensive, try an accident.
Not all about profits. That is true.
Let me put it this way. Among our many stakeholders, our shareholder is primus inter pares, first among equals, and he is the guy that pays us.
It begins with profits, true, but without profit it all ends.
The future is to increase saleable capacity with new technology, aptly put.
Optimize the present, more juice out of existing plants aptly grounded.
A glimpse of the future:
Batteries and coal
Darwin, a great teacher for sustainability, may add a perspective of sustainability.
May I suggest 3 ingredients for sustainability:
• Taking into account the interests of the next generation – we reinvest 2/3 of our profits
• Institution matters – we keep strengthening ours, reinventing ours.
• Adaptation to change – our conversations yesterday and today are pregnant with adoption to change.
The stars aligning – I always thought it was the holy spirit that worked in mysterious ways.
Jimmy’s Review of 2018 , simple, powerful, and meaty. Thank you for that format, Jimmy and team.
Our safety metrics must continuously improve
The future :
Rebranding…all about future-proof
Distributed energy – before the meter
Turning household into energy producers
Quadrupling over the next five years – if only that we may be happy.
Proactive smart metering
Driving regulation for sanity
Monetize peer to peer selling
WRONG BUT ALL RIGHT
Well framed, Robert.
Gold Coin – Ayala Energy
Congratulations to all. Both promising scores…
Gold Coin – Pandora’s box is truly opened as to us. Before Gold Coin we were just peeking out of Pandora’s box, so to speak
Introduce your barber to Dennis, he will need his services soon.
Liza and Cindy
We are not here to create value. Any idiot can create value . We are here to create extraordinary value
We are not here to win. Any idiot can win. We are here to bring home the gold, not the bronze. We are here to be the winner.
And this, Lisa and Cindy’s creative theatre-like presentation, clearly talks about the partnership, the chain of HR and finance, and, in general, the value of both PEOPLE AND SYSTEMS.
THE TWO ACTORS IN THE LISA-CINDY THEATER WERE WARM GLOW AND CASH FLOW.
We love warm glow and again that is wonderful. Your shareholder likes it too so long as you remember – CASH FLOW
The Q&A Session
ALL OF YOU WHO ANSWERED WHAT KEEPS YOU AWAKE AT NIGHT – GO SEE A PSYCHIATRIST, ALL OF YOU. WORRY IS A ROCKING CHAIR – IT GOES BACK AND FORTH AND GETS YOU NOWHERE.
GO HOME, HAVE A GLASS OF TXANTON WINE, PLAY WITH WHATEVER YOU LIKE TO PLAY WITH, AND GO TO SLEEP AND DREAM. WE NEED YOU FULLY CHARGED TOMORROW.
LaBlanc’s talk. Obsolescence – another perspective
LaBlanc’s talk. Obsolescence – another perspective
My film Hasselblads, which I have had for 30 years, are only worth more everyday. They have no level of obsolescence at all. They may have a different purpose from taking pictures to enhancing the photographic experience. My first digital cameras I have given away many of them..
My old Rolexes are worth more than ever. I bought my first one for 350 USD and, now, it is worth 3,000, 40 years later. And they tell lousy time. Those digital Swatches are useless. The watch that tells lousy time is worth more than the one that tells lousy time.
My vinyl records are worth more everyday and are far from obsolete.
My digital iPhones and iPods and iPads play terrible music and are obsolete by the month.
Go to any Indian government office. Their manual typewriters are ubiquitous. Millions are sold. Go to Amazon and type in manual typewriters?
Future Proofing AboitizPower
Again, very powerful and apt.
Why business unusual ?
Manny is telling you: The landscape is increasingly complex and increasingly complicated.
Our world of climate change, shifts in technology, and our regulatory landscape is complex, difficult to understand, and complicated with many moving parts, and that requires being both different and excellent – business unusual.
Over the year, I have come to my premise that our most significant risk-cum-threat-cum-challenge is the law of unintended consequences, and that our two most substantial assets are an engaged team that is in full attention 24 x 60 x 60 by seven. It seems from yesterday and today that 1AP has come to the same conclusion. So, now, the confirmation bias alert button in me tells me we might both be wrong. To enlighten us all, I think we should go and do it the Winston Churchill way, over a whiskey and a cigar. Thank you again, one and all.
Mikel and I were chatting outside. From the morning, it was obvious that the quality of the presentations have improved dramatically from what was last year already a good one. Start thinking now about how to make it better for next year.
To the organizers stressing over the last detail – from the time clocks, to the air temperature, etc. – thank you on behalf of everybody
Mr. Churchill we are on the way.
¹ Aboitiz Leaders Conference 2019 held the day prior to AP ManCon