Looking back at what we wrote in the beginning of 2016, I realized our view of the year to come was quite accurate.
As we had said, corporate activity was going to be quite intensive in 2016 and perhaps, overambitious. But we did accomplish most of what we ambitioned for, and I now feel that the foundation for a solid 1AP is in place. Our systems, processes and policies are working, allowing us to all look forward to our plans coming into fruition. We feel that all support units are now contributing to a better AP.
Our distribution business did quite well during the year with kWh growth above expectations all across. For the coming year, indications show that growth should continue to be robust. Our intelligence on upcoming projects like buildings, malls, hotels and other tourism-related activities, on top of some manufacturing growth, indicates a healthy increase in demand. We need to continue with our tradition of service excellence. A reliable utility will attract businesses to locate there.
On the generation side, we got both units of Therma South Inc. (TSI) operating. We are working on improving TSI’s reliability and we hope to get past the plant’s teething pains soon.
Our solar venture is up and running but due to line constraints, we are still unable to deliver the full capacity aside from selling into the spot market with very low prices.
We also bought Aseagas from AEV and it is now in the commissioning stages.
A late-season typhoon struck the Bicol area with extensive damage to our Tiwi geothermal facilities. Fortunately, no one was hurt. We expect to be back in full production within 30 days.
Internationally, our focus remains on Indonesia. We currently have a geothermal and a hydro project being evaluated and worked on there. The results of the evaluation are expected well into the future.
Last year, we commented on the success of the Electric Power Industry Reform Act or EPIRA Law and how the private sector has responded by building power plants all over the country. We now have 15 major business groups owning power plants. Where we had tightness in power supply just a few years ago, we now have an abundance in all three regions. Given the pipeline of committed projects, we will have sufficient power for the next five to eight years.
There is a new reality and this has to be the focus of our efforts moving forward. The landscape shows a very competitive market with captive customers now becoming contestable, so the number of potential customers has increased dramatically. The need for us to develop relationships and properly service these accounts has increased. From the hundreds, we now have several thousands of potential customers. These customers are smaller in size, with lower load factors, and with margins eroding. We simply need not only to survive but also to flourish in this new reality.
Our whole team has to focus on this effort. Selling and building relationships is a function we all have to participate in. Our sales team has to take the lead but we have to make sure our business units are aware of it, will participate, and will contribute to our selling effort. Our support units can contribute as well. We are 1AP, and as one team, let us unite, help each other, and operate as a homogeneous unit.
Trading is another area of promise. We simply have to be on the ball all the time, actively looking for opportunities to increase margins when situations present themselves. The axiom that every centavo counts is very applicable indeed.
We are quite proud of our operating capability. We run a tight ship all over and our operating efficiencies and costs are good. We need to make sure this is a mainstay.
Project development and execution is an area we also need to focus on. Capital and development costs are going to be key components in the viability of future projects. We, as a group, have taken the long-term view that good quality equipment will provide a long project life, reduce maintenance, and increase reliability over time. Competitiveness must be emphasized.
Indeed, our business has become more complex, regulation has increased, and the number of relationships needed to be maintained with government regulators and customers alike has grown. This has resulted to sharply higher overheads for AP, and this is most seen in the number of people we employ at the corporate level.
Higher overheads and lower margins are incompatible. It’s time we give emphasis to lowering our costs and making sure that expenditures are truly value-adding.
There’s a lot on our plate but I am confident that together, we can overcome these difficulties and continue powering the country’s progress and energizing the lives of our countrymen. More than ever, the need for teamwork and full collaboration is needed to achieve our goals.
Antonio R. Moraza
President and COO
Reliable, responsible operators. As we continue to expand the business, we will also continue to improve our balanced mix portfolio of renewable and thermal power plants, while we strive to improve reliability, availability, and efficiency in our operations to the highest standards possible across the Group. We will never stop looking beyond our facilities to ensure our operations will always promote the welfare of our communities, customers, and partners. Our stakeholder management framework is in place and should guide us to become ideal members of our communities. We have proven in our many facilities how our presence and our contributions have changed the lives of our teammates and our communities for the better. That has always been the Aboitiz Way and our trademark, wherever facility you may go.
– Emmanuel V. Rubio, EVP and COO, AP Generation Business Group
AboitizPower Distribution Utilities (AP DU) stayed ahead of the game in 2016 and will continue to build on its momentum in 2017, driven by our passion to serve and engage our customers well while surpassing regulatory standards.
Riding on the country’s economic boom, we will help bring investments into our franchise areas — forging partnerships with local government units and national agencies to push local and foreign investments in order to spur economic growth. We will step up to meet the demands of new customers gravitating towards our franchise areas in Metro Cebu, Metro Davao, Cotabato City, Subic, and in our EnerZones.
We are more than just a provider of energy, we are part of our communities. We will continue to look for ways to improve our services, help spur the economy, and make lives better.
– Jaime Jose Aboitiz, EVP and COO, AP Distribution Business Group
When Open Access started, we were only one of maybe three suppliers that customers were considering. Since then, the industry has become much more competitive. There are now about a dozen suppliers, some taking aggressive, risky positions.
As prices drop, with so many suppliers chasing customers, some players will be caught short. So how do we make sure we are not one of them?
First, we have to be top-of-mind. Customers cannot remember the names of all the suppliers. We have to make sure they remember ours. We must always be in the top three, if not the top choice, of our customers. Second is reputation. We must demonstrate that we are helpful and the most reliable among all the suppliers. This way, we have the upper hand when offer prices are equal. Third is to build a low-cost portfolio. This allows us the flexibility to match the price of any other supplier.
– Luis Miguel Aboitiz, EVP and COO, AP Corporate Business Group