By Endika Aboitiz — Chairman of the Board, AboitizPower
On behalf of Aboitiz and Company and AboitizPower Board, we would like to thank the organizers of this conference, Ricky for being the emcee and all of you that have put so much time and effort into educating us.
The only way teams go forward is when everyone knows how they can make a difference.
The theme, 1AP – Staying Ahead Of The Game, could not be more appropriate.
Montxu’s Opening – The large picture from which we should all start
Last year’s theme was Gearing for Growth.
What did Montxu tell us? We are a catalyst.
He reviewed the history of power – from EPIRA to Full Open Access.
Our future – the GenTailer – owning the customers
The risks we took.
So we must own our customer – Open Access
There are some things you can subcontract. There is only one you cannot – and that is getting your wife pregnant.
Own your customer.
Large picture of size:
- 9 Terra – 16% of the market
- Distribution – 6 Terra – 12% MS
- Retail – 3+ Terra – 12% MS
- Towards 4000 and 12 Terra locally and towards chosen ASEAN markets
The local market – from an NPC monopoly towards more and more competition.
A review of mega trends, disruption and future market.
Models for you to think about during Sunday Mass.
Review of four distruptors:
- Competition – new and old
- Government – protecting the consumer and attracting investment
- Technology
- Customer Change
He missed out on increasing functionary incompetence and lethargy as a challenge.
In ending, Montxu spoke of staying ahead of the game by adapting to change. I add that the only way to adapt to change is to keep our minds completely open by being willing to change our minds the moment after we made it should new information come about.
We live in a world that is being pulled in all kinds of directions that are increasingly anchored by a very-leveraged world, amidst a clash of civilizations, threatened and improved by disrruption that is technology-based.
ARM – Operations
Tony began by promising to save time taken by Montxu and yet he took time from Liza – he is hanging around with too many politicians.
Some highlights:
Succession, turnover, transition – his most important function. One that your board is watching very, very closely.
Key strategies reviewed:
- Energy Sales Growths
- Technology for Distribution Group: smart meters, WiFi radio — make life easier for our customers and for us
- Execution Excellence – The TSI delay will end up costing 2.5B pesos of cash… sales is vanity, profit is sanity and cash flow is your only reality.
- Asset Management – We are talking about hundred of billions of pesos and adding 10B / quarter or some number like this.
Our business drivers:
- GenTailers
- Low Margin Environment
- Generating Portfolio
- Privatisation
- Where to build
- What to build
- Distribution
EPIRA result = competition. Well, that was the intention stressed.
The advantage of a diversified portfolio
The low margin environment to come where will growth come from: green, brown, acquisition.
If I may add – I am not so sure general liquidity will be the same driver it was in the past decade. I am not so sure foreign investors will have the same interest they had in the Philippines that they had in the past — not that they ever had great interest. We have disappointed many of them.
I am not so sure local balance sheets are as loose as they should be.
The 2020 Goal – 4 T and 12 Terra.
Liza Montelibano – Finance
Their team initiatives:
- Approval matrixes – Flexibility without losing control
- Project Forward et. al.
- CEB
- Debt-raising
- Cash upstream efforts
The role of Finance – business partnership and decision support
Cost-management – what is appropriate – I guess this is an assessment of where long-term value is achieved. At Aboitiz, we have never sacrificed the long-term for a short-term cost saving.
Here are the 2016 initiatives:
- COA Manual
- Hyperion
- Debt-raising
- Max oracle
- 1AP alignment of policies and procedures
Then we received overview of:
- Risk
- Legal
- Treasury
- Investor Relations
- Tax
- Corporate Finance
She spoke of teamwork and I am beginning to see what that is about at AP — It’s Tony roaring and Lisa purring.
Robert McGregor – AP Investment
Only four slides – what he did not tell us is that he had 2000 words per slide.
And being a Scot, he needs to be educated – wine is not alcohol. It is grape juice that happens to have a little alcohol — 12% — women’s perfume has more!
As a young boy, my dear mother used to tell me that the family that prays together stays together. But I realized that it was the family that drinks together that stays together. We just expanded the Holy Communion part of the Mass.
Where did we learn to drink? From the priest in Holy Communion! He would do it all day, any time of the day including a six o’ clock mass! Six masses a day — that is a bottle a day!
Robert’s Why, Why? How? What?
- International strategy – process of elimination
Three target markets: Indonesia, Myanmar, Vietnam
Realizing returns lower than PH’s and maybe triggering a signal of what our future PH returns will be like.
He showed us the business pre-development pipeline.
Focused. Disciplined. Vigorous. 3 keywords worth repeating often.
You saw the funnel.
Smart thinking. Common sense. Professional courtesy.
And if I may add without losing candor, Indonesia – the distance from one end to the other is the distance between Los Angeles and New York. They have a word in Indonesia for manana — an Indonesian told Andalus from Sevilla. It is Batak. The only thing I noticed the Indonesian told the Sevillan – Batak does not have the same sense of urgency as mañaña does.
Indonesia – new country. RFR country. New culture. Greenfield… fought with risk… we know it.
Luis Miguel – Corporate Business Group
Overview – Asset Management, Risk Management, Safety and Health, Supply Chain Management
The Support Groups – a way to assess maturity – how far towards the edges of the organization have we pushed it.
Asset Management – hundreds of billions of pesos and rising. Every one-percent of 100B is a billion bucks.
Maximo – technology to maximize.
Asset management is one of Murphy’s favorite porn sites.
Risk management — we are hearing this word more and more, indicating to us increased permeation.
Safety – we see increasing focus. Taking the lead is Manny Rubio learning from SNAP.
Certification – they are not papers to plaster on a wall but rather an instrument to drive quality and continuous improvement into presence of mind.
Supply chain management
Story — A friend of mine, Head of the European Defense Agency who is now working on common armaments in Europe. Every country has its own type of guns, bullets et. al. duplicating costs all over.
LMA stressed cost down – Quality up. That is long-term value. We have a culture of never sacrificing the long-term for the short-term.
The support group and the front lines. Support groups are women. Frontlines are men.
Men think that when their wives have triplets, it is because of their virility. It’s the ovary that delivers triplets and NOT THAT DUMB LITTLE HEAD BETWEEN YOUR LEGS, YOU GUYS!
Donald Lane – Project Development and Execution
The overview – very revealing.
22 people managing 3300 contractors. 5 or 6 suppliers, 5 or 6 partners.
1.8B USD under construction.
2700 MW under active development.
1100 MW under construction.
2016 Drivers
- Thermal towards supercritical
- The race for LNG
- The race for FIT
- The stress on competition – we are hearing this world everywhere!
In the SWOT, the highlight is in the threats. From contractors, to government to markets.
Complex and complicated.
The former complex is about difficulty to understand — the solution is intelligence.
The later complicatedness is solved through analysis and discipline.
The videos always complete a story — show us more. And maybe next year we can see what we learned at TSI – that we will implement at TR.
Ochie Gloria – Energy Trading and Sales
Highlights
- Targets exceeded by 34% – 200MW
- Spoke of models and modeling accuracy
- Showed us the valley of pricing through 2025 with 2019 as the nadir of price
- Two customer classes – Cooperatives and Open Access
- Strategy: Dominate the primary
- Specific value proposition for the secondary market
- The MERALCO Challenge
- The AP Response: Solution Partner and How To Execute
Ochie, as part of your Fun Strategy, you may want to improve your joke inventory.
Cholo – Regulatory
Highlights
- Income mix – 86% regulated
- 2015 lessons from 2015 challenges which you saw enough to give one migraines
- Policy Advocacy as key to long growth
- Alliances at all levels and why
- Compliance and execution to maintain our competitive edge
He spoke of government policy regulating profits and how it hampers our maximization.
2016 Large Picture: Defend, Win, Strengthen
Regulatory lag is a challenge.
2016 Plan – more of 2015 – protect revenue base, open new markets.
You saw the supply chain and its pieces. Let’s get better at getting the 200 permits we need. Maybe this will nullify the nadir of Ochie’s pricing model as in all PH’s country initiatives you have to eliminate the year.
The challenge of inexperience cum heroic regulators – ERC going from 250 to 500 people.
That turns a headache into a migraine!
Manny Rubio – AP Generation
Overview
- 44 Generation Facilities
- 3174 MW – 2402 attributable net capacity – towards 4000 attributable net
- 37% renewable
Stressing the need for asset management, Manny showed trends in slides.
In availability, 1% of 12 terra to come… you do the math.
You have seen the many initiatives,
InyoVation was explained across the board.
Congratulations Rene on your wins — the geo model and the portable lathe machine.
Risks presented: Litigation Regulatory. Project. Catastrophic in RED.
2016 PLANS
- MAX REVENUE
- Build relationships – regulators, stakeholders
- Optimize plants
- Improve functional capacity
- Strengthen the Aboitiz culture
By the way, Manny, your planned outage schedules looks like an abstract painting to me.
Jimmy – Distribution
Presented growth trends of energy, sales, and the number of customers.
You saw the convex trend of our gross distribution margins.
CAPEX in the 2B range.
System losses dropping from a high of 9 to a targeted 6.6-percent range. I trust Jim that is a weighted average. That 8% cap we are told may come down to 7.5%.
One million customers soon – malls being built everywhere in the South.
Jimmy showed us world comparatives on reliability – our goal is to be world-class so we must compare against the world.
2015 Highlights and 2016 Outlook
- More competition – RES for RCOA / MERALCO into cooperatives
- Regulatory – too many to mention
- Technology – Disruption (roof to solar?)
- Opportunities – rate flexibility / smart technology
Overall, let me again extend on behalf of our Board, our congratulations as we see nothing short of a better team, overall and individually that is making better and better music together. We see fewer and fewer areas out of tune in this concerto by EIA and his orchestra called Staying Ahead Of The Game.
And now for some grape juice.