As we celebrated Lopez Holdings’ 20th anniversary, your company was fairly stable compared to the rather turbulent years that preceded it.
Lopez Holdings posted 1.943 billion in net income attributable to equity holders of the Parent for the year 2013. We remained focused on two core businesses: First Philippine Holdings Corporation (FPH) and ABS-CBN Corporation (ABS-CBN). In 2013, your company received 942 million in cash dividends from these investees.
Through Lopez, Inc., your company subscribed to 987,130,246 preferred shares issued by ABSCBN in February 2013 at par of 0.20 per share, with a cumulative interest rate of 2% per annum. Your company also subscribed to a new issuance of 34,702,140 ABS-CBN common shares for 1.5 billion. The new investment, together with 2.5 billion
infused by The Capital Group, will be used by ABSCBN for its digital convergence strategy led by its foray into mobile telephony under the brand ABSCBN Mobile.
As at December 31, 2013, your company had direct obligations of US$23 million in restructured notes and 1.167million in short-term loans.
Year 2013 became especially challenging for your company and for our country, with the Bohol-Cebu earthquake in October, followed by super typhoon Yolanda in November.
ABS-CBN acted swiftly and with purpose. Through its News and Current Affairs Division and through Sagip Kapamilya, ABS-CBN was able to spread factual information and redirect the goodwill of donors to those who needed immediate help the most.
In the case of the super typhoon, where the whole of Central Philippines was devastated, Sagip Kapamilya did a most commendable effort to coordinate relief with local governments, national leaders, as well as donors and other funding agencies. The track record of Sagip Kapamilya in disaster relief and rehabilitation has earned for it a sterling reputation—trusted by Filipinos from all over the world. The tremendous goodwill of ABS-CBN, built over the last 60 years, translates into unparalleled brand quality.
Also worthy of mention is work done by Energy Development Corporation (EDC), and Lopez Group Foundation, particularly in providing immediate as well as long-term assistance to Lopez Group employees affected by Yolanda. EDC’s Leyte Geothermal Production Field straddles Ormoc City and Kananga in West Leyte. The super typhoon rendered its main power plants constituting 700 MW inoperable.
EDC gave priority to ensuring the welfare and safety of employees in the area. In this effort, they were ably supported by other Lopez Group companies such as First Gen, First Philippine Holdings, ABS-CBN, Sagip Kapamilya, and also the HR Council which mobilized volunteers and called for donations at the corporate and individual levels.
As a result of the 2013 disasters, the Philippine economy is expected to grow at a slightly slower rate than the 6.5-7.5% targeted in the Philippine Development Plan.
All the more, our country needs new investments in industry and infrastructure to create jobs and facilitate recovery and reconstruction. For all these, our country needs affordable electricity, which is why EDC persevered and succeeded in bringing its geothermal plants back online. EDC did very well both in taking care of its employees in the typhoondevastated areas, and in mobilizing manpower, parts and equipment for the task of returning power to the grid. As of March 11, 2014, EDC was providing stable power to customers at the pre-Yolanda level.
First Gen Corporation, meanwhile, secured the transformer assembly needed to return San Lorenzo back to normal operations, after being out of commission due to a fire in the middle of 2013. It also decided to proceed with building San Gabriel, with the award of the EPC (engineering, procurement and construction) contract to Siemens in December 2013. This is an essential step for First Gen, as well as for our country, to develop natural gas into a significant component of our energy sources. Natural gas is abundant and clean, making it a preferred fuel to reduce pollution all over the world.
For the property companies under First Philippine Holdings, the industrial park and Rockwell Land, we expect them to perform well in the medium term. The demand for industrial land, as well as office spaces, continues to track our country’s growth. As for the residential component, interest rates remain low, giving our clients the confidence to make those dream home purchases.
On the communications side of the business, Bayan, together with its major creditor Globe Telecom, Inc., filed an Amended Rehabilitation Plan which was subsequently approved by the Court. As of yearend 2013, Globe had acquired about 38% ownership of Bayan through conversion of debt to equity. A change of control of Bayan requires the approval of the NTC (National Telecommunications Commission), and we expect that approval within the year. Rest assured that employees of Bayan will receive a fair separation package, and management has been communicating with them regularly. Globe, with its minority interest, already has representatives in the Bayan Management Committee.
At the same time, we look forward to the commercial launch of ABS-CBN Mobile and Digital TV.
ABS-CBN Mobile had its soft launch as a prepaid service in late November 2013. It became a vehicle to reach out to victims of Yolanda. It committed to distribute 100,000 SIMs to typhoon victims so ABSCBN Mobile subscribers in Manila could share a load with their kapamilya in the typhoon-stricken areas.
As for Digital TV, the government has finally chosen the Japanese standard, thanks to its special feature of being able to insert official announcements from government on expected disasters. This feature is used all the time in Japan for earthquake and tsunami warnings after an earthquake or other disaster. As of this writing, we still await the Implementing Rules and Regulations (IRR). However, what is important to note is that ABS-CBN investments in Digital TV and in mobile telephony, which have been under development for the last couple of years, will now be starting commercial operations.
As at end-2013, Lopez Holdings owned 46% of FPH and 56% of ABS-CBN. Your company remains committed to support its core companies by all means necessary to secure their path toward sustainable growth.
Thank you for keeping faith with your management team.
Salvador G. Tirona
President, Chief Operating Officer and Chief Finance Officer