Good morning fellow shareholders and welcome to our annual stockholders meeting.
The year 2004 was one of hope and surprises, for country as it was for your company. The nation was confronted by a serious fiscal crisis that cast a cloud of doubt on our future unless we are able to generate the political will to take necessary corrective actions.
As for Benpres Holdings, the year 2004 was similarly a mixed bag of good and bad news. There were developments that suggest long hoped for resolution of pending issues that had held us back these past few years. Yet, the completion of the Balance Sheet Management Plan, something we have been pursuing since June 2002 to get us back on track, has remained elusive in 2004.
Thus, Benpres continued to log a loss for 2004, at P1.36 billion, compared with 2003 loss of P1.90 billion.
There was however, encouraging good news with the successful start of commercial operations of the rehabilitated North Luzon Expressway. Close to seven years were spent securing government approvals and arranging for commercial credit facilities and less than two years for construction. The expressway is now expected to contribute to the Benpres bottom line.
Another solid achievement came from First Philippine Holdings Corporation (FPHC), whose First Gen Corporation subsidiary did very well in 2004. Despite continuing problems related to the dispatch of its production at its most economic level arising at the level of government's power transmission authorities, First Gen managed to perform well enough to now be a reliable source of dividends for the parent company. First Holdings, in turn, declared a P1.00 per share cash dividend last year.
Given First Gen's sterling track record, it is moving to sustain healthy cash flows by pursuing growth in power generation, fuel logistics and services. An initial public offering is being contemplated for First Gen, which may come within 2005.
However, it is not all blue skies in the power sector. The difficulty government is experiencing in the privatization of the assets of the National Power Corporation also means the implementation of long awaited energy industry reforms will also be delayed. Napocor's debts will also continue to adversely impact on public finances. The continuing high power rates will continue to reduce the country's competitiveness. Mixed signals from various branches of government on issues affecting the power industry, notably the judiciary, also threatens a potential supply crisis in the medium term.
There were positive developments in at least two of our subsidiaries in relation to their financial rehabilitation. Our telecom unit, BayanTel, obtained court approval for a 19-year repayment plan. The court stipulated, however, that all creditors be treated equally, a ruling now being contested by BayanTel's secured creditors at the Court of Appeals.
On the other hand, our cable unit, Beyond Cable Holdings, Inc., finally signed a debt restructuring agreement with majority of its creditors in July 2004, and received million in fresh funds on the strength of a Note subscribed to by ABS-CBN.
Also in 2004, another First Holdings investee, Meralco, successfully completed the refinancing of US8 million debt, which effectively stretched debt maturities to seven years. This helps Meralco carry out Phase IV of its refund ordered with finality by the High Court in 2003.
Rockwell Land registered a banner year, with the completion of the Manansala project set earlier than scheduled in the last quarter of 2005. Sales of units in the Joya project are above expectations, and initial preparatory construction work already started. Both the Manansala and Joya projects have received the strong support of overseas Filipino communities particularly in North America. Rockwell has also initiated studies on a possible project in the tourist island of Boracay.
But some problem areas remain. First on Maynilad Water Services, Inc., we made a decision some time ago to return the concession to the government. There is a consensus by all parties on this particular course of action. All the creditors have signed the Debt and Capital Restructuring Agreement which the Regional Trial Court approved on June 1. With the aid of the court-appointed receiver, we hope to be able to work out the technical issues within the next 3 months. Benpres's exit from Maynilad should make its restructuring program more workable. It was a complicated issue that required plenty of diligence, patience and nerves of steel. But most of all, an earnest desire to give the public, especially the Maynilad customers in the West Zone, a water service that is sustainable for the long term.
The most disappointing surprise for the year was ABS-CBN's loss of market leadership to GMA-7 in the MegaManila area. It, however, continues to retain leadership on a total country basis, and thus still able to charge premium rates. ABS-CBN has mobilized to regain leadership with new shows and a more determined program to improve production cost efficiencies as the network balances the financial squeeze between single-digit revenue growth and a double-digit growth in costs.
We believe the year 2004 also marks the time we have started to emerge a much stronger group, even if we have yet to formally complete our financial restructuring process. This is why we have decided to move on with various initiatives designed to prepare the organization to sustain the gains so far.
After a long period of internal discussions and planning, we have determined the vision of the revitalized Lopez Group of Companies, of which Benpres Holdings is at the lead. We want to be known as a group dedicated to the pursuit of management excellence and public service in the fields of power and media.
In this regard, all our activities would be consolidated in the two holding companies, with First Holdings concentrating on power and Benpres on media and related sectors. We believe that an increased focus with clear accountability on the part of our management groups would see us re-emerge as a force in our traditional areas of expertise.
It is also for this reason that we instituted various programs to help all of the group's companies in their journey to excellence, adopting the highest standards of business performance, competitiveness, and corporate citizenship. The Lopez Group had to look beyond its immediate financial restructuring problems to the longer term perspective of its viability and competitiveness in the future. One of the demands of competing with other companies is the ability to measure oneself against the best in the world. This is the rationale for selecting standards that are globally recognized and accepted.
One such standard is the ISO. Since the mid-90's we have identified ISO certification as a means to being on par with the international standards of quality management. By 2002, FPHC had the distinction of being the first Filipino-owned conglomerate to have its parent company and all its subsidiaries and affiliates certified against the ISO 9000 standards; while 4 from the rest of the Lopez Group have also been ISO 9000 certified.
The second global standard we have implemented is the Environment, Safety & Health System adopted from the multinational business association, the Conference Board. From 11 members in 1999, the Group's ESH network has grown to 30. Today, our ESH experts are fielded to various companies under a Network Assistance Program. 4 of our experts have been presentors in international fora and one from First Gas has received the Labor Secretary's Award for Gawad Kalusugan at Kaligtasan.
While ISO and ESH seem an ideal entry point to performance excellence, we do not stop there. We have pursued other programs that can accelerate our progress toward business excellence. These additional programs are Six Sigma and Malcolm Baldrige National Quality Awards in the U.S. The latter is the dominant reference model for national business excellence award worldwide.
The award was quickly coined our "Oscar Award" by our Business Excellence Team. No company within the Lopez Group has yet won this ultimate award, but striving for it imposes on us the disciplined, systematic approach to improvement; one that allows us to compare ourselves directly with the best performing companies in the world. Also, our special efforts to attain excellence and efficiency in operations earned national recognition from the Philippine Productivity Council for First Sumiden, a manufacturing joint venture of First Holdings and Sumitomo of Japan.
A wellness program started in 1998 continues to be in place to ensure our managers and staff are kept healthy and fit for work. Studies have shown how wellness programs in the workplace have helped increase efficiency, productivity and job satisfaction among workers, by decreasing downtime and contributing positively to the bottom line.
We also consolidated the Lopez Group's efforts in corporate social responsibility by gathering the various Foundations of the Group under the umbrella of the Lopez Group Foundation. Significant accomplishments were registered in the fields of education and child welfare by both ABS-CBN Foundation and the Knowledge Channel Foundation.
The six-year effort of ABS-CBN Foundation to rehabilitate the La Mesa Dam watershed was completed in 2004, when its Bantay Kalikasan program exceeded the original target of 1,200 hectares for replanting and went on to have 1,500 hectares planted with fast growing tree varieties. The development of the La Mesa Dam Eco Park, a recreation facility with its jogging/biking paths, salt-water swimming pool, fishing pond and boating lagoon, was also largely completed in 2004 and formal inauguration is set for the second quarter of 2005.
In sum, even as there were continuing grave concerns in 2004, there was also good basis for greater optimism about the future. But greater support from our stakeholders is necessary to enable us to finally cross that threshold towards sustainable growth.
I would like to thank our officers, staff and shareholders for the support and understanding during these difficult times. The dedication of the staff in seeing through the various programs that would bring us back to financial health is specially noteworthy.
We are confident that we are treading the right path with the right attitude. A little more patience and perseverance should eventually deliver for all of us. The process of evolving into a new and revitalized Lopez Group of Companies has started, with Benpres at the lead.