My fellow shareholders:
On our agenda today is a proposal to change the name of the company to Lopez Holdings Corporation.
The change intends to identify the company more clearly as part of the Lopez Group of companies and not as is often mistaken, a printing press. A 2009 TNS survey, supervised by ABS-CBN Research, showed that the public distinctly associated the Lopez family with helping people and communities, as well as with delivering quality products and services. However, the same survey showed that the name ‘Benpres’ had little affinity with the Lopez Group.
Benpres was actually taken from the names my grandparents, Benito and Presentacion Lopez. My father, the late Eugenio H. Lopez, Sr., who founded the modern day Lopez Group, wanted to honor them and the values they faithfully kept and handed down from generations of Lopezes before them. These values – a pioneering entrepreneurial spirit, business excellence, nationalism, teamwork, strong work ethic, integrity, social justice, and concern for employee welfare and wellness – continue to guide us today as we do business under very demanding conditions in an increasingly competitive global marketplace.
Those values are now identified with the Lopez Group and we hope that being identified as Lopez Holdings will strengthen that identification. We also hope that the change will be welcomed as representative of capital strength and better shareholder value. This, after your company achieved a breakthrough in its seven-year debt restructuring exercise in 2009. Angel Ong, our president, will give details on this in his report.
The past few years have indeed been challenging, not just to us but to the world economy. But as the right responses have been made as we persisted not just to survive these trying times but to regain prosperity, we are about to reap the benefits of the good results of our efforts.
Thus, we are blessed, and thankful, that we are now able to usher in a new decade relatively free of heavy debt problems, free of grave threats to any of our major businesses, profitable across our portfolio and able to look forward to resuming our entrepreneurial and pioneering ways. This has come at considerable cost to us, but that is, perhaps, a fair price to pay in order to extricate ourselves from the war for survival, and to place ourselves in a position from which we can grow our businesses again. In this regard, we thank all our stakeholders for keeping the faith and sticking with us through the turbulence of the past years when we had to restructure our finances.
Today, Benpres’s principal assets are its stakes in First Philippine Holdings Corporation (First Holdings) and in ABS-CBN Corporation (ABS-CBN). These companies, I can say with conviction, are where we have proven our core competence and remain to be our strongest suits in facing the merciless onslaught of competition in a constantly changing business milieu.
The question uppermost in our minds and that of all our shareholders is, where do we go from here.
Looking ahead, the first thing I would emphasize is that our battle has shifted to a battle for market dominance. Today, the Lopez Group remains the market leader in the power generation and media businesses, competitor claims notwithstanding. But the highly competitive environment means we cannot be complacent to maintain our leadership positions.
There are many powerful business groups entering, or trying to enter our markets. They are all flush with cash and all are looking for large-scale investment opportunities. They see the opportunities where we are – power, infrastructure and media.
We cannot stop these groups from deploying large amounts of capital in the pursuit of their own business aspirations. But we need to show them, however, is that you cannot wrest market leadership in any business simply by throwing large amounts of money at it. You have to do it the old-fashioned way. You have to manage eople for superior operating performance. You have to manage your financial resources. And manage well your choice and use of technology. This is where the Lopez Group will remain supreme.
We must at all times maintain our highest standards of business excellence. To a large extent, our strategic imperatives and their corresponding plans have been set.
On the media side of our business, we have started to get the maximum benefits from offering high quality content on multiple platforms or delivery channels. This has met with increasing success as we capture the young, who make up as much as 80 percent of our markets. Our media and communication companies have tracked and ably responded to all these trends, and more, dictated by their customers. ABS-CBN, SkyCable and Bayan (Bayan Telecommunications, Inc.) continue to work together to gain efficiencies and ensure that responsive programming reach the consumer in so-called ‘sticky’ ways.
Toward this end, SkyCable and Bayan piloted in February 2010 a video-on-demand service called iWanTV. It is an online portal that offers catch-up viewing for subscribers to see their favorite ABS-CBN shows at their convenient times. Also in response to market demand, ABS-CBN International Sales and Distribution has slowly but surely been presenting the best of Philippine programming to the rest of the world. ABS-CBN dramas are subtitled or dubbed in English, Turkish, Khmer, Mandarin and French for airing in North America, Europe, Australia, Asia Pacific, and Africa.
On the power side of our business, even as the attacks on our ownership in Meralco grabbed our attention over the last two years, so much went on and so much was achieved. After raising more than US0 million in 2008 to enable us to bid for and win EDC (this is the geothermal company), we successfully refinanced close to P20.0 billion of short-term bridging loans to make the acquisition stick, this at a time when the global financial markets were spinning out of control. And with the P15.0 billion rights offering at First Gen at the beginning of 2010, one that was oversubscribed, we brought our capital structures back to acceptable balance, so that we can feel that we are working for ourselves once again, not for the banks.
The principal reason we went for EDC in such an aggressive fashion was our desire for a platform from which we can grow our power generation business. With EDC, we have been able to establish our presence in the Visayas and Mindanao, complementing our earlier investments in Luzon. We also look forward to leveraging EDC’s expertise in geothermal energy development to expand the business internationally. This will take a lot of capital and it will require choosing the right partners and locations. That is why we have to go slowly and carefully. But one thing is now very clear to us. EDC is an acknowledged leader worldwide in terms of the practical exploitation and management of geothermal fields. We have the knowhow, the track record and the people, and we are in great demand as a partner for concession areas waiting to be explored and developed in such diverse locations as Chile, Indonesia and Kenya.
Where else do we go from here?
Well, the first thing I will point out is that our minority stake in Meralco, namely 6.6%, will remain, value-wise, a very considerable and significant investment in our portfolio. True, we may not have a controlling voice in Meralco, but we will continue to have an important voice, particularly in the context of our relationship with the Metro Pacific group. It would be erroneous to think that we will now ignore Meralco. On the contrary, we will continue to watch closely over a very valuable asset and we will continue to do whatever we can to protect and support it.
I believe that we also have the track record, the knowhow and the people to respond in a significant way to the country’s major infrastructure needs. We had to give up the North Luzon Expressway (NLEX) in our defense of Meralco, but we will continue to look for new opportunities for major infrastructure projects. Our sale of the NLEX was a respite, not an exit. We do have a full plate of challenges before us but I am confident that we have what it takes to be on top of our game.
The commitment of your company has always been toward investments that improve the lives of Filipinos. It invests in industries vital to nation-building, at the same time building on its strengths and competencies in core power and media businesses. Meanwhile, the journey toward becoming a world-class conglomerate, as envisioned, means it must provide the highest standard of service and value to the customers—identified as shareholders, affiliates, regulators, creditors and employees.
Toward this end, Benpres formally adopted continuous improvement among its organizational principles since 2003 when its quality management system was certified to the International Organization for Standardization or ISO 9001:2000 standard. Last year, Benpres was re-certified to the new ISO 9001:2008 standard for quality management systems.
This focus on the customer has been a recurring theme and as a publicly listed company at the core of this is good governance. Although the company has encountered rough sailing with respect to its financial position, our officers and staff members persevered in exercising diligence, transparency and social responsibility in providing management services.
In recognition, Benpres received not one but two international awards for corporate governance last year from two prestigious Asian publications, The Asset magazine and Corporate Governance Asia. In addition, Benpres just last month received a Silver Award from the Institute of Corporate Directors for its exemplary performance in the Corporate Governance Scorecard for Publicy Listed Companies submitted to Philippine regulators in September 2009.
In October 2009, Benpres became the first holding company in the country to be certified against the Investors in People (IiP) Standard, following an assessment by IiP Philippines. Adopted form the United Kingdom, IiP is a framework for delivering business improvement through people and is among the tools adopted by Benpres to concretize the company’s commitment to continuous improvement.
The institutionalization of business excellence initiatives and practices in Benpres and in its investees--both holding and operating units--is one way to ensure that products and services will continue to be relevant to and preferred by chosen markets. Another group-wide initiative we have is the promulgation of the Lopez Credo, a simple iteration of our core values, those imperishable values that we live by and make us what we are. The Lopez Credo enshrines the commitment of Benpres, as well as the bigger Lopez Group, to these values that are bound to make our companies built to last. The way forward is building on our strengths. The way forward entails patiently inculcating our values so that every member of the group chooses the time-tested paths of business excellence, good governance and social responsibility that lead to corporate relevance and sustained success. With these, Benpres and its investees shall be able to serve the country and its citizens with honesty, justice and accountability.
Finally, as announced at the annual stockholders’ meeting of First Holdings last week, I am stepping down as chief executive officer (CEO) of the First Holdings Group on June 12 after reaching the age of 80 last April. Nevertheless, I intend to be active as chairman emeritus, in order to contribute meaningfully in the advocacy and pursuit of business excellence and corporate social responsibility, and in the aggressive promotion of a leadership role for our companies in environmental friendliness and protection.
In Benpres, it is also time my brother, Meralco chairman Manuel M. Lopez, take over the duties of chairman and CEO in this company. I wish to take on the role of chairman emeritus to promote and champion our cherished values across the Lopez Group companies. I have nothing but praises for the way Manolo has led Meralco. His work ethic--leading by example--and genuine concern for all levels of the workforce—the fair treatment of rank and file and officers alike--are something all leaders should emulate. I am certain he will lead Benpres and the Lopez Group investments toward new directions aligned with the values handed down to us by our forebears, and contributing to national development at the same time.
Once again, I thank you, fellow shareholders, for your confidence in your board and in your management team.