The year 2010 saw the country enter a new era, as President Benigno S. Aquino III received an overwhelming mandate from the Filipino people in the first automated national elections in the Philippines. Gross domestic product grew by 7.3 percent, the highest annual growth in the last 25 years. According to official government figures, the industry and services sectors expanded strongly in the last quarter of 2010, and agriculture recovered after four consecutive quarters of decline due to El Nino.
Lopez Holdings Corporation, formerly Benpres Holdings Corporation, similarly entered a new era marked by several milestones. The most obvious is the change in corporate name, to identify the company clearly as part of the Lopez Group. At the same time, our former chairman Oscar M. Lopez stepped down as chief executive and was conferred the title chairman emeritus of Lopez Holdings, as well as of affiliate First Philippine Holdings Corporation.
In this role, he has been actively leading an internal campaign to inculcate the Lopez values among the 13,000-strong workforce of the Lopez Group. We sincerely believe that the consistent practice of these values is what has allowed generations of Lopezes to endure difficulties, recover from setbacks, and prosper slowly but surely over time. We believe that it is adherence to these values that will allow our group of companies to remain relevant in the service of our nation for generations to come.
Lopez Holdings is a much younger corporation compared to the Lopez family’s 200 years in Philippine business, or the Lopez Group’s 82 years as a conglomerate. Established in 1993, Lopez Holdings was meant to invest in major development sectors of the Philippine economy. At the time, Lopez Holdings had core competence in media and broadcasting and in power distribution. It also held a profitable, though minority, interest in a bank. We responded to the call of the government to enter newly deregulated sectors to support the growth of the national economy.
Lopez Holdings invested heavily in First Philippine Holdings Corporation (FPHC) so that it could expand into power generation, established a new player in telecom, bid for the Metro Manila water concession, and proposed to rehabilitate the North Luzon Expressway—all on the invitation of government, which had identified those projects as vital to Philippine development.
The Asian financial contagion in 1997 that ultimately saw the dollar-denominated debt of Lopez Holdings double in peso terms turned the tide against our committed investments. Rate increases, including foreign currency adjustments, were delayed, reduced, if not withheld completely. The inability of peso revenues to cover payments due on dollar-denominated debt led to the debt restructuring that has been the focus of Lopez Holdings for the last eight years.
Today, the principal assets of Lopez Holdings remain to be controlling stakes in ABS-CBN Corporation (ABS-CBN) and First Philippine Holdings Corporation.
The difference is that ABS-CBN is now a much larger corporation, successful beyond broadcasting and a recognized leader in multimedia communications---both on the content development side and on the choice of platforms or distribution channels. By and large, ABS-CBN has delivered on its commitments to its viewers, customers, advertisers, and shareholders. Its entertainment and news programs remain the most watched among Filipinos globally. Its market capitalization makes it among the most valued and most admired of media assets in Southeast Asia. And more significant for Lopez Holdings, ABS-CBN has regularly paid dividends of up to half of its previous year’s earnings.
As for FPHC, it successfully shifted its resources, and consequently its sources of revenues, from power distribution to power generation. It purposely created and supported First Gen Corporation to develop a portfolio of clean, indigenous and/or renewable energy assets. In this, it has also become successful as First Gen subsidiaries count among the most efficient and most competitive among power generation companies in the country today. More important, it has acquired and demonstrated expertise in geothermal energy development, a highly valued body of knowledge the world over. First Gen is the leading clean and renewable energy producer in the Philippines today, while its affiliate Energy Development Corporation (EDC) is the country’s largest producer of geothermal energy.
With these major assets providing the returns expected of them, and the financial restructuring effort winding down to a quite manageable debt level, Lopez Holdings is now in a position to consider new investments. For now, all expansion, diversification and new projects or investments will be pursued at the level of the operating companies. ABS-CBN has a clear vision and strategy for pursuing its global business, while maintaining dominance in the national market. Just last month (May 2011), ABS-CBN and Lopez Holdings took in a partner for Sky Cable Corporation through the primary and secondary sale of PDRs (Philippine Depositary Receipts). The partnership with Singapore’s STT Communications Ltd. is expected to boost Sky Cable’s ability to provide innovative, world class services, as it expands its Pay TV and high speed broadband service offerings.
FPHC, which is celebrating its 50th year anniversary this 2011, has creditably pursued pioneering pursuits: in the field of clean and green power generation through First Gen and its affiliate, Energy Development Corporation; and in the field of manufacturing and other portfolio investments, including property development, where affiliates operate applying international best practices resulting in best-in-class products and services.
Meanwhile, Lopez Holdings will continue to provide value-adding services to support the leading position of its subsidiaries and affiliates in industry. The company is implementing a quality management system certified to ISO 9001:2008 in the areas of Finance, Accounting, Legal, Human Resources and Public Relations, including enterprise risk management. It continues to abide by standards consistent with its Investors in People certification achieved in 2009. The company’s corporate governance practices rank at par with the top publicly listed Philippine companies, for which it received a gold award from the Institute of Corporate Directors in May 2011.
Business excellence in the areas of corporate governance, risk management and social responsibility is a way to ensure that group services will continue to be relevant to and preferred by stakeholders.
Lopez Holdings will continue to build on its strengths in its core media and power businesses. And true to its mission to improve the lives of our fellow Filipinos, it will drive the Lopez Group’s additional economic and social investments toward projects that provide superior value to stakeholders, bring out the best in every Filipino, and move forward the country’s development.
Before I close, I want to thank all those among you who have expressed their support for my work in Tokyo. Thank you for the well wishes and the messages of hope and inspiration. The life of a diplomat is neither simple nor easy. Your accountability is great, as you are aware that you are representing your countrymen 24x7. You wake up thinking what else must be done to serve our people. You spend much of the day attending to their needs and concerns. I know our concrete contributions toward the safety and welfare of Filipinos living in Japan, and our work to increase Japanese-led investments in the Philippines will bear the desired fruits and benefit our country in time.
For now, I thank all of you for your faith in your Board and in your management team.