Lopez Holdings


Remarks of Federico R. Lopez, chairman and CEO, at the First Philippine Holdings Corporation Annual Stockholders' Meeting on May 29, 2017

PSE Centre Auditorium, Pasig City

Dear fellow stockholders:

At last year's Annual Shareholders meetings, FPH and the various companies in our group pledged that we would no longer consider developing or investing in coal-fired power plants. When we made that decision to close the door to any of our companies putting up coal-fired power plants, it was not an easy one. Even today, we are the only large energy company that has done so unequivocally.

Recently, we've been inundated by even more global evidence telling us that we have much less time to act than originally belived. Global warming is already wreaking havoc on the Earth's water cycles and creating weather extremes like we've never seen before; and it is accelerating faster than previously imagined because of all the feedback loops being unleashed.

All sixteen years of the 21st century rank among the seventeen warmest on record, and the five warmest years have all occured since 2010 with 2014, 2015, and 2016--in quick succession--having been the hottest years on historical record. According to the National Aeronautics and Space Administration (NASA), the combined Arctic and Antarctic sea ice numbers last February 13, 2017 were at their lowest point since satellites began to continuosly measure them in 1979. Since that period we've, on average, "lost a chunk of sea ice larger than Mexico"!

Last April 18, 2017, another record was broken when the CO2 level in the atmosphere breached the 410 ppm threshold. We’ve used up 90% of that carbon concentration budget as most scientists agree we should not go beyond 450 ppm.

Many experts believe we are now living in an era where we could see more than half the species on Earth wiped out before the end of the century. American journalist Elizabeth Kolbert expounds on this in her Pulitzer Prize-winning book, The Sixth Extinction: An Unnatural History. The last mass extinction occurred 65 million years ago as all the dinosaurs were wiped out during the Cretaceous period.

Remember that this transpired over thousands of years. What’s startling is, today we see it happening in just over a few decades!

Our country is ground zero for the calamitous effects of global warming. None of us will ever forget the aftermath of Typhoon Yolanda (Haiyan) and the immense suffering of communities who lost loved ones and whatever few possessions they had; and when we just think of the scale of rescue, relief, and rebuilding efforts that came after, those images cannot but have an enormous impact on how we move forward as a company. For the Philippines, global warming is not some distant future event; it’s here, it’s now, and it’s affecting the very people and communities we love and serve.

Today the world already stands 1.1 degrees C warmer than preindustrial times and the United Nations Environment Programme (UNEP) warns that we have three years left before the door closes to limiting temperature rise to 1.5 degrees C. In fact, most experts believe the COP 21 agreements will not limit warming to only 2 degrees C but will likely get us to a 3- or even 4-degree warmer world.

The math is simple---global carbon emissions need to peak no later than 2020 and the world needs to be totally off carbon in 30 years or less if we are to keep within the 2 degrees C limit---which means cutting global emissions by half every decade henceforth. This is why the rush away from fossil fuels and toward renewables needs to accelerate; the world will need to deploy technology to utilize energy more efficiently in our buildings and homes; we will need to protect and enhance the trees and oceans that today still absorb half the world’s emissions; and we need to transform our food system from a major greenhouse gas emitter into one that’s at least GHG neutral.

The bright side is that technology is moving along the right trajectory. We’re seeing exponential cost reductions for solar, wind, and battery storage; and over the last decade installations of renewable energy (RE) have been doubling roughly every 5 to 6 years. At this rate, RE will approach 100% by 2050. However, as more renewables penetrate our lives, this will have serious strategic implications for electric utilities and power generators given its ability to change the shape of demand daily and yearly. Demand peaks will be shaved, grid electricity demand growth will be moderated, and energy production will be more democratized as more and more consumers simultaneously become producers of power. It’s a brave new world coming for the energy industry, with the looming threat of coal-fired power plants being stranded and incompatible with the need for dispatch flexibility and low carbon emissions.

This is where our natural gas platform has a distinct advantage as, it is capable of flexible operation, rapid starts-stops, and has less than half to a third of the CO2, NOx, and SOx emissions of even the best coal-fired plants. As indigenous gas sources taper down in the next 7 to10 years, we are preparing to develop the country’s capability to import and use LNG through a regasification terminal in the heart of the First Gen clean energy complex in Batangas City. This component is essential as we believe natural gas plants will play a key role in keeping the lights on and costs affordable in the transition to a clean, decarbonized energy paradigm.

Ironically, the Philippine electricity industry is a product of the 20th century and the default is to continue doing more of the same. But under the existing paradigm, many of our countrymen are still left out. There’s an estimated 11 million Filipinos still without electricity while many more suffer from unreliable and poor quality supply. The disparity only widens the gap between haves and have-nots, and the extremes caused by climate change and global warming will only make this gap worse. Paradoxically, however, we have the opportunity to build a power industry that leapfrogs into the 21st century and shouldn’t leave anyone behind.

Our geothermal platform is essential to a decarbonizing world that’s emerging. Today, it’s the only renewable energy technology capable of 24/7 baseload power at prices that already compete head to head with fossil fuels. We will continue to drive our costs down as we expect even more intense competition amongst various fuels and technologies in the years to come. Our solar and wind projects, on the other hand, have been beneficiaries of Feed-In Tariff (FIT) regimes but we know these are just transitory mechanisms meant to encourage early entry of renewables into the grid mix. We are preparing, however, to deploy these technologies in the competitive arena where they stand on their own merits, without subsidies or FIT’s. That day is coming soon.

The electricity industry and many others today are changing very rapidly Whether it's from the need to address a dangerously warming planet or a business landscape being constantly redrawn by disruptive technology. The forces at work move faster than many of us could even have imagined a mere ten years ago. But just as paradigm shifts bring risks, they likewise create opportunities for those that move decisively enough to capture them. This is uncharted territory for many but our business platform at FPH is continuosly changing, evolving, and advancing with the times. Whether it's in energy, real estate, construction, transformer manufacturing, or the new businesses and services we have yet to initiate, one thing is certain: they will not look like anything we have done in the past. This is a time for new mindsets, new capabilities, and even new ways of organizing how our people and companies operate. Your company is at an exciting juncture and we intend to test the boundaries of the new world with creativity, innovation, and boldness in the years to come. Many thanks for your valuable and continued support.

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Lopez Holdings Corporation 
16/F North Tower, Rockwell Business Center Sheridan, Sheridan St. corner United St., 1550 Bgy. Highway Hills, Mandaluyong City, Philippines

  • Trunkline: (632) 8878 0000
  • Fax: (632) 8878 0000 ext 2009