AboitizPower is committed to good governance, convinced that it is the sensible, appropriate, and only sustainable way to move forward as a business enterprise. Good corporate governance practices create value for the Company and its businesses
Dear Fellow Stakeholders,
We send you all our warmest greetings.
The year has passed, and we are back to talk to you, our fellow stakeholders, to tell you our story for the quirky year that is behind us. More importantly, we will share with you our best assessment of the year and years to come.
The timely adaptation to change, as a broad philosophical guide for both our thinking and behavior, are ingredients of the culture we are enriching in everything we do, everywhere and always. Adaptation could not have been underlined and placed in bold letters more than by COVID-19. We still see unintended consequences as our most serious threat. COVID-19 reminded us vividly.
The continuous challenge we mentioned to you last year of getting all our fundamentals right as we innovate precisely for the timely adaptation to change is generally being met. The highlight is that our plants are running better. COVID-19, on the other hand, has delayed the entrance into the operation of our single largest investment in a very long time and maybe in our history, our GN Power Dinginin. That is another fundamental that we will get right this year.
COVID-19 will force all of us to operate smarter disruptively and digitally. We were a little ahead of the game here and this enabled us to adapt very quickly. As part of our digital transformation strategy very early on, we dedicated a significant amount of energy and resources into preparing our team for remote working alongside vigilance to cybersecurity risks. These became top concerns in the business world last year but Aboitiz has already put this into practice, which has really paid off given our seamless experience in shifting our work setup.
Your Boards also met more frequently than usual and took in weekly virtual meetings with the various executive committees to ensure nothing was left to chance under an extremely volatile situation. For a few months, we devoted much discussion on preparing for the worst by monitoring, with management, more of the company more often than usual. We are back to our normal governance schedule but must take the opportunity to applaud the government, particularly Bangko Sentral ng Pilipinas whose quick action ensured the banking system remained liquid and open to lending.
Looking back, our first imperative was the safety of our people. Your management team, particularly at HR, did what it needed to do to ensure the safety of our team members and their families as we moved into working from wherever. Limitations and constraints enhanced the challenge that we met but we kept a holistic approach to protect our people physically, emotionally, and mentally.
As the nationwide lockdown was imposed, we aimed to ensure peace of mind among all team members by releasing their mid-year pay and Christmas bonuses ahead of schedule. Our non-stop information campaign tackled proper health and safety protocols, virtual updates from our technical working group, consultations with experts, to name a few — all to help the Group better understand the dynamics of COVID-19. Aboitiz Academy used the time to train and educate. Vaccination is high on our agenda for both protection and evolution to a newer, better, and smarter way of doing things with caution yet more freedom.
The next imperative was to help our communities through direct interventions and in cooperation with the government and other members of the private sector as the surprise micro-beast that attacked us was one that needed all hands on deck. The disasters of typhoons in the past prepared the private sector to react and help, together with the government. We invite you to read through the COVID-19 section of this report, which provides details on our groupwide initiatives to support our communities and all our stakeholders through this health crisis.
Pressure and difficulty are wonderful wake-up calls. COVID-19 sent up flares in numerous areas from small matters like DocuSign — that we should have executed earlier — to, more seriously, innovative digital solutions to ensure continued availability of our services and the acceleration of more sophisticated cybersecurity controls.
Fortunately, while some of our businesses were affected by the economic slow down caused by the community quarantine, our businesses proved resilient with most back to pre-pandemic levels. We do not have businesses that will take a long time to come back to where they were, if they ever do. We refer to the tourism, hospitality, and transportation businesses that are particularly difficult.
Overall, all sectors are working with profits and positive cash flows for an ever firmer balance sheet. Our president will give you more details in his report. The system to monitor all operations tighter and more frequently were set up at the governance and management levels. We are lightening the load of the center to evolve into higher levels of openness, agility, and innovation.
The vaccine is upon us and igniting optimism but it is not yet here. Prudence tells us to continue on red alert and never leave it so we are ready for the next surprise.
Aboitiz, as a corporation, enters its second century in a wake-up call year. As a family enterprise, we enter our third century in that same wake-up call year. We were awake in many areas but in siesta mode in others. COVID-19 has woken us up completely. We will attend to tighter attention to the fundamentals of our business with the concern of accelerated change and disruption firmly tattooed on our foreheads.
Our imperatives to increase the efficiencies of our plants, particularly our coal plants, continue. We know that a thermal shift from coal to gas is in front of us. We face the challenge to build our renewable portfolio because it is the right thing to do for our country and for the long-term sustainability of our business.
Most importantly, increased attention is being given to what is beyond the balance sheet — the value produced by our intangibles, particularly our culture. Too much attention was given by the world, and us by osmosis, to compliance and process. While this is important, there is much to get done and we are re-balancing how we invest our time and energy into getting things done better and smarter to remain super competitive.
We are on red alert today. The main ‘beyond the balance sheet’ initiative we have learned and are ingraining into our DNA is that red alert is the “new normal”. We know a new surprise is coming. In what form and from where we are not sure, but we do know it is in its bacterial stage. Complacency and overconfidence are our enemy.
As we have for the last 100 years, our purpose is to advance business and communities. We continue to do so as we have for a very long time. Being contributing neighbors is the right thing to do and it is through our business — our products and services — where we can make the biggest positive impact on our stakeholders.
We are not going to be a company that rides on to a fad of having a purpose. We had this purpose since we can remember. Ramon Aboitiz built the Cebu Boys’ Town to take care of and train orphans. We modernized the shipping business with our SuperFerries. We brought in one of the first modern sugar mills to Ormoc a little under 100 years ago. In Davao, we did not just put up more poles to serve more people, we also set up free street lights, the city’s 911 emergency service, the Aboitiz Cleanergy Park for the pawikan, and, in December 2020, launched BEST Bus, its first free electric bus service in the central business district. Go to YouTube and listen to the public — Davao BEST Bus will connect you to what the public says. In banking and financial services, we are leveraging digital technology to elevate lives by promoting greater financial inclusion. We are likewise helping to ensure food security and availability, for example, by training displaced Maranao yellow corn farmers in entrepreneurship and by linking them to potential buyers. Service to our communities and our country goes hand in hand with better business — it always has.
We have always put people first because success is about better people serving our customers in better and smarter ways. Good returns follow happy and returning customers. Aboitiz has always acted understanding the above clearly. It is probably the single most important reason that we have, as a family, been in business all over these islands way before we began life as a corporation. COVID-19 reminded us against any talent management complacency.
There is a fear that our economy will take longer than most to recover. We are hoping that the unmeasured resilience of our people will make up for the deficit of traditional international measures. We are a unique people that have been isolated and insulated in our own little part of Southeast Asia.
We may not be the best at the pro-active but we are quite good at the reactive. We have faith in the capacity of our people to work together in crisis even some of our more formal institutions fail. Our overseas workers, the heroes of our economy are all firmly there — everywhere they are first to hire and last to fire. Some have come back, like the cruise ship farers, but far more are still out there helping their families and our economy. We are a spiritual culture that helps each other. That matters in ways few international institutions can measure. We have surprised ourselves before. We will surprise ourselves again.
Not everything that counts, can be counted. we have shown the world this often.
We are optimistic that the economy will recover and reach pre-pandemic levels. Whether that recovery comes this year, the next, or the one after — we are ready! One thing we are positive about is we will come out of this crisis stronger as a business and as a country.
Enrique M. Aboitiz
Chairman of the Board
Aboitiz Equity Ventures Inc.
Erramon I. Aboitiz
Chairman of the Board
Aboitiz Power Corporation
Consolidation of Our Power Business – Incorporation of AboitizPower
As early as 1905 and all the way through to pre and post -World War I era, Aboitiz & Co. Inc. had invested in the power distribution businesses. These investments included the Visayan Electric Company, Inc., Davao Light & Power Company, Inc., Cotabato Light & Power Company, Ormoc Electric Light Company, and the Jolo Power Company. In December 1978, the Aboitiz Group divested its interests in the electric utilities of Jolo and Ormoc when these were sold to the Philippine Government for conversion into electric cooperatives during the Marcos years. The Company would later add distribution utility networks in special economic zones, such as in Subic Freeport Zone, Mactan Export Processing Zone, and West Cebu Industrial Park.
Sometime in the late 1990’s to early 2000’s, there were precedent-setting changes being studied for the power industry’s regulatory framework. Deregulation of the power industry and Privatization of National Power Corporation (NPC) was put on the legislative agenda. For the Aboitiz Group, it saw that its strategic horizon required a focused consolidation of all its power generation, distribution and related power assets into one corporate basket, AboitizPower.
AboitizPower was incorporated on February 13, 1998, as a wholly-owned subsidiary of Aboitiz Equity Ventures, Inc. and became the designated corporate vehicle of the Aboitiz Group for its investments in power and power related businesses. As envisioned, AboitizPower would invest in, hold, own, acquire or purchase business assets and facilities for electricity generation and distribution of hydropower facility and other related businesses. AboitizPower was also expected to provide operations, management, and technical services and advice for commercial, industrial manufacturing and other kinds of enterprises engaged in electricity generation and or distribution, any electricity generation and distribution of hydropower facility, including business entities that construct, own lease and operate electricity generation, distribution, hydropower plans or related businesses; as well as carry on the general business of manufacture, generation, and transmission of electric power.
Deregulation and privatization of the power industry were finally legislated through the passage of the Electric Power Industry Reform Act of 2001 (EPIRA). This landmark legislation would change the way the power industry would be structured and more importantly, it would change the business model of the Aboitiz Group’s power business. Its distribution utilities, albeit a relative to the Manila Electric Company, they are widely respected for being efficient and low-cost producers. The proposed competition undertaken under EPIRA further challenged the utilities’ efficiency and its ability to survive in the new performance-based rate making regime and ability to gear up for the open access.
Our commitment to corporate governance practices involves a commitment to all our contractual stakeholders and our other community of stakeholders. Our contractual stakeholders include our Customers, our Employees, our Business Partners, our Suppliers, Shareholders, Lenders, and Alliances. We also recognize our community stakeholders who are Consumers, Regulators, Government Agencies, Local Governments, Politicians, Local Communities, Traditional and Social Media, Non-Governmental Organizations, Trade Groups, Advocacy Groups and other groups within the general sphere of influence.
The company is guided by a core set of policies and procedures embodied in its corporate charters, the Amended Articles of Incorporation and By-Laws. The Articles of Incorporation and By-Laws provide for the Company’s purpose in doing business, including the basic procedures and the form and manner by which the Company is managed.
In compliance with the Corporation Code and pursuant to ISMS policy of the Company, the Amended Articles of Incorporation, By-Laws, General Information Statement and other corporate books and records are kept and carefully preserved in the principal office of the Company.