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.