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SECURITIES AND EXCHANGE COMMISSION
SEC FORM 17-C
CURRENT REPORT UNDER SECTION 17OF THE SECURITIES REGULATION CODE
AND SRC RULE 17.2(c) THEREUNDER
1 May 19, 2008Date of Report
2. SEC Identification Number 19073 3. BIR Tax Identification No. 350-000-288-698
FIRST PHILIPPINE HOLDINGS CORPORATIONExact name of issuer as specified in its charter
4.
5. 6. (SEC Use Only)Industry Classification Code:
N/AProvince, country or other jurisdiction ofincorporation
7. 6th Fir., Benpres Bldg., Meralco Ave. cor. Exchange Road, Pasig CityAddress of principal office
1600Postal Code
8. 2-631-8024Issuer's telephone number, including area code
9. N/AFormer name or former address, if changed since last report
10. Securities registered pursuant to Sections 8 and 12 of the SRC or Sections 4 and 8 of the RSA
Title of Each Class Number of Shares of Common StockOutstanding and Amount of Debt Outstanding
Total Outstanding Shares 590,033,360 shares(As of April 30, 2008)
11. Indicate the item numbers reoorted herein: Item No.4
Item 4At the annual meeting of the stockholders held on May 19, 2008, the persons named herein were
elected as members of the Board of Directors of First Philippine Holdings Corporation (the "Corporation"):
NationalityFilipino
NameMr. Augusto Almeda-Lopez
Address35 Joaquin Street, San Lorenzo VillageMakati City
*Mr. Cesar B. Bautista Filipino 1914 Kamias St., Dasmarilias Village,Makati City
Mr. Thelma Y. Cunanan Filipino 48 Manila St., Bonifacio VillagePasong Tarno, Quezon City
Mr. Jose P. De Jesus Filipino 30 Mangyan Road, La Vista, Quezon City
Mr. Peter D. Garrucho, Jr. Filipino 44 Roseville St., White Plains,Quezon City
*Mr. Oscar J. Hilado Filipino 112 Mariposa Loop, Cubao, Quezon City
Mr. Elpidio L. Ibanez Filipino 687 Michigan St" Greenhills East
Mandaluyong City
Mr. Eugenio L. Lopez III Filipino Biak na Bato cor. Rizal Street, Ayala HeightsQuezon City
Mr. Federico R. Lopez Filipino 438 Rizal Tower, 31 Residential DriveRockwell Center, Makati City
Mr. Manuel M. Lopez Filipino The Bustle Penthouse, Rizal TowerResidential Drive, Rockwell Center, Makati City
Mr. Oscar M. Lopez Filipino 672 Notre Dame, Wack-Wack Village
Greenhills, Mandaluyong City
*Mr. Artemio V. Panganiban Filipino 1203 Acacia St., Dasmaririas Village,Makati City
*Mr. Vicente T. Paterno Filipino Unit 16A Hidalgo PlacesRockwell Center, Makati City
Mr. Ernesto B. Rufino, Jr. Filipino 29 Banaba Road, South Forbes Park,Makati City
*Mr. Washington Z. Sycip Filipino 60 Cambridge Circle, North Forbes Park,Makati City
*/ndependent Directors
2
At the Organizational Meeting of the Board of Directors held on May 19, 2008, the followingpersons were elected officers as well as Chairman and Members of the Board Committees of the
Corporation:
Oscar M. Lopez
Augusto Almeda-LopezElpidio L. Ibanez
Federico R. Lopez
Francis Giles B. Puna
Arthur A. De Guia
Fiorello R. EstuarBenjamin K. LiboroDanilo C. LachicaRichard B. TantocoPerla R. CatahanRamon T. PagdagdaganAnthony M. MabasaLeonides U. GardeRicardo B. YatcoHector Y. DimacaliVictor Emmanuel B. Santos, Jr.Oscar R. Lopez, Jr.Robert C. ChanRodrigo E. FrancoBenjamin R. LopezAriel C. OngElizabeth M. CanlasEnrique I. QuiasonRodolfo R. Waga, Jr.
Chairman of the Board & Chief Executive OfficerVice ChairmanPresident & Chief Operating OfficerManaging Director for EnergySenior Vice President/Treasurer &
Chief Finance OfficerManaging Director for Manufacturing &
Portfolio Investments GroupHead of Infrastructure Business DevelopmentSenior Vice PresidentSenior Vice PresidentSenior Vice PresidentVice President/ComptrollerVice President/Internal AuditorVice PresidentVice PresidentVice PresidentVice PresidentVice PresidentVice PresidentVice PresidentVice PresidentVice PresidentVice PresidentVice PresidentCorporate Secretary/Compliance OfficerVice President/Asst. Corp. Secretary/
Asst. Compliance Officer
Executive CommitteeMr. Oscar M. Lopez, ChairmanMr. Augusto Almeda-Lopez, MemberMr. Elpidio L. Ibanez, Member
Comoensation and Remuneration CommitteeOscar M. Lopez, ChairmanWashington Z. Sycip, Member'Vicente T. Paterno, Member*
Committee to review/set the Chairman/Chief Executive Officer's comDensation and remunerationAugusto Almeda-Lopez, ChairmanWashington Z. Sycip, Member*Vicente T. Paterno, Member*
Audit CommitteeMr. Oscar J. Hilado, Chairman*
.Independent Director
3
Mr. Washington Z. Sycip, Member*Mr. Peter D. Garrucho, Jr., Member
Nomination and Election CommitteeMr. Oscar M. Lopez, ChairmanMr. Vicente T. Paterno, Member'Mr. Washington Z. Sycip, Member*Mr. Oscar J. Hilado*, MemberMr. Manuel M. Lopez, Member
Finance and Investment CommitteeMr. Oscar M. Lopez, ChairmanMr. Peter D. Garrucho, Jr., MemberMr. Eugenio L. Lopez III, MemberMr. Thelmo Y. Cunanan, MemberMr. Jose P. De Jesus, MemberMr. Federico R. Lopez, Member
Risk Manaaement CommitteeChief Justice Artemio V. Panganiban, Chairman*Amb. Cesar B. Bautista, Member*Mr. Ernesto B. Rufino, Jr., Member
Please find attached herewith a copy each of the speeches of Chairman & CEO Oscar M. Lopezand President & COO Elpidio L. Ibanez.
SIGNATURES
Pursuant to the requirements of the Securities Regulation Code, the issuer has duly caused thisreport to be signed on its behalf by the undersigned hereunto duly authorized.
FIRST PHILIPPINE HOLDINGS CORPORATIONIssuer
~ENRIQUE I. QUIASON
Asst. Information OfficerMay 19, 2008
.Independent Director
4
OPENING REMARKSof
OSCAR M. LOPEZChairman & CEO
on the occasion ofFirst Philippine Holding Corporation's
46th Annual Stockholders' Meeting
held at theMeralco Theater, Ortigas Ave., Fasig City
on May 19,2008
Fellow Stockholders and Staff-Members,
Friends and Other Stakeholders of First Philippine Holdings Corporation,
Ladies and Gentlemen:
annual stockholders' meeting in 2012.
we will also be celebrating the eightiethsometime this year,
FPHC 46dt Stockholders Mee~gMay 19, 20Q8
Page -2
since I stood before you in 1986 after returning to the management
Time
Well, to the business at hand,
As your Chairman and Chief Executive, it is my duty to
continue to take today, as well as on other matters that are of
This, I will do this afternoon. Mr. Ibanez willimportance to us.
management are here with me in full force to assist me in
2
FPHC 46d1 Stockholders MeetingMay 19,2008
Page-3
answermg m tohaveany you may
Corporation's fmancial and operating results, or to the conduct of
I only ask that you hold back on your questions tillits business.
we have formally addressed the various items in our meeting
have not made a secret of their hostility and their intentions, but
Most haveand those that have come under cover of anonymity.
been against Meralco, but some have also been against our other
3
FPHC 46th Stockholders MeetingMay 19,2008
Page -4
Meralco as a diversionaryuse
face, and on which their leaders have failed them utterly.
various degrees of intensity whenever there are things that
It fIrst happened in the years
immediately before martial law, when Meralco was also
We survived the
martial law dictatorship. We will survive this one too.
I have chosen this forum to respond to a couple of these
attacks because our corporations are the ones standing accused, but
4
FPHC 46dt Stockholders MeetingMay 19, 20QS
Page-5
To
Attack Number One.
industrial and electric transformer manufacturer, sells transformers
To them, I say:to Meralco.
Philec dominates the local market for utility and industrial
.
.servIcesvalue-added thatand the best no
manufacturer, domestic or foreign, can match.
ofthan 70%the Aboitiz moregroup
5
FPHC 46& Stockholders MeetingMay 19, 20Q8
Page -fi
Electric and Dagupanlike CEPALCO,utilities
cooperatives,e 1 ectri calElectric, of the propertymost
transformer100% of thePhilec providesHospital.
requirements of American Power Conversion, a manufacturer
apparatus.
purchases some transformers manufactured by Philec and
sells these transformers overseas under the Cooper name.
Does Meralco buy from other transformer manufacturers?
.
General Electric and Asea Brown Boveri, as well as Philec,
to submit sealed bids for Meralco' s distribution transformer
beats theseBut the fact is, Philec often
6
FPHC 46th Stockholders MeetingMay 19,2008
Page-1
than can be found off the shelf and many manufacturers
low-lossbeenMeralco has toFor example, shifting
repaIr andforparts
Global manufacturers cannot maintain such inventories in the
and the entireMeralco,Philec has
.
years when Meralco was under the control of the Marcos
Philec was established ill order to produce
its needs. Provided it sells transformers to Meralco, or to any
7
FPHC 46th Stockholders Meet~gMay 19, 20Q8
Page-~
other utility or industrial user, in a transparent, competitive
manner,
Weare proud of the fact that
We are proud of thePhilec is a competitive manufacturer.
Weare
proud of the fact that our transformers are made by Filipinos.
And we are also proud of the fact that Meralco is able to buy
What do
our detractors want Meralco to do?
Like we depend on imports for our rice and most of our
Our accusers say that First Gas, whichAttack Numb-eJ Two.
owns and operates the Santa Rita and San Lorenzo plants, made
$~t w~~ nqt 4yfiY~fe4~
8
FPHC 46d1 Stockholders Meeting
May 19, 20Q8Page-9
When First Gas charged Meralco for capacity fees for 1,000
.
and there is official documentation to support this. Was First
The answer is no. And why
Yes, five whole years! Was this incompetence on theyears.
.
fault of either Meralco or First Gas?
yes.
between the parties similar to those entered into by NPC with
9
FPHC 46th Stockholders MeetingMay 19,2008
Page -10
were fmanced and constructed. A default by Meralco would
led to a default by First Gas and this, in turn, could also
have led to a default on the set of agreements and covenants
and made commercial.
Most, if not all,
of the independent power producers who have contracted to
difference
IS,
they also enJoy governmenta
guarantee ofN:---apocor's commitment,
something that First Gas cannot have from Meralco. Are
constructed because there is no investor who would be
10
FPHC 46th Stockholders MeetingMay 19,2008
Page -11
As I
I warn
Its sole reward is the truth. And often, the truth does not make for
proper.
2007 provided better defmition to the long-term investment
This isis true of the manner in which our earnings were generated.
true of the manner in which a number of key investment decisions
And this is true of the manner in whichwere made.
11
FPHC 46d1 Stockholders Meeting
May 19,2008Page -12
For 2007,
P4.475 Billion, of which P4.43
"natural" to our business and it is the income level that we shall
In contrast, net income
of First Gen
Our P4.475 Billion in net income came from what we can
competencies,consider to be our four core power
12
FPHC 46th Stockholders MeetingMay 19,2008
Page -Ip
Let me say a few words about our strategic intent on each of these
businesses.
Power Generation
andIS the Filipino-owned controlledlargestinterest, now
independent power provider in the Philippines, with a total gross
installed of 2,582.4 743.8megawatts,
megawatts from its most recent acquisition, PNOC-EDC.
The acquisition of a 60% effective interest in PNOC-EDC
generated Meralco. Although we havewent to Napocor as
customer for the Bauang diesel plant, this plant is predominantly
13
FPHC 46th Stockholders MeetingMay 19,2008
Page -14
on standby and is only dispatched when there is a shortfall in the
hydroelectric plants, in 2007, and with the addition of PNOC-
count Napocor,EDC's capacity this year, however, we now
WESM and other distribution utilities among the markets that we
serve,
2007, with the.
mmor ofIn Agusan's 1.6
megawatts, all our capacity was concentrated in Luzon. The
addition of PNOC-EDC's capacity gives us anew, significant
.presence ill the Visayas and Mindanao, but more
plants in those regions around geothermal fields that have been
viable, but that are still untapped. PNOC-EDC alsoproven
provides us the opportunity to participate in the development of
geothermal elsewhere in the regIon, with Indonesiapower
14
FPHC 46d1 Stockholders MeetingMay 19, 2PQ8
Page -15
agreements.
Our BOT
Iffuel sources.
the Clean Air Act is ever strictly enforced, and there is mounting
the cost of
15
FPHC 46th Stockholders MeetingMay 19,2008
Page -16
Within our resource capabilities over time, we intend to
fuels, whereand renewable presentin clean
plants beingeither or onthemselves, on
Power Distribution
have a 33.4% ownership stake, is our major investment in power
In 2007, we doubled our stake in Meralco and thisdistribution.
company.
ofpotentialin thecontinue believeWe to
doneeds, and efficiently-run,to anso as
16
FPHC 46th Stockholders MeetingMay 19, 2008
Page -17
to say a few words about this towards the end of my remarks.
Infrastructure
Infrastructure, which, in turn, houses our investments in both the
The 84-kilometer NLE was, in 2007, widely
recognized to be the most modem, after its reconstruction, and the
You only need to
motoring consumers. An average of approximately 146,600
17
FPHC 46fu Stockholders MeetingMay 19,2008
Page -18
daily revenue for the concession of P 15 Million.
Tarlac Expressway displaced NLEX as the country's most modem
Conversion Authority"BCDA "
, theBases or
SCTEX in linked with the NLEX and provided seamless access,
growth hubs of Subic and Bataan, on the one hand, and Tarlac, on
the other.
been awarded the short-term concession to operate and maintain
Weare confident that, by proving that it is the only
SCTEX.
18
FPHC 46th Stockholders MeetingMay 19,2008
Page -19
Balfour, IS.
majorOur construction Inc.,Firstarm, a
consortium calledin Private Infrastructureparticipant a
Development Corporation that has been awarded the concession to
develop the Tarlac-La Union Toll Expressway Project, subject to
To be implemented
as a build-transfer-operate concession for an initial period of 35
years, this 88.6-kilometer long project will extend the expressway
system north from La Paz, Tarlac, where the combined NLEX and
SCTEX now reaches, all the way to Rosario, La Union, where the
two main roads to Baguio begin.
PI5 Billion initially, and will take a total of five years to build, in
will be the leadFirst Balfour and D.M. Consunji, Inc.stages.
members of the PIDC consortium.
extend LRT 1 from its current northern terminal at Monumento,
19
FPHC 46d1 Stockholders MeetingMay 19,2008
Page -20
EDSA North Mall station. The joint venture is also confident that
the infrastructure,
NLEX and Tarlac-La Union project, and even the extension of
20
FPHC 46d1 Stockholders MeetingMay 19,2008
Page -21
Manufacturing
We regard manufacturing to be our fourth core competence,
of older businesses. Philippine Electricone our
of industrial and utilitymanufacturerour
Sumiden Circuits, Inc, our joint venture with Sumitomo Electric of
Japan for the manufacture of flexible printed electronic circuitry,
cannot be competitive in manufacturing. It is true that
the case of shoe manufacture, textiles and garments and consumer
21
FPHC 46th Stockholders MeetingMay 19, 20Q8
Page -22
countries has made it difficult for local manufacturers to compete
on even terms.
the forefront of the development of better infrastructure such as
have ill theplants have also been
I would also admit that it has been difficult to promote
manufacturing as one of our core businesses.
purely localto demand for oftypea
will to .In andmeasure investmentsup our power
infrastructure. We are simply too small a market. Therefore, to
22
FPHC 46th Stockholders MeetingMay 19, 20Q8
Page -23
broadly describe as P5.0 Billion in annual revenues and Pl.O
Lately, we have found one such
manufacture of high-efficiency solar electric panels.
Corporation in joint venture with Sun Power.
silicone wafers for the semiconductor industry, since the processes
are very similar and use the same basic machines. First Philec
23
FPHC 46th Stockholders MeetingMay 19, 200~
Page -24
have the revenue potential of as much as US$150 million annually
in five years' time
It is our stated ambition and goal that in five years' time, our
manufacturing businesses should be able to contribute a combined
P5.0 Billion in annual revenues and PI.O Billion in annual income
to our business portfolio.
reflect and support our four core businesses.
long-term strategy that its businesses will take, and providing core
support and control functions for better governance. Last year, we
established First Philec Corporation as the intermediate holding
for businesses. this role. itIncompany
24
FPHC 46dJ Stockholders MeetiQg
May 19,2008Page -25
replicates what we have done with First Gen Corporation for
and First forpower Infrastructure our
businesses.infrastructure Meralco, sole majorour
investment in power distribution, does not require the intervention
practice of corporate is consideredto whatgovernance best
practice around the world. These are discussed in fair detail in our
over to our President, Elpidio L. Ibanez, for the operating and
25
FPHC 46& Stockholders Meet~gMay 19,2008
Page -26
fmancial summaries, would like to say just a few more words on
already stated in an open letter to the President, published last
Directly and indirectly,Wednesday in our major broadsheets.
power.
Meralco is small compared the portion of theto costvery
Why has the cost of
gasoline gone higher than P50 per liter? For the same exact reason
the global price of oil has increased from an average of about
US$27 per barrel where it stayed for quite a long time up until
26
FPHC 46th Stockholders Meeting
May 19,2008Page -27
about the time of 9/11, to close to US$130 per barrel where it is
now. You can flog Meralco to death -it will not alter the high cost
least philosophically, I would have to accept the argument that it
a time when its consumers are suffering. But Meralco has not been
permitted to generate obscene profits, nor even the level of return
that it is permitted to earn under the law. As it is, Meralco has not
deserves. Contrast Meralco' s earnings over the past ten years to
In
the capitalist system, it is also not the role of private enterprise to
27
FPHC 46th Stockholders MeetingMay 19,2008
Page -28
sector of our society. For if companies are forced to underwrite
Now I ask you, are we ready and able to shift to another system?
And, pray, what system would we shift to?
cost of power, then I submit that it must re-examine the royalties
and taxes that have been imposed on power at every stage of the
process that produces electric power from the source fuel, be that
fuel gas, oil, coal or other. And it must ensure the transparency
and controlled power generators that still account for the large
flog Meralco to death, but it will not reduce the price of gasoline,
LPG and other essential fuels that people rely on for their everyday
28
FPHC 46d1 Stockholders Meeting
May 19,2008Page -29
Commission on Audit or "COA ".
and SEC and the
in addition externalto its own
auditors.
you to make your own conclusions.
29
MR. ELPIDIO L. IBAÑEZ
President and COO
First Philippine Holdings Corporation
Annual Stockholders’ Meeting
May 19, 2008, 3:00 P.M.
Meralco Theater
MR. CHAIRMAN,
FELLOW SHAREHOLDERS AND EMPLOYEES,
GOOD AFTERNOON,
The year 2007 brought about mixed results: most of our businesses
demonstrated strong bottom line growth, as measured by our recurring net
income.
However, the Group’s total earnings for the year paled in comparison to the
previous year due to non-recurring income: the listing of First Gen’s shares,
the favorable Supreme Court decision on Meralco’s tariff unbundling, and
the higher returns from the sale of our investment in SiRF Technology
Holdings, Inc. Thus, net income decreased by 25% compared to the P15.6
billion reported in 2006. Net income attributable to equity holders of the
Parent decreased by 49% compared to the P8.8 billion income for the prior
year.
Income from operations increased by 9% to P15.2 billion, driven by the
overall lower costs and expenses. Foreign exchange gains and other income
improved by 132% to P2.6 billion. Our full year results also benefited from
the prepayment of loans during the first quarter, bringing down finance costs
by 8% to P6.7 billion. Our finance income, however, went down by 41% to
P1.9 billion as we deployed our cash to the reduction of debt and significant
investments in our core business.
Our Business Results
Turning to our businesses:
First Gen recorded another year of record profits. Net income attributable
to parent increased 14 % to $104.7 million driven by the continuous growth
of its natural gas-fired plants, the full year impact of the hydro plant
acquired in late 2006, and income from the newly-acquired EDC.
Meralco’s recurring earnings significantly improved. Net income
attributable to parent for 2007 was at P3.8 billion. This was higher by 8%
compared to the P3.5 billion recurring income of 2006. Meralco’s net
income of P13.7 billion in 2006 included the write-back of all provisions for
probable losses booked from 2004 to 2006 amounting to P15.7 billion.
FPII maintained steady growth. Net income attributable to equity holders of
the parent was higher by 12% at P1.5 billion, driven by traffic growth and
foreign exchange gains.
Our other businesses performed better than expected during the year:
- Our property businesses continued to report double digit growth
- Our manufacturing businesses significantly improved their
performance
- Our construction business, FBI, achieved a profitable position after
incurring losses in the past
The Company made significant progress on a number of its strategic
objectives and continued to deliver on its growth strategies. The Group’s
portfolio evolved in 2007 with these three key acquisitions and investments:
- First Gen solidified its leadership position finishing the year with
the acquisition of the controlling stake in PNOC-Energy
Development Corporation (EDC). This achievement propels First
Gen into being the largest vertically-integrated power generation
play in the country.
- First Holdings strengthened its ownership interest in Meralco, with
its acquisitions of the ownership interest of First Philippine Union
Fenosa, Inc. (FPUFI) and Meralco Pension Fund. The acquisition
of the 40% interest of Union Fenosa Internacional, S.A. in FPUFI
was concluded on January 23, 2008. The decision to increase our
stake in Meralco to 33.4% from 17.7% in 2006 stems from our
optimistic view of Meralco’s more predictable financial
performance under a new rate setting mechanism. The
Performance Based Rate (PBR) setting mechanism embodies a
new rate fixing scheme, which sets power distribution tariffs
according to forecasts of operational performance and capital and
operating expenditures. PBR addresses the regulatory lag between
cost incurrence and the corresponding recovery. PBR also
employs a penalty-reward mechanism depending on the utility’s
actual performance.
- The First Holdings consortium was selected by the BCDA as the
interim O&M contractor for Subic-Clark-Tarlac Expressway on
Nov. 6, 2007.
We believe that as a result of these achievements we are better poised to
deliver stable growth in the long term.
For 2008, our focus will be on exploring various financing facilities to
support our growth ambitions. For the first four months of 2008, the Parent
Company and First Gen raised P4.3 billion and $260 million, respectively.
The success of these transactions underscores confidence in our financial
fundamentals and prospects.
I would like to briefly discuss our financial performance for the first quarter
of 2008:
° Unaudited revenues increased by 29% to P19.9 billion, compared to
the P15.5 billion reported for the first quarter of 2007.
° Operating income improved by 62% to P6.0 billion, during the same
period. The higher revenues and operating income reflect the revenue
contribution of First Gen’s newly-acquired subsidiary, EDC, and
revenue growth of Santa Rita and San Lorenzo.
° Net income, however, decreased by 26% to P2.1 billion, from P2.8
billion last year, whilst, net income attributable to equity holders of
the Parent decreased by 79% to P223 million. Income was adversely
affected by the higher finance costs, foreign exchange losses and
income tax provisions. Finance costs increased by 95 % over the first
quarter of last year, as the Group’s debt level increased by 189% to
P123.1 billion. First Holdings and First Gen raised debts to fund their
respective acquisitions. Moreover, the expiration of the income tax
holiday of Santa Rita resulted in higher provision for income taxes.
The overall environment will continue to be challenging with the global
economic recession impacting the local economy. At First Holdings, this
year will be focused on integrating and normalizing the major acquisitions
we made last year.
Thank you for your continued support.
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