ANNUAL REPORT 2014 MISSION We are the leading Philippine infrastructure investment firm. We manage, transform and grow our companies while continuously seeking investment opportunities to create long-term value for our shareholders.
VISION We have a stellar portfolio of infrastructure assets, each being the dominant player in its field. We are admired globally for excellence in investing and transforming infrastructure. We attract, retain and develop world-class talent. Through our companies and foundation, we significantly contribute to the economic development of the Philippines and thereby uplift the quality of life of every Filipino.
VALUES TEAMWORK AND EMPOWERMENT ENTREPRENEURSHIP • We recognize the diverse strengths and • We innovate, take risks, act quickly and abilities within the team. decisively, and are customer focused.
• We enable and inspire people to achieve FINANCIAL DISCIPLINE superior results. AND ACCOUNTABILITY • We employ rigorous financial analysis to INTEGRITY AND TRANSPARENCY arrive at sound business decisions. • We adhere to the highest ethical and • We are results-driven and meet corporate governance standards. our commitments.
CONTENTS
1 Financial Highlights 42 Hospitals: Advancing Service Improvements 2 Key Metrics 48 Corporate Social Responsibility: 4 Corporate Structure A Holistic Approach to Caring for the Community 5 Significant Events 64 Board of Directors 7 Milestones 76 Senior Executives 10 Message from the Chairman 80 Management Teams 14 Message from the President & Chief Executive Officer 84 Corporate Governance 18 Message from the Chief Financial Officer 94 Risk Management 22 Water: Continuing Service Expansion and Improvement 96 Audit and Risk Management Committee Report 28 Power: Sustained Operational Excellence 97 Statement of Management’s Responsibility 34 Toll Roads: Service Improvements Extended 98 Financial Statements*
*Digital document file of detailed Financial Statements are attached. Financial Highlights (IN MILLIONS OF PESOS)
TOTAL INVESTMENT TOTAL PARENT EQUITY 94,905 85,835 78,063 77,863 73,625 64,579 63,602 60,198 58,906 47,899
‘10 ‘11 ‘12 ‘13 ‘14 ‘10 ‘11 ‘12 ‘13 ‘14
TOTAL CONSOLIDATED TOTAL CONSOLIDATED REVENUES CORE INCOME 33,832 8,508 30,877 27,807 7,229 6,564 22,070 5,102 18,564 3,856
‘10 ‘11 ‘12 ‘13 ‘14 ‘10 ‘11 ‘12 ‘13 ‘14
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 1 2014 Key Metrics
Water
REVENUES P4.4BN 463MCM 33.9% 2014 18,363 Contribution to Billed Volume Non-Revenue MPIC Water (Average) 2013 16,895 2012 15,883
CORE INCOME P4.4BN 1.2MN 32.9% Capital Billed Non-Revenue 2014 8,777 Expenditures Costumers Water 2013 7,530 (Period End) 2012 6,800
• EXCLUSIVE WATER CONCESSION FOR THE WEST ZONE OF GREATER MANILA AREA UNTIL 2037 • 9.7M POPULATION, 8.9M SERVED, COVERING 540 KM2, 14 CITIES, 3 MUNICIPALITIES • DISTRIBUTION NETWORK TOTALING 7,458KM
Power
REVENUES P3.0BN 35.2k GWh P12.4BN 2014 266,336 Contribution to Energy Sales Capital MPIC Expenditures 2013 298,636 2012 285,270
CORE INCOME 5.6BN 6.5% 94.1mins Number of System Loss Customer Average 2014 18,128 Customers Interruption 2013 17,023 Duration Index 2012 16,265
• LARGEST ELECTRIC DISTRIBUTION UTILITY WITH FRANCHISE UNTIL 2028 • COVERS 9,337 KM2, HOME TO APPROXIMATELY 25% OF PHILIPPINE POPULATION • DISTRIBUTES 55% OF PHILIPPINE ENERGY SALES.
METRO PACIFIC INVESTMENTS CORPORATION 2 ANNUAL REPORT 2014 Toll Roads
REVENUES P2.2BN 185.3K 110.4K 2014 8,641 Contribution to Average Daily Average Daily MPIC Vehicle Entries Vehicle Entries 2013 8,154 (NLEX) (CAVITEX) 2012 6,784
CORE INCOME 3.5MN P2.6BN Average KM Capital 2014 2,154 Traveled (NLEX) Expenditures 2013 1,963 2012 1,575
• OPERATES APPROXIMATELY 64% OF THE TOTAL KILOMETERS OF TOLL ROADS IN THE PHILIPPINES • CONCESSION FOR NLEX UNTIL 2037, FOR CAVITEX RI UNTIL 2033 AND CAVITEX RI EXTENSION UNTIL 2046
Hospitals
REVENUES P465MN 2,134 2014 14,096 Contribution to Number MPIC of beds 2013 12,493 2012 11,329
CORE INCOME 2.0MN 5,367 Number of Number of 2014 1,007 patients served accredited doctors 2013 879 2012 720
• OPERATES THE LARGEST PRIVATE HOSPITAL NETWORK IN THE PHILIPPINES • NATIONWIDE PRESENCE ACROSS EIGHT HOSPITALS AND ONE MALL-BASED DIAGNOSTIC CENTER
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 3 Corporate Structure AS OF 30 APRIL 2015
52.8% Maynilad Water Services, Inc.
100.0% MetroPac Water Investments Corporation
39.0% 20.0% Manila Water Consortium, Inc. Medical Doctors, Inc. 60.0% Colinas Verde Hospital Managers Corp. (Cardinal Santos Medical Center) 20.9% Davao Doctors Hospital 41.9% Riverside Medical Center Inc. 60.0%
East Manila Hospital Managers Corp. (3) 32.5% (Our Lady of Lourdes Hospital) Manila Electric Co. 51.4% (MERALCO) Asia Hospital Inc. 30.6% De Los Santos Medical Center, Inc 30.6% The Megaclinic, Inc. 30.6% Central Luzon Doctors’ Hospital
75.6% Manila North Tollways Corp. 46.0% Tollways Management Corp. 55.0% 100.0% Light Rail Manila Corp. Cavitex Infrastructure Corp.(1) 29.5% 20.0% Don Muang Tollway Public Company Ltd. AF Payments Inc. 45.0% CII Bridges & Roads Investments Joint Stock Company (2)
(1) By Virtue of a Management Letter Agreement (2) Combined investment in shares and convertible bonds (3) Ownership interest in hospitals on a fully-diluted basis
METRO PACIFIC INVESTMENTS CORPORATION 4 ANNUAL REPORT 2014 Significant Events
2014 • Metro Pacific Tollways Development Corporation JUL • Metro Pacific Tollways Corporation (MPTC) (MPTDC) acquired equity interest equivalent JAN purchased an additional 3.9% of Manila North to 50.0% plus one share of the capital stock of Tollways Corporation (MNTC) from Egis Projects Easytrip Services Corporation (ESC) through a SA, for an aggregate purchase price of P1.4 billion. combination of subscription to new shares of This brought MPTC’s ownership in MNTC to 71.0% ESC and purchase of shares from Egis Easytrip Services SA
• AF Payments Inc. received Notice of Award to • MPIC declared cash dividends of P0.026 per FEB AUG design and construct P1.7 billion Automated Fare common share payable to stockholders as of the Collection System (AFCS) project record date of 29 August 2014 with payment date of 24 September 2014 • MPIC declared final dividends of P0.022 per MAR common share, payable to stockholders as of • The Department of Transportation and the record date of 8 April 2014 with payment SEP Communications (DOTC) officially awarded the date of 30 April 2014 bringing the total dividend 32-year concession for the LRT Line 1 project to declaration out of 2013 earnings to P0.037 per the Light Rail Manila Consortium (LRMC). LRMC common share is composed of Metro Pacific Light Rail Corp. which leads the consortium with a 55.0% stake, • AF Payments Inc. AC Infrastructure Holdings Corporation with a signed a ten- 35.0% stake, and Philippine Investment Alliance for year concession agreement to build Infrastructure’s Macquarie Infrastructure Holdings and implement the (Philippines) PTE Ltd. (MIHPL) with a 10.0% stake AFCS project for the LRT and MRT lines in Metro Manila
• MPIC purchased from Beacon Electric Asset JUN Holdings Inc. (Beacon) 56.4 million shares, comprising approximately 5.0%, in Manila Electric Company (MERALCO) at P235 per share for an aggregate consideration of P13.2 billion. This brings MPIC’s ownership in MERLACO to 27.5% • LRMC signed with the DOTC and the Light Rail • GIC, through its affiliate, invested P3.7 billion for OCT Transit Authority (LRTA) the Concession Agreement JUL a 14.4% stake in Metro Pacific Hospital Holdings, for the P65.0 billion Light Rail Transit Line 1 Cavite Inc. (MPHHI) and advanced to MPIC P6.5 billion Extension and Operations & Maintenance Project. by way of an Exchangeable Bond which can be LRMC is formally awarded the project by the DOTC exchanged into a 25.5% stake in MPHHI in the and LRTA after the consortium of MPLRC, AC Infra future, subject to certain conditions and MIHPL submitted the lone bid with a premium • MPIC acquired remaining 75.0% of FPM of P9.4 billion Infrastructure Holdings Ltd. which holds a 100% economic interest in AIF Toll Road Holdings • MPIC declared special cash dividends of P0.040 (Thailand) Co., Ltd. This brings MPIC’s effective NOV per common share payable to stockholders as of ownership of Don Muang Tollway Public Company record date of 2 December 2014 with payment Ltd. to 29.5% date of 18 December 2014
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 5 Significant Events
• MetroPac Water Investments Corporation (MWIC) • Maynilad wrote the Philippine Government, DEC entered into an agreement to operate and maintain FEB through the Department of Finance, with the 100 mld bulk water facility of Rio Verde Water reference to the undertaking which the Republic Corporation located in Baungon, Bukidnon of the Philippines issued in favor of Maynilad • The Arbitration Panel of the Metropolitan on 31 July 1997 and 17 March 2010. Maynilad’s Waterworks and Sewerage System (MWSS) call on the Undertaking comes after the MWSS and Maynilad upheld the alternative rebasing and its Regulatory Office (RO), have chosen, adjustment of Maynilad. If implemented, it will over Maynilad’s repeated objections, to defer result in a 9.8% increase in the 2013 average basic the implementation of the 29 December 2014 water charge of P31.28 per cu.m., inclusive of the Arbitral Award, despite the Award being final, P1.00 Currency Exchange Rate Adjustment which binding and executory on MWSS, the RO, and the MWSS has now incorporated into the basic Maynilad charge. The Award will translate to an average • MPIC declared final dividends of P0.037 per increase of P3.06/cu.m. common share, payable to stockholders as of 2015 the record date of 25 March 2015 with payment date of 17 April 2015 bringing the total dividend • MPTDC procured the original proponent status declaration out of 2014 earnings to P0.103 per JAN for the proposed Cebu-Cordova Bridge Project common share from Cebu City and the Municipality of Cordova • MPTC entered into an equity investment and financing transaction with Ho Chi Minh City Infrastructure Investment Joint Stock Company (CII) that will result in MPTC holding about 45.0% of CII B&R through a combination of purchase of CII B&R secondary shares from CII, and subscription to VND-denominated bonds to be issued by CII, which are exchangeable into secondary shares in CII B&R. Total consideration of VND 1,955 billion (P4.1 billion) for the shares and bonds
• MNTC and the Bases Conversion and FEB Development Authority (BCDA) inked agreement to integrate North Luzon Expressway (NLEX) • MNTC signed SCTEX Business Agreement and Subic-Clark-Tarlac Expressway (SCTEX) toll MAR with BCDA. Under this agreement, MNTC systems shall be responsible for the management • MPIC placed 1,812 million shares at P4.90 each, services, toll collection, traffic safety and raising P8.9 billion in new equity – This brought security management, toll road and facilities public float to 47.9% maintenance, including all necessary support • MNTC received the Notice of Award from the BCDA services. The agreement also includes a for the management, operation and maintenance P3.5 billion upfront payment; P600 million toll of the 94-kilometer SCTEX subject to compliance integration costs; and payment of concession with specific conditions. The Notice of Award was fees equivalent to 50.0% of SCTEX gross toll issued by BCDA following the results of the Price revenues over a 29 year period until 2043 Challenge held on 30 January 2015
METRO PACIFIC INVESTMENTS CORPORATION 6 ANNUAL REPORT 2014 Milestones
2006 MAR DEC • MPIC is incorporated and registers with the • MPIC effectively lists with the Philippine Securities and Exchange Commission Stock Exchange (PSE) by way of introduction NOV • MPIC establishes DMCI-MPIC Water Company (DMWC) as a Joint Venture to acquire interest in Maynilad
2007 JAN MAY • MPIC acquires 42.0% effective ownership • MPIC subscribes to P750 million of of Maynilad through DMWC convertible notes of Medical Doctors, Inc. (MDI) – Makati Medical Center – which entitles the Company to up to 33.0% of equity interest in MDI
2008 JAN NOV • MPIC acquires 33.0% of MDI with the • MPIC completes purchase of 99.8% of conversion of the notes subscribed in 2007 Metro Pacific Tollways Corporation FEB DEC • Maynilad exits from court administered • MPIC directly acquires additional 5.9% of rehabilitation Maynilad bringing its effective ownership to 56.8% MAY • MPIC acquires 34.0% of Davao Doctors Hospital (DDH)
2009 MAR OCT • MPIC establishes Colinas Verdes Hospital • MPIC acquires 14.7% of MERALCO - 10.2% Managers Corp. under MDI and enters into of which was owned by the PLDT Beneficial a 20 year contract to manage and operate Trust Fund and was paid for using 16.8% of Cardinal Santos Medical Center MPIC shares
JUN • MPIC issues additional 6.9% of its • MPIC divests 17.0% of its interest in outstanding capital stock to Metro Pacific LandCo. bringing its effective ownership Holdings, Inc. in exchange for MERALCO down to 34.0% shares • MPIC wins bid, together with Harbour JUL Centre Port Terminal, to develop, manage • Manila North Tollway Corporation’s income and operate the North Harbour under Manila tax holiday is extended until December 2010 North Harbour Port, Inc. (MNHPI) SEP DEC • MPIC international roadshow sets record • MPIC acquires additional DDH shares equity placing for 2009 with issue size of increasing its effective ownership to 34.9% US $300 million
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 7 Milestones
2010 JAN JUL • Maynilad is granted a six-year income tax • Maynilad’s Putatan Water Treatment holiday Facility begins operations - initial 25MLD capacity now at 100MLD MAR • Establishes Beacon Electric Asset Holdings AUG Inc. (Beacon), a Joint Venture between • MPIC divests an additional 15.0% of MPIC and PCEV, for the sole purpose LandCo. bringing its effective ownership of holding their respective holdings in down to 19.0% MERALCO, totalling 34.8% • MPIC declares its first dividend of P0.010 per common share to stockholders of APR record as of 19 August 2010 • Maynilad’s concession term is extended by an additional 15 years to 2037 NOV • MPIC establishes East Manila Hospital MAY Managers Corp. and enters into a 20 year • MPIC acquires 51.0% of Riverside Medical contract to manage and operate Our Lady Center Inc. of Lourdes Hospital
JUN • Segment 8.1, an extension of NLEX, commences operations • MPIC divests its entire interest in MNHPI
2011 FEB NOV • Formal unveiling of Maynilad’s Putatan • MPIC acquires 100% of Colinas Verdes Water Treatment Plant Hospital Managers Corporation (operator of Cardinal Santos Medical Center) from its associate Medical Doctors Inc. MAY • Beacon increases ownership of MERALCO to 38.9% DEC • MPIC acquires 1.09 billion common shares of Asian Hospital, Inc. which JUL represent approximately 56.5% of its total • MPIC places 2,400 million shares at P3.60 outstanding capital stock each, raising P8.6 billion in new equity – bringing public float to 40.8%
OCT • Beacon acquires 68.8 million shares from PCEV comprising approximately 6.1%, of MERALCO. In addition, PCEV subscribes to 1.20 billion preferred shares of Beacon for an issue value of P15.1 billion. This brings Beacon’s shareholdings in Meralco to 45.4%
METRO PACIFIC INVESTMENTS CORPORATION 8 ANNUAL REPORT 2014 2012 JAN AUG • MPIC and PCEV purchases an additional • MPIC, through its appointed depositary, 2.7% of MERALCO through Beacon. Deutsche Bank, launches its American This brings Beacon’s shareholdings in Depositary Receipts Level 1 Program MERALCO to 48.0% • Maynilad signs a Share Purchase Agreement for the acquisition of 100% of MAR Philippine Hydro Inc. • MPIC launches its tender offer to the share- holders of Asian Hospital, Inc. at a purchase OCT price of P1.39 per tender offer share • MPIC announces its tender offer for the common shares of MPTC to comply with MAY the requirements and conditions of the • MPIC forms a joint venture corporation proposed voluntary delisting of MPTC from with Ayala Corporation for the purpose of the PSE pursuing the LRT 1 Expansion Project DEC JUN • MPIC establishes presence in the • MPIC purchases from PCEV 282 million southern tollroad system by entering into preferred shares of stock in Beacon Electric a P6.8 billion Financing and Cooperation Asset Holdings, Inc. for an aggregate Agreement with Cavitex Holdings purchase price of P3.6 billion. This brings MPIC ownership of both common and preferred shares to 50.0% in Beacon
2013 JAN APR • MPIC places 1,330 million shares at P4.60 • MPIC is included in the Morgan Stanley each, raising P6.1 billion in new equity – Capital International Index This brought public float to 43.8% • Maynilad is declared as the winning bidder MAY for the sale of Olongapo City’s 10.0% stake • MPIC acquires 51.0% of De Los Santos in Subic Water and Sewerage Co., Inc. for a Medical Center, a Level 3 teaching and total purchase price of P210.6 million training hospital in Quezon City • MPTC secures 100% control of CAVITEX Infrastructure Corporation by virtue of a OCT Management Letter Agreement • MPIC acquires 51.0% of Central Luzon Doctors’ Hospital (CLDH) in Tarlac City. FEB CLDH is MPIC’s eighth hospital in its growing nationwide chain of private • Marubeni purchases 20.0% of Maynilad hospitals of now 2,021 beds reducing MPIC’s economic interest from 56.8% to 52.8% NOV MAR • First Pacific and MPIC forms a joint venture • MERALCO, through a joint venture with to acquire a 29.4% stake in a Thai toll First Pacific Company Limited (First road operator, Don Muang Tollway Public Pacific), acquires 70.0% of PacificLight Company Ltd. Power Co. Ltd. - formerly GMR Energy (Singapore) Pte. Ltd. At acquisition, DEC PacificLight was finishing construction of a • Ayala-First Pacific Consortium (AF 2x400MW Liquefied Natural Gas Combined Consortium) is declared as the winning Cycle Combustion Turbine Power Plant bidder of the P1.7 billion Automated Fare located in Jurong Island, Singapore Collection System Project
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 9 Message from the Chairman My fellow shareholders, It has been five years since we re-launched your Company, Metro Pacific Investments Corporation (MPIC) as a public company. Since that date, September 2009, much have been acomplished.
METRO PACIFIC INVESTMENTS CORPORATION 10 ANNUAL REPORT 2014 All verticals which were acquired prior to the re-launch experienced significant growth, making us the pre- eminent infrastructure focused conglomerate in the Our ability to manage Country. In Water, rehabilitating Maynilad Water Services our relationship with Inc. (Maynilad) was the first order of business and, since regulators has faced a then, we have gone on to develop opportunities outside of Maynilad’s franchise area. For Power, we secured the severe test in 2014. appropriate tariff for the 3rd Regulatory Period for Manila Electric Company (MERALCO), and are using its strong cash flows to invest in new power generating capacity in 2019. For Toll Roads, both the North Luzon Expressway the country. Toll roads have been an exercise in identifying (NLEX) and Cavite Expressway (CAVITEX) have not had any investment opportunities in our existing network, in under- tariff adjustments for two cycles – equivalent to four years served areas of the country like Cebu, and in other ASEAN for NLEX and six years for CAVITEX. Finally, while the tariffs countries that offer excellent value, like Thailand and were adjusted for the LRT 1, they were set at a level below Vietnam. With the Hospital Group, we now control eight that set out in the bid. hospitals around the country and we are also expanding into mall-based diagnostic clinics and tele-medicine. In the case of Maynilad, we have called on the Indemnity of the Republic of the Philippines through the Department We have also entered into another vertical with a of Finance to cover losses arising from the delayed partnership amongst ourselves, the Ayala Group and a implementation of tariff increase, pursuant to the fund managed by Macquarie. The consortium won the Arbitration decision referred to above. At MERALCO, we public bidding for the Light Rail Transit (LRT) 1 PPP project have anticipated the delay for the 4th Regulatory Period of Government. This is a complex project requiring much and are working with the Energy Regulatory Commission attention to rehabilitating the existing system, significant for an approval of the capital expenditure for the first funding, cooperation with strong partners, and extensive regulatory year of the 4th period, in order that our service interaction with regulators. delivery is not affected adversely. For the Toll Roads, we have acquiesced to a price challenge on the Subic Clark REGULATORS Tarlac Expressway (SCTEX), and since there was no other Our ability to manage our relationship with regulators has bidder, the award was given to us. We are working on two faced a severe test in 2014. This refers specifically to tariff more unsolicited projects where our unsolicited proposals adjustments or rebasings with our regulated businesses. In have been accepted, and will be subjected to a Swiss Water, the implementation of the arbitral decision confirming Challenge – wherein we have the right to match the best Maynilad’s ability to cover corporate income tax in its tariff bid. These are the Connector Road in Manila and the Cebu- has been delayed, if not contested by MWSS. At MERALCO, Cordova Bridge. There are expansion projects for CAVITEX we appear headed for a delay with the rate rebasing for and NLEX that would greatly alleviate traffic congestion in the 4th Regulatory Period covering 1 July 2015 to 30 June Metro Manila, subject to our getting approvals for the tariff.
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 11 Message from the Chairman
2014 RESULTS The partial divestment of the Hospitals Group allowed us to 2014 continues the upward trend in profitability since reduce the need for capital raising at the parent while securing the re-launch of Metro Pacific. Maynilad continues to a strong partner for the continued growth of the business. be the biggest contributor to earnings (43%), with the rest as follows: MERALCO (30%), Metro Pacific Tollways OUTLOOK Corporation (22%) and Metro Pacific Hospital Holdings, Inc. Over the short-term, our prospects for growth are quite (5%). Given the issues securing the tariff for both Maynilad promising, driven by good volume expectations in each of and the toll roads, efficiency and volume gains drove the our businesses. However, delivery on our medium to long growth in the past year. term goals would be reliant, in the main, on securing the tariff adjustments we are entitled to, as enshrined in the Our Core Net Income for the year rose by 18%, from relevant Concession Agreements covering our water and P7.2 billion in 2013 to P8.5 billion this year. Reported Net tollways businesses. Income also rose by 10% to P7.9 billion this year versus P7.2 billion last year. We wish to assure you, Management continues to remain intently focused on managing both our businesses and our STRATEGY regulators. In the interim, volume growth based on the first We continue to see opportunities in infrastructure in the quarter 2015 indicators has been quite good. As we continue country and around ASEAN. In the course of 2014 and until to improve our operating efficiencies, and drive up the volume the start of 2015, we have increased our beneficial stake in of water and power and toll roads, we are optimistic that your MERALCO by 8% to 32%, incorporated the SCTEX into our Company will see growth in its profitability. road portfolio, added a new vertical with the LRT 1 bid, and deepened our commitment outside the country with the purchase of a larger stake in the company operating the Don Muang Tollways of Thailand and a significant minority stake in the biggest Vietnamese company operating tolled roads and bridges in that country.
We remain committed to a conservative funding structure given the vagaries of the regulatory environment. As such, whilst we have utilized leverage to fund part of the requirement for these opportunities, we have also taken the opportunity to raise some capital by issuing shares at the MPIC level and selling down a portion of our investment in MANUEL V. PANGILINAN the Hospitals Group. Chairman Board of Directors
METRO PACIFIC INVESTMENTS CORPORATION 12 ANNUAL REPORT 2014 2014 Contribution to MPIC P4.4BN WATER
P3.0BN POWER
P2.2BN TOLL ROADS P465MN HOSPITALS
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 13 Message from the President and Chief Executive Officer
My fellow shareholders, 2014 brings us to five years since we re- launched the stock in 2009. At the end of that year, we reported Consolidated Core Income of P2.0 billion, and for the Parent Company equity was at P47.4 billion, and assets at P65.0 billion. Since then, income has grown to P8.5 billion, equity to P85.8 billion and assets to P101.8 billion.
METRO PACIFIC INVESTMENTS CORPORATION 14 ANNUAL REPORT 2014 The greater than fourfold increase in profitability versus the P1.3 billion to P2.2 billion – minor discrepancies between less than doubling of equity and assets speaks to our ability profitability and contributions are due to accounting to drive profitability in existing businesses and invest your adjustments on consolidation. Average daily traffic on the money in expansions wisely. North Luzon Expressway (NLEX) increased by 23% from 150 thousand to 185 thousand while EBITDA grew from At Maynilad, we made stellar progress with a company P3.3 billion to P5.8 billion. We also added investments to we brought out of court-administered rehabilitation. In our portfolio that have just started to make an impact to the 2014, it made P8.8 billion in Core Income and contributed bottom line – the Cavite Expressway (CAVITEX) and a stake P4.4 billion to MPIC – notwithstanding the delay in tariff in the Don Muang Tollway (DMT). adjustments due to the ongoing arbitration. That was growth of 163% and 184% for core income and contribution, Our Hospital Group has grown significantly over the time respectively. This was achieved primarily by reaching more period through a combination of improvements at existing customers, growing connections from 815 thousand to 1.2 hospitals and acquisitions. As results, Core Income has million, and increasing water available for consumption by increased from P528 million to P1.0 billion. Contributions, reducing non-revenue water from 57% to 33%. even as we sold a 40% stake in the business to Singapore’s GIC Private Limited, have grown at a faster rate from With MERALCO, given the company was doing an excellent P174 million to P465 million as we acquired a bigger stake job meeting regulatory metrics, our efforts were primarily in the newer hospitals. directed towards securing a fair tariff that reflected the continuing investments into the business and the formula Unfortunately, our share price has not reflected the same laid out in the Performance Based Regulatory regime. Our growth. We re-launched at a price of P3.00/sh and ended success meant MERALCO’s stand-alone profits increased 2014 with P4.60/sh, or an improvement of 53%. Our share from P7 billion to P18.1 billion. Contributions increased at price has gone higher but it has trended down recently a much faster rate from P212 million to P3.0 billion. That because of regulatory issues, discussed below. reflects the timing of our entry into MERALCO, October 2009, and the increase in our economic shareholding from REGULATORY FRICTION 17% at the end of 2009 to 27% by the end of 2014. Across all our regulated businesses, we are having issues with our regulator. At Maynilad, we have initiated For our toll road business, traffic growth and operating an arbitration against the Republic of the Philippines for leverage were the primary drivers for growth in profitability compensation against the regulator’s refusal to implement from P1.2 billion to P2.2 billion and contributions from a decision reached by a separate arbitration panel.
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 15 Message from the President and Chief Executive Officer
MERALCO is managing a likely delay in the process for its At MPTC, the issue has been the regulator’s delay in 4th Regulatory Period covering the period 1 July 2015 to acting on tariff applications for the adjustments to the 30 June 2019. Finally, Metro Pacific Tollways Corporation rates at NLEX and CAVITEX. NLEX should have received a (MPTC) is having issues securing tariff adjustments laid 15% increase in its tariff on 1 January 2015, representing out in the concession agreements for both the NLEX and two cycles or four years of worth of inflation adjustment. CAVITEX. CAVITEX was meant to receive a 25% increase on 1 January 2015 for its segment 1, representing two cycles Maynilad sent a letter to the Department of Finance on 27 or six years of inflation adjustment, and for segment 2, a March 2015 to inform them that the company has filed for 16% increase on 1 January 2014 representing three years arbitration. This action was necessary after the regulator of inflation adjustment. refused to implement a prior arbitral decision, issued on 29 December 2014, which allowed us to recover corporate Finally, for the LRT 1, a project we won in a consortium income taxes through our tariff. As of February 2015, this with the Ayala Group and a fund managed by Macquarie, delay has cost the company P3.4 billion and is increasing the tariff increase was less than what was disclosed by approximately P200 million a month. The arbitration will during the bidding for the project and written down in be held in Singapore under United Nations Commission on the concession agreement. The difference in the tariff International Trade Law (UNCITRAL) rules and we expect implemented will result in 15% lower revenues for the the process to take at least six months from when we sent project, assuming passenger volume and everything else the letter to the Department of Finance. stays the same.
For MERALCO, it is almost certain that the re-basing for the 4th Regulatory Period will be delayed. The company is currently working on an interim one year plan with the regulator, to ensure service levels are met and to continue preparing the franchise for the future.
METRO PACIFIC INVESTMENTS CORPORATION 16 ANNUAL REPORT 2014 Message from the President and Chief Executive Officer
STRATEGY In the meantime, we will continue to pursue the avenues All of the above indicate a general deterioration in the available to us and press for our rights under the contracts stability of the regulatory regime in the Country. From that govern our businesses. Each business is doing an investor’s viewpoint, it certainly seems to be the case, well operationally and that will continue to be the case. given our share price. However, your management team Growth will still be pursued and, like the LRT1 project, we has seen this before. One example is MERALCO. For years, will continue to bid realistically and more conservatively. that company was unable to secure the appropriate tariffs We built into our returns for that bid, the volatility in an for its business. However, in this current regulatory period environment that suffers setbacks such as these, and we covering 1 July 2011 to 30 June 2015, the regulator has will continue to do so going forward. adjusted tariffs to reflect the formula in the Performance Based Regulation Scheme, plus an additional charge to PROSPECTS allow the company to recoup the revenues not received in For the coming years, volume growth is still expected to prior periods. be robust and efficiencies should allow us to continue to grow the bottom line of each business on a pre-tax basis. We note that the government has shown willingness to This will be further bolstered by the application of the tariff raise tariffs when necessary, as was recently implemented adjustments we are owed. However, our growth will stall if in rail; or to implement new tariffs for expansion such as tariff adjustments are not granted in a reasonable amount the initial tariff rate that was approved for Segment 10 of of time. NLEX. Observing the rail commuters, it is fair to say that the public can accept fare increases, provided there is promised As always, we thank you for your expressions of support improvement in service levels. We therefore view the and encouragement as we traverse this difficult period. current situation in both Maynilad and MPTC as temporary and remain confident of a resolution. The Government acknowledges that infrastructure development requires help from the private sector. Companies like ours, as well as international investors, will only invest under a stable regulatory environment. A big component of that would be JOSE MA. K. LIM following the contracts for existing providers. President and Chief Executive Officer
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 17 Message from the Chief Financial Officer To my fellow shareholders, The majority of this Annual Report deals with the Audited Consolidated Financial Statements of the Group and the interpretation of these statements for our shareholders in terms of its contribution to Core Income. There is no value to repeating this analysis here, except to note that the focus on Core Income is our attempt to communicate with our shareholders what we consider to be the true and fair underlying earnings of the Group, stripped of one-off gains and losses, including the effect of foreign exchange fluctuations. Without doing this, it is difficult for our shareholders to form a view on which to base our future earnings outlook.
METRO PACIFIC INVESTMENTS CORPORATION 18 ANNUAL REPORT 2014 All numbers presented are in millions of Pesos, except as otherwise stated. “The Company maintains MPIC Consolidated Net Income (In Millions of Pesos) a careful calibration of 2014 2013 Variance the consolidated financial Core Income 8,508 7,229 18% Non-core Expense (568) (20) >100% statements but manages Net Income 7,940 7,209 10% each investment individually attributable to MPIC by reference to its particular Consolidated Core Income for 2014 increased by 18% to P8.5 cashflow.” billion driven by an 18% increase in contribution from operations to P10.1 billion reflecting strong performances from all our core businesses. owns 45% of MERALCO. The financial statements are further Non-recurring charges of P568.0 million were recorded, complicated by the concession accounting and acquisition substantially comprising taxes incurred on the reorganization of accounting standards attributable to our water and toll roads the hospital group, project expenses and one-time separation businesses which some investors find to be counter intuitive. expenses and arbitration costs at Maynilad. This is due to: Feedback on our financial statements from our investors is that: (i) capital expenditures being added, when complete, to (i) in many cases they find the audited financial statements “concession assets” rather than fixed assets; and rather impenetrable; and (ii) the requirement to fair value the entire concession, on (ii) they would like to understand more about the financial acquisition by MPIC of the concession holding company, position and cash flow of the Company itself. and to then amortize this valuation over the life of the concession. AUDITED FINANCIAL STATEMENTS The Company holds less than 100% of most of its principal The Company maintains a careful calibration of the operating subsidiaries including Maynilad, Manila North consolidated financial statements but manages each Tollways Corporation and beginning 2014, Metro Pacific Hospital investment individually by reference to its particular cashflow. Holdings, Inc. All of these subsidiaries are consolidated in the The holding company’s financial position and leverage Company’s financial statements. The Company equity accounts capacity is then set by reference to the ability of each for its largest single investment, Beacon Electric of which it investment to remit dividends to it. There are no cross default holds 50%. Beacon Electric carries significant borrowings and provisions in the portfolio from one investment to another.
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 19 Message from the Chief Financial Officer
Tracking the cash flows for the Company itself and how we expect these to evolve in future is provided in the following tables.
PARENT CASH FLOW INFORMATION (In Millions of Pesos) 2014 2013 Directional Commentaries Dividends from Investments MPTC 1,219 1,138 Expected to increase in 2015 with payments of preference share dividends. Maynilad 528 1,764 2013 included special dividends relating to the sale to Marubeni. Regular dividends to increase once the arbitration award is operationalized. Beacon / MERALCO 405 405 2014 excludes dividends from Beacon round tripped against the acquisition of a 5% direct interest in Meralco. In 2015, dividends to increase following debt reduction at Beacon. Hospitals 213 130 2015 dividends will be lower following the sale of 40% to GIC in mid 2014. Sub-total 2,365 3,437 Interest and Operating Expenses Bank debt interest (494) (776) Lower interest benefitting from the loan refinancing made in 2013. Interest will increase in 2015 in line with rising leverage. Interest received 70 100 Decrease in interest income resulting from lower interest rates Operating expenses and others (903) (1,016) Expected to increase in 2015 in line with general expansion. Sub-total (1,327) (1,692) Cash inflow before investments, 1,038 1,745 capital raising and dividend payments Dividends paid (2,298) (916) P0.022 final 2013 dividend per common share declared 19 March 2014. Interim 2014 dividend of P0.026 per common share declared 12 August 2014. Special one-off dividend of P0.04 per common share declared on 6 November 2014. Cash flow excluding capital (1,260) 829 The deficit illustrates the limits to MPIC’s leverage capacity without further raising and net debt movement dividend income from the portfolio.
NET DEBT POSITION (In Millions of Pesos) 2014 2013 Directional Commentaries Bank debt 6,383 6,448 Borrowings will increase in 2015. Cash and short-term (4,088) (4,529) Investments partially off-set by proceeds from the Exchangeable Bond issued to investments GIC in relation to the sell-down of the Hospital group. Net debt 2,295 1,919
PARENT COMPANY STATEMENT OF FINANCIAL POSITION (In Millions of Pesos) 2014 2013 Directional Commentaries Investments Power 51,444 38,159 Direct investment of 5% in Meralco. Water 15,251 14,553 Equity infusion in MetroPac Water Investments Corporation for water projects outside Maynilad’s concession area. Toll Roads 22,395 20,606 Additional investment in Don Muang Tollway Public Company Ltd (Thailand) (P1.8 billion).
METRO PACIFIC INVESTMENTS CORPORATION 20 ANNUAL REPORT 2014 PARENT COMPANY STATEMENT OF FINANCIAL POSITION (In Millions of Pesos) 2014 2013 Directional Commentaries Hospitals 4,006 4,283 Net impact of hospital group re-organization and sell-down to GIC. Rail 1,462 - Investments in AF Payments, Inc. and Light Rail Manila Corporation. Total 94,558 77,601 Cash and other assets 7,212 8,011 Total Assets 101,770 85,612 Bank debt (6,383) (6,448) Other liabilities (9,551) (1,101) 2014 includes remaining unpaid obligation to Beacon Electric of P7.2 billion for acquisition of 5% of Meralco Net Assets 85,836 78,063
CAPITAL RAISING Panel upholding the alternative rebasing adjustment proposed by On 16 May 2014, MPIC and GIC, Singapore’s sovereign wealth fund Maynilad that would result in a 10% increase in the 2013 average through its private equity arm, entered into a definitive partnership basic water charge. Maynilad is willing to implement the increase agreement to facilitate the further expansion of the Hospitals group on a staggered basis in order to mitigate the immediate increase of MPIC. GIC, through its affiliate, invested P3.7 billion for a 14% to its customers in the West Zone of Metro Manila. However, stake in MPHHI. The partnership with GIC will help the Company MWSS has not yet acted on the arbitration award and as a result, grow in hospitals and other health-related fields in the Philippines. Maynilad formally reminded them of the indemnity undertaking GIC also advanced to MPIC P6.5 billion by way of an Exchangeable of the Republic of the Philippines regarding delays in tariff Bond which will be exchanged into a 26% stake in MPHHI in the implementation. future, subject to certain conditions. The proceeds from the bond will be used by MPIC for continuing investments in roads, power While our subsidiary, Light Rail Manila Corporation was awarded and water. with the 32-year Concession Agreement for the P65 billion Light Rail Transit Line 1 Cavite Extension and Operations & Maintenance On 9 February 2015, MPIC placed 1,812,000,000 new common Project, the tariff increase announced by Government in January shares at an issue price of P4.90 per share. The proceeds from the 2015 is unfortunately insufficient to reach the opening fare placing and subscription transaction are being used by MPIC for the provided for in the concession. reduction of relatively expensive debt at Beacon Electric, investment in previously announced projects and general corporate purposes. We are mindful of these indicators of increased regulatory risk in the Philippines when considering new investment opportunities. REGULATORY RISK We continue to face regulatory uncertainties with a number of our DIVIDEND POLICY businesses facing overdue tariff adjustments - particularly our The regular interim and final dividends for 2014 were increased by Water and Tollroads operations where if left unresolved, continued 73% and 68%, respectively, as the Company continued its policy capital expenditure on water projects and road construction would of gradually increasing its dividend payout ratio. This brings the be constrained. regular dividend pay-out ratio to 20% of Core Income for 2014 and we are committed to increasing this to 25% in 2015. MPTC is experiencing delays (with no basis we are aware of) in toll rate increases due on the NLEX and CAVITEX of 11% due January 2013 and 19% due January 2012, respectively. Given the further rate adjustment due in January 2015, the pending tariff increases have now risen to 15% (NLEX) and 25% (CAVITEX). DAVID J. NICOL Maynilad settled its tariff dispute with Metropolitan Waterworks Chief Financial Officer and Sewerage System (“MWSS”) with the decision of the Appeals
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 21 WATER
22 WATER
Continuing Service Expansion and Improvement
Billed Volume (In MCM) Non-revenue water (Period end)
463 32.9% ‘14 ‘14
444 35.4% ‘13 ‘13
428 41.0% ‘12 ‘12
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 23 WATER
24 Continuing Service Expansion and Improvement
The deferred implementation of our rebased tariff rate compelled us to prioritize our spending and focus primarily on preserving the quality of service our existing customers have come to enjoy. Nevertheless, we continued to pursue programs that enhance operational efficiency and connect more people to our network. Our people’s unwavering determination resulted in an all-time high billed volume that helped boost revenue growth in 2014. It also enabled us to connect more households in the southern part of our concession, where people who used to rely on deep wells now enjoy access to potable surface water. We hope for a positive outcome to our claim on the government undertaking, as this will allow us to implement a business plan that will not only improve our current service levels, but reach new customers and provide new services, particularly in the area of wastewater management
VICTORICO P. VARGAS President and Chief Executive Officer Maynilad Water Services, Inc.
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 25 WATER
The water business, through Maynilad, has been the largest has been adhered to for the last 17 years, and in every rate contributor to MPIC’s earnings over the five years since rebasing save this one. the re-launch in 2009. Even with the delays in the rate rebasing process and the implementation of the arbitral As we mentioned in last year’s report, we went into award, which we calculated has cost Maynilad P3.4 billion arbitration against MWSS to resolve the issue of income as of the end of February 2015, its contribution to MPIC has tax. Our confidence in securing a positive result was borne grown by 15% year-over-year to P4.4 billion. This mirrors the out by the decision issued by the appeals panel on 29 17% growth in Maynilad’s stand-alone Core Income. That December 2014. The panel upheld Maynilad’s proposed profitability was achieved through volume growth, better rate adjustment after finding that it is entitled to include collection efforts and efficiency gains from a right-sizing corporate income tax in its cashflows. program. Unfortunately, the regulator has chosen to defer REGULATOR implementation of the tariff. Their rationale, which has no The resolution of the rate rebasing process is still pending. legal basis, is that it would be contrary to public interest At its heart lies an attempt by the Metropolitan Waterworks if they were to implement a decision for Maynilad that and Sewerage System (MWSS) and its Regulatory Office is in opposition to the arbitral decision for the East Zone to reduce the tariff of the concession, primarily by pulling concessionaire. The decision of the arbitration panel is meant two levers: one is taking out from the capital expenditure to be final and executory. The regulator’s choice to hold in plan the development of alternative water sources, and the limbo the implementation of our tariff defeats the purpose second is disallowing the recovery of income tax. There are of the arbitration. For this reason, we have decided to call on other points of contention but these two are the biggest the guaranty by the Republic of the Philippines through the contributors towards the regulator’s goal of reducing the Department of Finance. tariffs of Maynilad. In essence, the guaranty is meant to protect and compensate The development of alternative water sources is not an Maynilad from interference by any arm of government for inherent component of the concession. The concession delays in the implementation of its contractually agreed only requires the government to provide enough water upon tariff. We have sent three letters to the Department of supply, without dictating where or who will develop that Finance -- calling on them to compensate us for our revenue source. The recovery of income tax, on the other hand, losses because of MWSS’ delay in implementing the adjusted is a practice enshrined in the concession agreement and tariff in the first; informing them of the details of our claim
FINANCIAL HIGHLIGHTS (In Millions of Pesos)
2010 2011 2012 2013 2014 Revenues 12,050 13,769 15,883 16,895 18,363 Core EBITDA 7,907 9,361 10,456 11,083 12,857 Core Income 4,835 5,974 6,800 7,530 8,777 Reported Income 4,780 5,833 6,380 6,936 8,255
Assets 42,590 55,366 61,467 68,730 72,542 Total Debt 16,091 22,538 21,655 25,342 24,201 Equity 7,944 12,311 16,718 20,693 27,867 Contribution to MPIC 2,394 3,082 3,548 3,789 4,376
METRO PACIFIC INVESTMENTS CORPORATION 26 ANNUAL REPORT 2014 and again demanding that they pay us for our revenue losses MWIC has been structured in a similar way to our Hospital in the second; and giving them notice of arbitration, naming Holding Company and we expect them to replicate that our nominee to the arbitral tribunal, and asking them to success in the water space. To date, it has investments in a name their nominee, in the third. Again we are faced with an bulk water distributor for the city of Cebu, Carmen Bulk Water, arbitration - this time against the Republic and, like before, we and an Operations and Management contract for Rio Verde are confident about our success. Water Consortium Inc, a bulk water distributor in Cagayan de Oro. These are fairly small projects and indicative of the size The arbitration follows the conventions of the United Nations of individual opportunities in the Philippines. The goal is to Commission on International Trade Law (UNCITRAL) and will aggregate these opportunities and find a way to operate them be held in Singapore. We expect the process to take at least six without draining management resources. months from when we sent the third letter, 27 March 2015. We are also looking at opportunities within the region. In that STRATEGY space, we are expecting to leverage on our technical expertise, We believe our active efforts to enforce our concession international presence, and deal structuring experience. agreement at Maynilad will lead to the appropriate tariffs and compensation for any delay. The expectation that we will be OUTLOOK made whole is the reason we continue to believe there are We expect customer and billed volume growth to continue opportunities in the water space. at Maynilad over the next several years. However, in order to support the continued high levels of capital expenditure PhilHydro, a bulk water distributor servicing an area North of needed to improve service levels, we must positively resolve Metro Manila, and Subic Water, a water service provider in the the pending claim on the Department of Finance’s guaranty. Subic Bay Freeport Zone, will remain within the portfolio of As in the prior arbitration, an unexpected loss will impact Maynilad with newer investments to be housed in MetroPac Maynilad’s service levels, profitability and ability to pay Water Investments Corp. (MWIC). dividends over the coming years.
OPERATIONAL HIGHLIGHTS
2010 2011 2012 2013 2014 Billed volume (in MCM) 374 405 428 444 463 Billed customers 903,682 1,005,350 1,073,508 1,129,497 1,190,062 Non-revenue water Average 53.4% 47.8% 43.4% 38.7% 33.9% Period end 51.0% 42.2% 41.0% 35.4% 32.9%
Service levels 24-hour coverage 71.0% 84.0% 96.0% 97.8% 99.9% Over 7 psi 86.0% 96.0% 99.8% 99.9% 100.0%
Pipes laid (in kms) During the period 456 375 234 221 152 Total network 6,476 6,851 7,085 7,306 7,458
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 27 POWER
28 POWER
Sustained Operational Excellence
Energy sales (in gWh) Number of customers (in thousands)
35,160 5,575 ‘14 ‘14
34,084 5,368 ‘13 ‘13
32,771 5,189 ‘12 ‘12
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 29 POWER
30 Sustained Operational Excellence
As we continue to strengthen our mandate to serve, we remain fully cognizant of the challenges we face. These demand our unrelenting focus on outstanding service delivery, operational excellence and smart spend on capital and operating expenditures. In so doing, we are able to deliver on our commitment to sustain our momentum of growth.
OSCAR S. REYES President and Chief Executive Officer Manila Electric Company (MERALCO)
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 31 POWER
The electricity business has shown the highest growth DUs other than MERALCO, Dagupan Electric (DECORP) and in contributions to MPIC over the past five years. This Cagayan Electric Power and Light (CEPALCO), have not reflects the improvements in MERALCO along with the been able to undergo their 3rd RP rate reset. The rate reset increased ownership over the years. for the 4th Regulatory Period of MERALCO, DECORP and CEPALCO which covers the period 1 July 2015 to 30 June Tariffs are now at a level that allows the company 2019 will also be delayed. In the meantime, MERALCO to meet the returns under the Performance Based has filed with the ERC an application for the approval of its Regulation (PBR) Scheme in addition to recovering lost Capital Expenditures (CAPEX) for Regulatory Year 2016 (1 revenues prior to our taking a stake – tariffs had been at July 2015 to 30 June 2016), the first year of its 4th RP. the same level for six years prior to our take-over. The delay is unfortunate for the consumer because REGULATOR it creates uncertainty in the capital expenditure plan, Under PBR, tariffs are set based on the regulated asset postpones the setting of the rate of return and reinforces base, the required operating and capital expenditures the negative environment for operators in the public and the regulated return once every regulatory period infrastructure space when combined with outstanding (RP) to meet operational performance and service level regulatory issues in water and toll roads. requirements. These requirements aim to respond to customer needs for adequate, reliable and quality service, Uncertainty in the capital expenditure plan complicates efficient service, and growth of all customer classes funding and negotiations with suppliers, which can in the franchise area as approved by the ERC during a potentially increase the price for projects. On the delay of process called the ‘rate reset’. the fixing for the rate of return on MERALCO’s regulated asset base, MERALCO has hedged against risk by fixing its While tariffs are currently in accordance with regulation, liabilities for the medium term. However, consumers are the rate re-basing to set the tariff for the next regulatory exposed to upward movements in interest rates as that is period (4RP), which covers 1 July 2015 to 30 June 2019, an important component in the calculation of the allowable has been delayed. MERALCO is now on the last quarter of rate of return for the Company. its 3rd Regulatory Period, covering the period 1 July 2011 until 30 June 2015. The review of key principles, which STRATEGY was started by the Energy Regulatory Commission (ERC) We continue to be focused on growing MERALCO through in late 2013, is still on-going. Due to the rules review, vertical integration. We are going into power generation
FINANCIAL HIGHLIGHTS (In Millions of Pesos)
2010 2011 2012 2013 2014 Revenues 240,933 256,808 285,270 298,636 266,336 Core EBITDA 25,089 26,824 26,846 30,845 33,172 Core Income 12,155 14,887 16,265 17,023 18,128 Reported Income 9,685 13,260 17,117 17,211 18,053
Assets 178,968 211,088 216,891 264,004 269,913 Total Debt 21,221 24,443 24,613 33,591 30,042 Equity 63,196 66,869 68,150 75,335 79,474 Contribution to MPIC 1,486 1,711 2,213 2,333 3,027
METRO PACIFIC INVESTMENTS CORPORATION 32 ANNUAL REPORT 2014 both as a knowledgeable financial investor and strategic Visayas area of the Philippines with 615MW of existing partner. In retail electricity supply, the focus at the moment capacity and another 150MW to be completed by the third is serving the market in the distribution area of MERALCO. quarter of 2016.
There are two generating projects that are in advanced Our Retail Electricity Sales platform has proven to be the stages. San Buenaventura Power Ltd. (SBPL) is a 455 MW preferred supplier for the voluntary participants in the Open (net) supercritical coal-fired power plant in Quezon province Access regime – where customers are allowed to choose of Luzon in partnership with the Electricity Generating who they purchase their electricity supply, securing 60% of Public Company (EGCO) of Thailand. Redondo Peninsula the customer base. We hope to be able to provide the same Energy, Inc. (RP Energy) is a 2x300 MW circulating level of service to the rest of the market when Open Access fluidized bed coal-fired power plant in Subic Bay, Zambales is rolled out to all consumers. province with the Aboitiz Group and Taiwan Cogeneration as partners. Meralco has a 49% and 47% equity in SBPL OUTLOOK and RP Energy, respectively, to be funded from internally- We expect relatively modest profitability growth over the generated cash. next few years, any impact to tariff of the rate re-basing being offset by the power plants in the pipeline and Open MERALCO also has a 22% stake in Global Business Power Access. (GBP). GBP is the leading generating company in the
OPERATIONAL HIGHLIGHTS
2010 2011 2012 2013 2014 Energy sales (in gWh) Residential 9,540 9,344 9,779 10,235 10,364 Commercial 11,830 12,027 12,749 13,302 13,814 Industrial 8,734 9,080 10,111 10,417 10,850 Streetlights 143 141 132 130 132 Total 30,247 30,592 32,771 34,084 35,160
Number of customers (in thousands) Residential 4,412 4,580 4,735 4,901 5,097 Commercial 421 433 440 453 464 Industrial 10 10 10 10 10 Streetlights 4 4 4 4 4 Total 4,847 5,027 5,189 5,368 5,575
System loss performance System average interruption 6.5 4.8 3.9 3.4 2.7 frequency index(number of times) Customer average interruption 141.3 116.7 103.3 97.7 94.1 frequency index (number of minutes)
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 33 TOLL ROADS
34 Service Improvements TOLL ROADS Extended
NLEX Average Daily Vehicle Entries CAVITEX Average Daily Vehicle Entries (Open and Closed System) 185,297 110,393 ‘14 ‘14
173,067 102,280
‘13 ‘13
163,362 93,700 ‘12 ‘12
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 35 TOLL ROADS
36 Service Improvements Extended
The biggest challenge for MPTC continue to be the non-adjustment of tariffs, which have been held back for both NLEX and CAVITEX, and the delays on the approvals of our expansion projects.
Despite these regulatory issues, MPTC, over the past five years, continues to invest heavily on technology and innovation with the aim to improve safety to customers as well as provide them the best customer experience when travelling the Group’s expressways. Additional means of payment have been introduced, including Radio Frequency Identification - a first in the Philippine industry. Soon, the use Automated Fare Collection System as another means of payment will be introduced in the expressways. Additional cameras have been installed throughout the expressways and visibility has been improved with additional lighting.
The Company also continues to invest in its people, looking over the welfare of the more than 1,300 employees. Various human resource development programs have been implemented to ensure the continued development of these employees. RAMONCITO S. FERNANDEZ For 2015, we remain committed to expanding our President and Chief Executive Officer Metro Pacific Tollways Corporation existing business, not only in the Philippines but also in the ASEAN region.
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 37 TOLL ROADS
Over the past five years, the contribution from are adjusted on a two and three year schedule, our toll road business has grown by 75% - P1.3 respectively. Both NLEX and CAVITEX have gone billion in 2009 to P2.2 billion in 2014. This has two cycles without updating their tariffs. For NLEX, been mostly due to organic growth at the North the tariff should have increased by 15% as of 1 Luzon Expressway (NLEX), which has been January 2015. At CAVITEX, the first section of that bolstered by contributions from acquisitions of the road should have received an increase of 25% also Cavite Expressway (CAVITEX) and a stake in the on 1 January 2015, representing two cycles, while concessionaire for the Don Muang Tollway (DMT) the second section has had a 16% tariff increase of Thailand. pending since 2014, equivalent to only one cycle – each of the two sections of CAVITEX have the same During the last two years, traffic growth and three year cycle but different start dates. efficiency gains have been the primary drivers of growth in profitability. Over that time period, vehicle The rationale used by the Toll Regulatory Body entries have grown by a CAGR of 7% for NLEX and (TRB) to delay the implementation is based on a 9% for CAVITEX while EBITDA has grown by 14% for Supreme Court ruling issued on October 2010 that the combined operation. enjoins the regulator to test any tariff adjustment for reasonableness, no matter if a formula dictating The biggest challenge for MPTC continue to be the the terms of the adjustment was embedded in the non-adjustment of tariffs which have been held back concession agreement. Prior to this ruling, while for both NLEX and CAVITEX, as well as other toll there was a process to getting a tariff adjustment, roads. determining the appropriate tariff was a simple affair that relied on the formula written down in the REGULATOR concession agreement and public hearings. Unlike both Maynilad and MERALCO, there is no re-basing process for toll roads. Tariffs are meant Unfortunately, there is no formal process within the to be adjusted on a periodic basis for inflation and, concession framework to resolve the impasse. Our depending on the concession agreement, another options range from indirect pressure to direct legal multiplier to set the new tariff. NLEX and CAVITEX challenge. At present, the best option we believe
METRO PACIFIC INVESTMENTS CORPORATION 38 ANNUAL REPORT 2014 available to us is a combination of continuing the Department of Public Works and Highways dialogue with the regulator, a measured approach (DPWH) and the Department of Transportation and to expanding our existing concessions and a more Communication (DOTC) on expansion of the NLEX active discussion of the need for contracts to be and CAVITEX – including the completion of Harbor fully honored to ensure continued investment Link, lane expansion of certain segments of NLEX, in improving the Country’s road infrastructure. and the segment linking CAVITEX with C-5. The However, given the deteriorating traffic conditions expansions of these roads will carry less risk than in Metro Manila, we expect that shortly after the stand-alone projects because of the relative ease of next administration’s term in office begins, the projecting traffic volumes while employing the same government will accept the need to address the rate of return these projects were initially awarded. tariff issues in order to allow the improvement and Our unsolicited proposals, the Connector Road in expansion of tolled roads. Manila and Cebu-Cordova Bridge projects, will carry more conservative assumptions on government When tariffs are finally trued up to the proper rate, deliverables and will go through the process of the concession agreement allows for compensation finalizing the Swiss Challenge terms after which due to delays in implementation. Payment can be they will be bid out. As original proponents, we are made by either a direct government payment, an given the right to match the best bid when these are additional increase in the tariff or an extension in put out to bid. This is in recognition of the amount the concession. of work needed to identify, structure and propose these projects to government. For PPP projects, there STRATEGY is only one we are evaluating, the Cavite Laguna We remain committed to expanding our existing Expressway (CALAEX). network, developing unsolicited proposals and participating in PPP projects because we believe We remain interested in regional expansion that the pending tariff issues will be resolved in particularly in Vietnam and Thailand . Our goal due course. Nevertheless, regulatory risk has is to secure mispriced assets or participate in increased and therefore must priced-in for new bids. growth at the beginning of the curve. Our first two At present, we are cooperating with the regulator, investments fit those criteria. Our stake in the DMT
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 39 TOLL ROADS
operator was acquired during a period when getting would have the right of first refusal. We ended up into the country was made affordable due to the not having to exercise that right as no one opted to political crisis it was experiencing. The 45% stake bid against the (reduced) terms we had agreed to in CII Bridges and Roads – the leading Vietnamese with government. While we obviously would have operator and developer of tolled roads, on the other wanted to take over the concession when we won it hand, allows us to get in at the beginning of what in an open bid, the delays have allowed the traffic to we expect to be rapid growth in tolled roads in develop while simultaneously paying down debt – partnership with the premier operator in that country. both of which will lead to higher long-term returns.
OUTLOOK Notwithstanding the above, we will still focus on Profitability over the next few years is expected to getting the tariffs owed to us under the concession be robust given the strong traffic growth on the agreements. Strong traffic growth is not a NLEX, CAVITEX, DMT and the Subic Clark Tarlac replacement for inflationary adjustments because the Expressway (SCTEX). The SCTEX is a built road that government is not obliged to protect us if the reverse we had won the concession to in an open bid under happens and traffic declines substantially – which a prior administration. This administration wanted could be a possible scenario if fuel prices reverse to have the original terms awarded to us retested their recent falls. under a Swiss Challenge mechanism – where we
METRO PACIFIC INVESTMENTS CORPORATION 40 ANNUAL REPORT 2014 FINANCIAL HIGHLIGHTS (In Millions of Pesos)
2010 2011 2012 2013 2014 Revenues 5,858 6,465 6,784 8,154 8,641 Core EBITDA 3,692 4,144 4,438 5,540 5,788 Core Income 1,465 1,480 1,575 1,963 2,154 Reported Income 996 1,258 1,474 2,001 2,062
Assets 19,329 19,484 27,592 38,736 46,289 Total Debt 9,354 9,051 8,906 17,744 26,676 Equity 8,101 8,179 8,440 15,893 13,842 Contribution to MPIC 1,434 1,456 1,570 1,874 2,239
OPERATIONAL HIGHLIGHTS
North Luzon Expressway 2010 2011 2012 2013 2014 Open and Closed System (in vehicle entries) Class 1 121,583 119,890 121,686 129,484 139,560 Class 2 26,055 26,122 27,550 28,773 29,697 Class 3 12,244 12,330 14,126 14,810 16,040 Total 159,882 158,342 163,362 173,067 185,297
Closed System (in vehicle-kilometers travelled) - in thousands Class 1 2,246 2,160 2,192 2,305 2,509 Class 2 544 549 582 608 618 Class 3 326 305 351 360 379 Total 3,116 3,014 3,125 3,273 3,506
Cavitex Expressway (in vehicle entries) 2010 2011 2012 2013 2014 Class 1 80,579 88,774 96,768 Class 2 9,912 9,859 9,655 Class 3 3,209 3,647 3,970 Total 93,700 102,280 110,393
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 41 HOSPITALS
42 Advancing Service Improvements
Total Beds Available Number of Out Patients
2,134 1,849,301 ‘14 ‘14
2,021 1,626,017 ‘13 ‘13
1,806 1,500,274
‘12 ‘12 HOSPITALS
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44 Advancing Service Improvements
The Hospital Group will continue to focus on improving our existing hospitals’ delivery of quality care to all our customers, pursuing investments in more hospitals throughout the country, and expanding our investment agenda to other healthcare businesses, to be able to achieve our vision of establishing the first nationwide chain of premiere hospitals and healthcare facilities in the Philippines
AUGUSTO P. PALISOC, JR. President and Chief Executive Officer Metro Pacific Hospital Holdings, Inc.
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The contribution from the Hospital Group has grown STRATEGY by 167% over the past five years from P174M in 2009 The goal is still to increase the presence of the network to P465M in 2014. This reflects the improvements we across the Country. For Hospitals, this means expanding the have made in each facility along with increased number bed count to around 5,000 beds. That includes investing in of hospitals in the portfolio. From three in 2009 to nine, approximately 10 to 15 additional hospitals for 2,000 more including a mall-based diagnostic center, at the end of 2014. beds, expanding existing facilities by another 700 beds, and a plan to build a specialty center for the remainder. For 2014, contributions actually dropped by 20% as we sold an effective 40% share in the business to the Government In addition, to address the move of the industry to Investment Corporation (GIC) of Singapore in July 2014. preventive care, we are planning to scale up our diagnostic On a stand-alone basis, the group performed well with Core centers, potentially by tying up with mall operators and Income increasing by 15% on the back of higher out-patient putting a center in each of their malls. To improve our transactions and increased prices. ability to cover the market better, we are investigating the viability of telehealth service via a pilot program that we are DILUTION pursuing in joint venture with a leading Australian provider In last year’s report, we talked about the benefits of a of the service. The service is meant to provide access to strategic partner as it relates to crystallization of returns, medical advice, including access to a doctor over the phone, establishing a useful benchmark for the value of the for subscribers unable to get to their doctors. business, funding for future expansion and input into the strategy for taking the business forward. OUTLOOK The Hospital team is committing to an acquisition program The decision to sell a portion of the business was arrived that would see the group purchasing approximately two at with much deliberation and after the management of the hospitals a year until they get to their goal of another 2,000 Hospital Group conducted a review with several potential beds. Expansion of existing facilities will be happening partners. The process yielded an excellent partner in GIC, concurrently. which is fully aligned with our strategy, while establishing a value for 100% of the business of approximately P26 The ventures into mall-based diagnostic centers and billion at the time of the transaction. This underscores the telehealth will take time to bear fruit and will be marginal achievement of the team building this Group which has contributors for the next few years. achieved a greater than a five fold return on funds invested. Profitability is expected to continue to show strong growth MPIC was able to generate P6.5 billion from the transaction on a stand-alone basis given the increasing focus of a with another P3.7 billion invested by GIC into the business wealthier populace on preventive care. to fund future growth.
METRO PACIFIC INVESTMENTS CORPORATION 46 ANNUAL REPORT 2014 FINANCIAL HIGHLIGHTS (In Millions of Pesos)
2010 2011 2012 2013 2014 Revenues 6,991 8,485 11,329 12,493 14,096 Core EBITDA 1,274 1,626 2,328 2,656 2,946 Core Income 480 559 720 879 1,007 Reported Income 386 674 713 886 1,011
Assets 10,018 15,633 16,464 18,527 19,469 Total Debt 921 2,569 2,209 2,233 2,331 Equity 5,840 9,200 9,740 10,912 11,804 Contribution to MPIC 172 242 507 581 465
OPERATIONAL HIGHLIGHTS
2010 2011 2012 2013 2014 Total beds available 1,599 1,812 1,806 2,021 2,134
Number of patients Out-patient 905,884 1,198,658 1,500,274 1,626,017 1,849,301 In-patient 78,330 95,056 112,060 115,570 124,467
Number of doctors 2,390 4,333 4,546 5,418 5,367
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48 A Holistic Approach to Caring for the Community
Nearly 70,000 5,000 Volunteers Hectares of Nationwide Mangrove Protected
2,100 300 Junior Environmental Partner Scouts Organizations
7 3 Locations Mangrove Nationwide Information Center CSR
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CHEER: MPIC COMPANIES’ CSR and communities, and national agencies; marine, wildlife and Our four main thrusts in impactful infrastructure: roads, mangrove rescue, revive and restore initiatives; and education, hospitals, water, and power, are now complemented by our empowerment and livelihood activities was conceived four main thrusts in Corporate Social Responsibility: and implemented. • Community and cooperative work; • Health and hygiene; The very encouraging results of the holistic program • Ecology and environment; prompted MPIC not only to roll-out Shore It Up nationwide, • Education and empowerment, and albeit on a staggered basis, but also to institutionalize it as • Relief and rehabilitation the Foundation’s signature Corporate Social Responsibility program. The SIU Program is already a “brand” in itself and Our rationale is simple. Road networks promote travel, trade its many components and initiatives are already sufficiently and commerce, and thus promote community building and familiar to the general public. What we will report here are the cooperation. Hospitals are obviously involved in healthcare, current activities under the program that continue to deepen hygiene, and wellness. Water, we believe, is most emblematic its approaches and expand its scope and coverage. of balanced ecology and environmental care. And in turn, Power is best symbolized by education and empowerment for JUNIOR ENVIRONMENTAL SCOUTS PROGRAM: employment. STARTING THEM YOUNG
We have added a fifth initiative which is engaged in by all Junior Environmental Scouts (JES) program, originally just one the companies and MPIC as a whole, given their available of the activities in SIU, has been spun off as a program of its resources and broad coverage of the country: relief and own targeting coastal communities’ school and out-of-school rehabilitation work. Thus we have the acronym C-H-E-E-R, children. It has been brought across the country to promote aptly enough, since we believe these CSR thrusts provide and uphold environmental stewardship. The JES program much-needed relief in these not-so-buoyant times. Although takes up on the obligation to guide tomorrow’s decision- these areas overlap and all our companies have sought their makers towards a cleaner and healthier environment. respective CSR niches in each of them, they now provide a framework within which we direct our efforts, rationalizing as it were the diverse activities the different affiliated companies are engaged in.
SHORE IT UP: UPPING THE ANTE FOR THE ENVIRONMENT
Shore It Up, MPIC’s multi-awarded holistic approach to environmental conservation and restoration of ecological balance, has been running for more than 5 years, starting initially as an effort to simply cleanup of shorelines, beachfronts, and in Anilao, Mabini, Batangas. When Shore It Up, took on Alaminos, Pangasinan, around in the world-famous Hundred Islands eco-system, the much broader and long-term program embracing the involvement of local government
METRO PACIFIC INVESTMENTS CORPORATION 50 ANNUAL REPORT 2014 The Junior Environmental Campaign created a short cartoon vastness of the mangrove cover provides a good habitat video featuring a character that children can relate to: Jes, the for the salt water crocodile which still occurs in adequate first Junior Environmental Scout, who befriends a sea turtle number compared to other places in the country. named Pawi finds their friendship affected by the careless actions of his community. One day, Jes sees his marine friend Alaminos, in Pangasinan, will also soon have a Mangrove caught in plastic debris. Jes, valuing his friendship with Pawi Center (M.P.I.C.) of its own with target completion by the and recognizing the value of the environment, is able to inspire first half of 2015.The Mangrove Center in Bohol is due to his village to start a movement towards protection. This commence construction before the year ends. It is hoped becomes the take-off point for the short talk and Q&A that that many more such centers will be established in the aims to educate the children on environmental vigilance. many coastal communities in the country, if only to protect this vital part of the marine and coastal ecosystem. Volunteers from the MVP group, the schools and the LGU continue to participate in the program as they feel the impact SHORE IT UP NOW SPANS LUZON, VISAYAS, in the lives of the children and in the community in which AND MINDANAO they live in as simple, yet creative ideas on environmental protection are drawn together for possible action. Through Shore It Up with Padayon Bohol the Junior Environmental Campaign, MPIC is able to prime During the three simultaneous implementations of the Shore communities to an SIU program. It Up programs, Padayon Bohol completed the nationwide goal of Shore It Up with its first venture in the Visayas region. MANGROVE PROTECTION AND INFORMATION CENTER The Shore It Up template of an educational and fun weekend (M.P.I.C): ESTABLISHING A FOOTHOLD aimed to jumpstart environmental protection initiatives, long-term livelihood activities, and sustainable eco-tourism. The Mangrove Protection & Information Center (M.P.I.C.) or Bohol proudly surpassed the nationwide call for help The Mangrove Center is a legacy of Metro Pacific Investments “Bangon Visayas” and chose “Padayon” which means to Foundation, through Shore It Up. This facility is envisioned carry on and move forward. The Padayon Bohol SIU initially to serve as the center for the protection and propagation sought to identify the various problems and needs of the of mangrove trees in coastal estuaries, including the community recently devastated by a one-two punch of an rehabilitation of degraded mangroves in the whole island earthquake and a super typhoon. of Siargao, while providing information for locals, tourists and guests on the value and benefits of mangroves in our ecosystem. Although, Alaminos Pangasinan was the first area to do a groundbreaking, construction took a while because of bidding, soil testing and finalization of the architectural plan. This paved the way for the town of Del Carmen in Siargao, Surigao del Norte to start operating their Mangrove Center after the LGU received funding to renovate an existing building.
The overall mangrove cover of Siargao group of islands in Surigao del Norte is approximately 8,600 hectares making it the second largest in Mindanao. The Municipality of Del Carmen boasts of having a contiguous mangrove stand of more than 4,000 hectares, the largest in the Philippines. The
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Mobilizing local government officials, teachers and school 100 scuba diver volunteers trooped to the waters near the children, and residents, along with MPIC volunteers and town of San Benito to rescue the corals from the crown- their partners, Padayon Bohol SIU saw government agency of-thorns infestation and outbreak. Then the participants partnerships through Department of Environment and proceeded to the marathon venue in Numancia Elementary Natural Resources (DENR) with its Sustainable Coral Reef School where the “Race for the Mangroves of Del Carmen” Environment Management Program (SCREMP). SCREMP is was held. The two-day program culminated in a celebration a parallel and complementary program to Shore It Up with of local talent through a band competition for uniquely the aim of conserving 34 marine protected areas nationwide. Siargaonon interpretations of Shore It Up’s theme song. Other cooperating agencies were the Provincial Government of Bohol and the Department of Tourism-Central Visayas Region. Citing an immediate positive impact of Siargao It Up, the A learning session on the “Impact of Shore It Up to Coastal local government reported a significant decrease of 35% Communities ” was led by Commodore Geronimo Reyes of in mangrove wood harvesting and use post-launch of the the Philippine Coast Guard Auxiliary’s Marine Environmental campaign. This proved the effectiveness of the program as Protection support group. the people’s mindset seemed to have change: mangrove trees are better left in their natural environment rather The group shared resources in Pamilacan by turning over than in living rooms as ornaments and furniture or in the livelihood programs to support the locals’ entrepreneurial kitchens as firewood. skills so they can get their fair share of the island’s booming tourism industry. A total of 137 families received livestock The proponents successfully obtained the support of all and poultry livelihood showcase from MPIC, business starter nine municipalities of Siargao Island—by far the most- kits from Smart, solar lamps from One Meralco Foundation, attended program launch by local officials thereby sending and water micro-filters from Maynilad. a message of acknowledgment that the environment protection is of utmost priority. This year’s edition of Siargao It Up in Surigao del Norte Siargao It Up promises to be even more broad-ranging and impactful. Siargao It Up, especially branded for the locale, was a campaign mounted by MPIC, together with the local MANO AMIGA AIMS HIGHER: QUANTUM LEAP government to bring to light and address the environmental THROUGH QUALITY EDUCATION issues and ecotourism opportunities. The partnership between Mano Amiga and MPIC is fast being recognized as a perfect model for Corporate Social Responsibility engagement. In the first place, MPIC did not want to fund for the said school, nor did Mano Amiga itself want an outright financial dole-out: they wanted genuine involvement and meaningful commitment on the part of MPIC, so they both started on the same page, so to speak.
President Jose Ma. Lim, a firm believer in the uplifting power of good education himself, led the MPIC employees not only in donating school supplies to the children, bought with money
METRO PACIFIC INVESTMENTS CORPORATION 52 ANNUAL REPORT 2014 from their own pockets, but also in spending time with them, And then again more than the building and its facilities, the bonding and coaching, and on the whole learning from each staffing of the school is another challenge that Mano Amiga other. And thus the donor-beneficiary equation was altered; it faces: it will need many more hands to help educate children, was no longer a one-way street: the givers received, and the from the teachers themselves, to the maintenance personnel receivers gave. Thus began this model engagement of the and other support groups. This validates even more its call for MPIC Foundation and continues on for the past five years. greater involvement from the entities that support the school, not the least of which is MPIC. But the particular value of the commitment is the vision of Mano Amiga which also coincided with MPIC: quality K-12-Readiness: Employability after Secondary Education education to underprivileged children to jumpstart them in The curriculum of the school has been re-designed and their quest for a better life. And especially, education that is re-formatted in accordance with the K-12 guidelines of the truly empowering: not just teaching by rote but enabling them, Department of Education. The shift to K-12 has long been not just the 3Rs but critical thinking and concept learning, not urged upon the Philippine Education System by worldwide just physical skills but social and cultural. This is realized by and regional organizations, so as to better equip Philippine fielding teachers who are better-equipped and better-paid, and graduates not just for local but global employability. The goal are themselves part of a continuing education program that is is to more than adequately prepare them for such even with partly-financed by MPIC. just secondary education.
Again this is very much in keeping with Mano Amiga’s enabling, equipping, and empowering thrust. That is why the burden falls on the school all the more to upgrade the quality of its programs and the skills of its teaching staff. It cannot allow itself to be derailed by these demands of globalization. MPIC has fully supported this from the very start in the context of its involvement with the school.
MPIC EMPLOYEE ENGAGEMENT: PRE-LOVED LOVIN’ RAISES FUND-RAISING TO A NEW LEVEL
Campus Expansion: A Larger Umbrella The event for the innovative fund-raising scheme for for Underprivileged Children MPIC’s Corporate Social Responsibility initiatives says it It became obvious that the Mano Amiga school needed a contemporary lingo: “Pre-Loved Lovin’”. The items to be larger campus, as its student population expanded from just 60 sold would be things loved previously by the donors; hence scholars in 2008 to almost two and a half times that number in a sense it was a sort of sacrificial giving. On the other as of last year – the school was adding students at the rate of hand, the buyers would definitely love them because they 35 every year. The search for a suitable place, not too far from were not really just closet discards or throwaway items. It its Taguig location from where it draws most of its students, perfectly fit the concept of MPIC employee engagement, identified a 2,350 square meter property in Better Living in better contributing with and from the heart. environs. MPIC donated P10,000,000 to purchase the land and to start the construction of a new 2-storey building designed to house 1,000 students. The construction is still ongoing even as the school continues to solicit funds for its completion.
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The blurb in the posters added: “For clutter, new or old, for NEW HEIGHTS OF ACHIEVEMENT: things that no longer fit your closet, can’t hang nor fold. Think ANA MARIA SKILLED WORKERS ASSOCIATION of the communities that will benefit from things sold. Let’s RECOGNIZED BY DOLE share the joy of guilt-free shopping from all the items that you’re donating.” And then again the challenge of helping MPIC’s corporate social responsibility thrust is always organize the actual bazaar: each team had to name their stall, in keeping with its overall business direction which is to mount the stall structure, then put together all the items for ensure that whatever area it goes into, it should have a sale: clothes, accessories, books, baked goodies and other meaningful and long-lasting impact. When the Foundation food Items, gadgets, arts and crafts, etc. started to support the Ana Maria Homeowners Association in Barangay Calamansian, Caloocan City with the donation of various plumbing and masonry tools to its members, it followed through with skills training and capacity-building. Members who took the short course on plumbing have been given TESDA NC II document. Those who took masonry followed soon after with TESDA certification.
As a result, the mostly male members of the 25 households, which were initially targeted for assistance under the auspices of PBSP’s ManPower for Infrastructure Cooperative (MPIC) Development Project have become a well-organized group called the Ana Maria Skilled Workers Association, and is now officially registered with DOLE. As such, they are able to contract projects, secure better working conditions, and price their skills at a professional level.
But the clincher was that 50% or more of sale’s proceeds must be committed to a chosen program under the MPI Foundation such as: Mano Amiga, Shore It Up, or the ManPower Infrastructure Cooperative. Needless to say, “Pre-Loved Lovin’” was a huge success raising over P100,000 for the CSR projects of the Foundation. The team that donated the largest amount from their ‘Garage Sale’ earnings won a special prize.
METRO PACIFIC INVESTMENTS CORPORATION 54 ANNUAL REPORT 2014 Stepping Up: Ana Maria’s Multi-Purpose Cooperative Building The construction of the 2nd Floor of the Ana Maria HOAs’ multi-purpose cooperative building, started last year with the freshly-trained and for some newly –retrained plumbers and masons, is nearing completion, almost wholly- MAYNILAD CONTRIBUTIONS TO CHEER funded by the well-run coop. But more than just the hard Maynilad initiated in the most number of CSR activities in infrastructure is the soft component: the documentation of the past year. We have termed it the 360-degree stakeholder policies in the use and maintenance of the donated tools engagement. Maynilad enabled its various units to involve which can be availed of by members should they have different customer segments; government leaders including projects. These help ensure not just the long-term usable regulators and LGU officials; marginalized communities life of the wrenches, threaders, hammers, shovels, and including indigenous peoples and disaster survivors; others in the tool pool, but also the continued viability of the employees, advocacy groups, sister organizations, and industry cooperative as a whole. partners in its various endeavours.
Continuous interventions on organizational development Your Water Company sustained collaborations in and out of are also being provided including that of assisting the its premises to aggressively push the five CSR thrusts of the group in their registration to the Cooperative Development MPIC Group of Companies. These campaigns proved critical Authority. Per MPIC’s commitment, it will continue guiding in ensuring business sustainability and reinforcing our brand of the organization especially as it branches boldly out to other service that goes beyond providing clean, reliable, and potable endeavours that provide more opportunities for livelihood water to our customers. and entrepreneurship, over and above employment and contractual work.
Adding to the Skills Set: Painting and Electrical PBSP, of which MVP Chairman is the President, has already contracted the Ana Maria Skilled Workers’ Association for some schools’ furniture requirements. This is another worthy addition to their expanding list of projects that should showcase their additional skills set beyond just plumbing and masonry. The idea is for the group to become a manpower source for the various needs of construction and building projects in Metro Manila and surrounding conurbations.
For 2014, a number of members will undertook painting in construction work and electrical skills trainings, aimed at professionalizing their rendition of the said services. Tools related to these practices have also been provided by the MPIC project grant. As has been said often enough, “Give a man a fish and you will feed him for a day. Teach a man to fish and you will feed him for a lifetime.” MPIC is not just teaching them to fish but also giving them the tools to do so: that is our philosophy of empowerment.
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COMMUNITY AND COOPERATIVE WORK conservation as well as the practice of hygiene through washing, especially the hands. Water for Communities One of the activities closest to our heart, and perhaps Lingkod Eskwela provides us the most satisfaction, is our Water for the Poor Maynilad inaugurated Lingkod Eskuwela 2014 in Manila program under which we sustained 12 Samahang Tubig and Muntinlupa in cooperation with the DepEd and LGUs. Maynilad water associations (STMs) in providing clean The project installed drink-wash areas in 51 public schools affordable water to low-income households. We furthered to give students access to clean water. Water Education these efforts with our Water for Public Servants where we Signages were also upgraded that feature fun facts about donated 4 drinking fountains to Sangley Point Naval Base, water, health and the environment. one of Cavite BA’s biggest customers, for use by military and civilian personnel. We also installed drink-wash areas in ECOLOGY AND ENVIRONMENT the two schools inside the base attended by the children of servicemen. Sining Ipo The Ipo Watershed, a vital source of water for 14 million Tahong Cooperative people, has gone through gradual degradation from The Tahong Cooperative that was initiated by Maynilad posted years of indiscriminate logging and destructive farming increase in membership, capital share and revenue from practices. Maynilad sought the help of the indigenous 4-hectare tahong farm and supplies store, benefitting the Dumagats of Ipo to champion conservation efforts by poor fisherfolk of Bacoor. To further bolster the Company’s emphasizing their role in preserving and rehabilitating the ties with the Bacoor Community, Maynilad co-organized the critical water resource, and strengthening a deeper kinship 1st Bacoorenong Mandaragat Olympics, participated in by 7 to their lands by teaching them how to turn forest waste coastal barangays and attended by Mayor Strike and a number into works of art. of DENR officials.
HEALTH AND HYGIENE
Medical Outreach In cooperation with Arrival Medical, Maynilad provided much needed medical and dental care to indigenous Dumagat women and children in the Ipo Watershed Area, where Maynilad has a working arrangement with the said communities to help protect and restore the area from environmental degradation.
Brigada Eskwela Donations Maynilad, through the wider initiative called Brigada Eskwela, Tree-Planting Program donated lavatories in 3 schools (provide names of schools Maynilad, together with its medical outreach partner, Arrival and location) as well as repaired water facilities and cleaned Medical, also initiated a series of tree-planting activities. their septic tanks. “Water Education Corners” were also Thus, we were able to hit two birds with one stone: providing established in select schools, the idea being to promote water much-needed medical care to the indigenous tribal folks in the
METRO PACIFIC INVESTMENTS CORPORATION 56 ANNUAL REPORT 2014 watershed area, as well as reforesting the areas worst-hit meter high storm surges. Mission Ginhawa is an initiative by illegal logging activities. by Maynilad to provide the devastated communities access to safe drinking water through community engagement and EDUCATION AND EMPLOYMENT donation of compact microfiltration devices. The easy-to- install, portable, and shareable micro-filters purify water Auction for a Cause (Sining Apo) sourced from deep wells and other freshwater bodies, Maynilad mounted Sining Ipo Auction for a Cause, eliminating the need for 42,000 survivors to rely on relief- raising P245,000 to enable 27 Dumagat youth, including donated water for drinking. a college scholar, to continue their education. Proceeds also rewarded artists and sustained production of new 1,681 water filtration systems were donated with money sculptures including driftwood candle-holders. raised from employees and other generous donors. Maynilad’s coordination partners were US-based NGO Brigada Eskwela Adoption Program Wine to Water led by CNN Hero Doc Hendley, the Philippine Brigada Eskwela is intended to provide equipment, Water Sanitation and Hygiene (WASH) Cluster, LWUA, local facilities and school supplies, as well as services and government and other private organizations. Maynilad’s support to identified beneficiary public schools. Last President Ricky Vargas and other employee volunteers year, 36 schools were adopted in our biggest Brigada reached out to communities to teach proper use and upkeep Eskwela effort with BA and Head Office employees. of the filters.
Umiray Outreach Water for Survivors of Glenda, Mario, and Ruby Maynilad partnered with MWSS and Manila Water Maynilad provided 15,878 liters of water in jugs and bottles for an outreach activity for Dumagat women and and around 20 cubic meter of tankered water to various children in Umiray. This also involved the donation of typhoon-hit areas. It also deployed 2 portable water refurbished desktops and a printer-scanner for the treatment machines to serve the communities hit by the computer lab of Cynthia Elementary School, attended typhoons, in partnership with various government agencies by many Dumagat kids. and private groups including the MVP Group Tulong Kapatid.
Livelihood Projects Fire Relief Operations Maynilad also continued its support for select livelihood Maynilad also provided 11,792 liters of water in jugs and projects. One such livelihood venture was with STM- bottles and around 10 cubic meter of tankered water to Tondo; which added new products to their successful various fire-hit areas. This was again in partnership with Kapwa line of personal and home care products. In various government agencies and private groups including addition, Maynilad also tapped women of Gawad-Kalinga the MVP Group’s Tulong Kapatid. Enchanted Farm to produce the Tubee and Wayo Plush Toys, another marketing success. Employee Volunteerism The numerous CSR initiatives of Maynilad provided volunteer RELIEF AND REHABILITATION opportunities for employees of the Company, fostering not only a spirit of solidarity with the communities where Mission Ginhawa it launched such efforts, but also a sense of mission and As deadly as Super Typhoon Yolanda’s 315 kilometer accomplishment. per hour winds were, equally as destructive were the 7.5
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COMMUNITY AND CIVIC INITIATIVES
Light of Hope In 2014, the Foundation continued to spread the light of hope to families in need of power. 5,300 households MERALCO’S CHEER HIGHLIGHTS belonging to 61 communities have been energized within the Meralco franchise area. Working with local governments, Meralco recognizes the power of hope in building the program uses a multi-stakeholder approach in bringing communities. The Company is constantly committed electricity to marginalized families. Meralco also works with to reenergize people’s dreams and aspirations, helping the communities’ homeowners associations to prepare them to reach for their goals along with the nation’s. More them for ownership of the program. Electrification design than 25 million Filipinos count on Meralco every day to and solutions are customized for each community and power their lives—safely, reliably and affordably. This, it is require close coordination and engagement with various able to do, because of its long term commitment to drive government, community, civil society organizations, and the economic growth and improve the lives of Filipinos. It beneficiaries themselves to make the program sustainable. is also in the same spirit and power that Meralco brings through its corporate social responsibility (CSR) initiatives. HEALTH
Through its CSR arm, the One Meralco Foundation, more than A Sound Mind in a Sound Body 39,122 families have been reached through various social Sports enthusiasts from various communities nationwide development initiatives in 2014. It is its core belief that energy were involved in Meralco’s own Basketboys and Chess Clinic is vital for people to rise above poverty. It can save time and programs. Sports development was also instrumental in improve productivity at home, help people and community involving young people of the Autonomous Region of Muslim organizations earn a living, and energize community services Mindanao to be agents of peace through the annual Football especially for those hardest to reach: island schools, rural for Peace program which the Foundation strongly supported. health clinics and far-away agricultural centers. Akapela Open A different kind of ‘healthy’ activity, young people who would like to develop their singing and stage performance talents to help their families got first-hand mentoring from the nationwide talent competition, Akapela Open. It was not only fun, but brought about hearty camaraderie.
EDUCATION AND EMPOWERMENT
Development Programs and MVP Academic Assistance The Foundation engaged more than 2,000 disadvantaged but talented young students in various development programs
METRO PACIFIC INVESTMENTS CORPORATION 58 ANNUAL REPORT 2014 that prepare them for an active role in their schools and conservation. It also includes project-based learning communities. Two hundred dependents of employees of activities to make understanding energy a fun learning Meralco and its subsidiaries received educational grants experience for the students. through the MVP Academic Assistance Awards. Meralco employees, particularly its engineers, School Electrification Program spearheaded the “Safe Ang School Ko” program where The Foundation reaches out to the farthest, hardest-to- they help principals, school heads, and school building reach public schools through its School Electrification administrators learn about electrical safety in schools as Program. Completing 40 schools in 2014, more than part of the annual Brigada Eskwela program. 11,000 students benefit from enhanced learning experiences with the use of multimedia educational ENVIRONMENT AND ECOLOGICAL BALANCE tools. The program installs a 1-kW solar photo-voltaic system in partner schools, capable of harnessing Tree-Planting, Coastal Cleanups, and More solar power to power light bulbs, ventilation, laptop Driven by its mission of service in the franchise area computers, and multimedia systems for several hours of Meralco, 2,552 employees volunteered in various each day. programs such as tree planting, coastal clean-up, school electrical safety assessments, and more. These do not Provinces where this program has been implemented only show how the Company lives up to its corporate now include: Calayan Islands in Cagayan, South values of malasakit and makabayan, but also reflects the Cotabato, Sarangani, Leyte, Cagbalete Island in Quezon, light of hope that its employees bring when they share Palawan, Romblon, Northern and Western Samar. A their time, talents and treasures with many marginalized number of these schools cater to indigenous peoples communities. like the T’bolis of South Cotabato and the B’laans of Sarangani. RELIEF AND REHABILITATION
Energy Education Program 1Day2Give for Typhoon Victims The Foundation launched an Energy Education Program addressed primarily to students and teachers. A set of The Foundation also continued its rehabilitation and 350 lessons in energy was developed that teachers can recovery work after Typhoon Yolanda through various incorporate in their Science, Mathematics, English, Social projects. Eighteen classrooms were built in the provinces Studies, and Home Economics subjects. In partnership of Leyte, Iloilo, Capiz and Aklan so students and teachers with the Department of Education and the Coalition for can now return to their normal learning environment Better Education, the lessons were developed by a group after the devastating typhoon. These classrooms of selected public school teachers and include topics on were funded mainly by Meralco employees through sources of energy, energy management, efficiency, and the “1Day2Give” program. Power restoration support
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continued in Leyte as well as in other provinces like Albay COMMUNITY AND CIVIC CONSCIOUSNESS and Sorsogon affected by Typhoon Glenda. Biyahe 2014 Edition The Foundation also funded the Palina River Cruise in Capiz TMC again implemented BIYAHE in 2014, an infomercial- to boost local tourism and contribute to a sustainable making competition for students to promote road safety livelihood for families affected by Typhoon Yolanda. On top and courtesy in the expressways. Over 11 entries from the of this, boats were distributed to fishermen from Western different schools in Metro Manila, Bulacan, and Pampanga Visayas to help in the resumption of the livelihood of families were submitted. in the coastal areas. Basketboys Tournament A Sports Development program for the youth, Basketboys is a basketball tournament to promote wellness and develop camaraderie among the youth of NLEX and SCTEX host communities. 8 teams from Barangays 154, 155, 156, 157, Malis, Sipat, Camachiles and Sta. Ines competed for the prized trophy. TOLLWAYS GROUP CHEER ROADWAYS HEALTH AND HYGIENE Our road networks traversing large swathes of real estate over 6 provinces and 5 major urban centers in Luzon, the Medical Mission and Outreach Tollways Management Corporation, not only promoted TMC, in cooperation with partners from the medical and trade and commerce, travel and leisure but also touched dental professions, catered to the health care needs of the the lives of millions of people. Earning substantial revenues men, women and children within their coverage, who would from our operations, we ploughed back a significant portion otherwise be unable to avail of these diagnostic services into Corporate Social Responsibility programs and projects and medications. We also sought to educate them on the that were particularly relevant to our broad constituencies. importance of preventive care and wellness.
Together with our partners from both the government Operation Tule and private sectors, TMC’s initiatives ranged from sports One of our most popular outreach activities especially during programs to road safety promotion, from medical missions summer, Operation Tule, was conducted at Barangay 160 and to environmental activities, from education support to at Barangay Mapalacsiao, in Tarlac with 80 and 120 initiates accident and disaster relief work. Here are some of the respectively. MPIC CHEER activities our Company sponsored and participated in last year. Pandaras Elementary School Wellness Seminars Lectures of health professionals on proper nutrition, oral care and physical hygiene were held at Pandaras Elementary School, San Fernando, Pampanga with 242 school children (Gr 4 - 6), 8 faculty members & 14 PTCS officers.
METRO PACIFIC INVESTMENTS CORPORATION 60 ANNUAL REPORT 2014 ENVIRONMENT AND ECOLOGICAL BALANCE Gusto Ko Ligtas Tayo Another continuing program of the Company, GKLT is an Planting Trees Is Always Fun orientation seminar for barangay leaders and members of the TMC sponsored tree planting activities in the different SCTEX communities to enhance awareness on proper road safety and NLEX communities to support the campaign on climate practices and good pedestrian discipline. 1,679 barangay change and care for the environment. The Company is at the leaders and students attended the series. forefront of the advocacy to increase and expand greenery in the Central plain. RELIEF AND REHABILITATION
OPLAN Linis: Tugis Dengue Thankfully, no natural or man-made disasters visited the areas A clean-up drive to prevent dengue outbreak but also to where TMC operates requiring large-scale mobilization of promote healthier and cleaner surroundings, resources for relief efforts. However, TMC provided manpower misting and clean-up were implemented, appropriately enough, and other resources to the sibling companies who conducted at Disiplina Village in Barangay Ugong, Valenzuela with 938 such activities elsewhere. families as beneficiaries. Meanwhile, NLEX and SCTEX remain safe havens for trade EDUCATION AND EMPOWERMENT and travel with no major mishaps due to the continuing vigilance of our traffic and law enforcement arms. Summer Reading Program A support program conceived to intensify their passion for education and learning, students of Mawaque Elementary School in Mabalacat and Pio Elementary School in Porac, Pampanga, walked through some popular literature during their summer break.
Dictionary Drive In order to expand their vocabulary and their appreciation for words, the students of Tabe Elementary School in Guiguinto, HOSPITAL GROUP CHEER PROGNOSES Bulacan and Parang Elementary School in Tarlac were awarded dictionaries from generous donors. Among all the companies under the MPIC tent, the Hospital Group is perhaps the most diverse (with 9 affiliate Usapang Drayber hospitals) and the most extended (covering the three island A mainstay of its educational thrust, TMC continued to groups: Luzon, Visayas and Mindanao). These make the implement Usapang Drayber, a forum that orients drivers from hospitals and their staffs most available and deployable different bus and trucking companies, and other organizations for various Corporate Social Responsibility initiatives, too on the dos and don’ts safe expressway driving. 13 companies numerous to mention here. and organizations with 898 drivers and officers participated.
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 61 CORPORATE SOCIAL RESPONSIBILITY
Highlighted herein are some of the more meaningful HEALTH AND HYGIENE projects the various hospitals engaged in. By themselves, the hospitals in one way or another are doing so much Institutionalized Mission and Outreach humanitarian work that no other sector or type of institution Davao Doctors Hospital’s CSR activities benefit over a can match, over and above their corporate interests. Their thousand families every year. Our monthly activities include: engagements serve to show how they have embraced the free surgery clinic, blood-letting activities with Davao City social responsibility of doing business as corporate citizens. Blood Bank, annual free clinics for DDH Anniversary and DDH Dumoy, disaster and rescue initiatives with the MPIC COMMUNITY AND CIVIC INITIATIVES Mindanao.
Organizational Strengthening of Non-Affiliated Hospitals In turn, Our Lady of Lourdes Hospital has continued its The Makati Medical Center Foundation (MMCF), tradition as a Christ-centered hospital through its various Department of Health (DOH) and the Baguio General medical missions. The medical/surgical mission at Quezon Hospital and Medical Center (BGHMC) signed a pact to would cover minor and major medical procedures. boost the operation of the government-run hospital through “organizational strengthening.” This year, the MMCF set Programmatic Management of Drug-Resistant its eyes on the BGHMC after helping fix up the Armed Tuberculosis Forces of the Philippines Medical Center and the Rizal Riverside Medical Center is currently the site for the Medical Center in previous years under the public-private Programmatic Management of Drug-Resistant Tuberculosis partnership (PPP) program. (PMDT) Treatment Center and Laboratory in Negros Occidental for two years running. Funded by the Global Healthy Community Program Fund, through the Philippine Business for Social Progress The Healthy Community Program is a two-year community (PBSP) chaired by Mr. Manuel V. Pangilinan, the basic TB partnership of Cardinal Santos Medical Center with the services of the Program have treated 192 patients so far for City Government of San Juan; this is envisioned to be a 2014. 800 PMDT patients have been screened, 95 of which collaborative undertaking to maximize presence of health are currently enrolled in 18 to 24 month treatments and 10 care professionals in the area and also to initiate conduct of having been officially declared as cured. relevant health programs that focus on health literacy and sustainable community involvement towards better health outcomes.
METRO PACIFIC INVESTMENTS CORPORATION 62 ANNUAL REPORT 2014 EDUCATION AND EMPOWERMENT Tree-Planting, Dengue Clean-ups, Environmental Awareness, Etc. Knowledge Transfer Individually, some of the hospitals participated in local The Makati Medical Center Foundation has initiated activities, in partnership with government and private “knowledge transfer” to public hospitals, to be able for groups. De los Santos Medical Center in particular regularly these facilities to be able to stand on their own, with their engages in tree-planting, even as the other hospitals engage improved systems. “In every hospital we go to, there will be in cleanups to control Aedes Egyptii breeding grounds, rumors we’re privatizing it. We don’t. We walk away after as well as in environmental awareness and education a year. This is how we want the foundation to function,” programs. Montenegro said. In addition, the partner hospitals are also able to avail of discounts afforded the MPIC Hospital Group RELIEF AND REHABILITATION for purchases of medical equipment and supplies. Leyte Provincial Hospital Back in Operation Health Education Outreach After the onslaught of Typhoon Yolanda, the Leyte Asian Hospital Charities , Inc. partnered with Nagcarlan LGU Provincial Hospital (LPH) was one of the hospitals in officials to have the Health Education Outreach Program. Visayas left with destroyed facilities, flooded building , and The objective is to educate adults and school children on damaged equipment. Now, LPH is back to full operations good nutrition and proper hand hygiene. Asian Hospital through the help of Asian Hospital. Dr. Absin, head of LPH staff volunteers also demonstrated cooking using organic said, “In behalf of Leyte, LPH and its staff, I thank Asian ingredients from their own back yards. Hospital for all their help to us. Words are not enough to express our gratitude especially now that we are once again ENVIRONMENT AND ECOLOGICAL PROGRAM able to serve people.”
All the individual hospitals participate in the MPIC’s environmental activities, particularly the already institutionalized “Shore It Up,” an internationally-awarded program for ecological initiatives. The natural path for them would have been to provide medical and paramedical support during the activities, but many individual staff members of the hospitals have chosen to participate too in the clean-up drives, the mangrove planting, the marine educational programs, the pictorial documentation work, and many more. Indeed, Shore It Up is one of the activities that bring not only all the hospitals together, but also the other companies in the MPIC Group.
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 63 Board of Directors
From left to right:
JOSE MA. K. LIM President and Chief Executive Officer
MANUEL V. PANGILINAN Chairman of the Board
DAVID J. NICOL Chief Financial Officer
METRO PACIFIC INVESTMENTS CORPORATION 64 ANNUAL REPORT 2014 From left to right: VICTORICO P. VARGAS Executive Director EDWARD S. GO Independent Director
RAMONCITO S. FERNANDEZ Executive Director ANTONIO A. PICAZO Director, Corporate Secretary AUGUSTO P. PALISOC, JR. Executive Director
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 65 Board of Directors
From left to right:
EDWARD A. TORTORICI Executive Director and Executive Advisor ARTEMIO V. PANGANIBAN Independent Director RAY C. ESPINOSA Director WASHINGTON Z. SYCIP Independent Director ROBERT C. NICHOLSON Executive Director
METRO PACIFIC INVESTMENTS CORPORATION 66 ANNUAL REPORT 2014 From left to right: LYDIA BALATBAT-ECHAUZ Independent Director AMADO R. SANTIAGO III Director
ALFRED A. XEREZ-BURGOS, JR Board Advisor ALBERTO G. ROMULO Board Advisor
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 67 Board of Directors
MANUEL V. PANGILINAN of Trustees of the San Beda College. He also serves as Born in the Philippines in July 1946, Mr. Pangilinan Chairman of the Hong Kong Bayanihan Trust, a non-stock, graduated cum laude in 1966 from the Ateneo de Manila nonprofit foundation which provides vocational, social University, the Philippines, with a Bachelor of Arts degree in and cultural activities for Hong Kong’s foreign domestic Economics. He received his MBA degree in 1968 from the helpers. On February 5, 2007, Mr Pangilinan was named the Wharton School of Finance and Commerce at the University of President of the Samahang Basketbol Ng Pilipinas (SBP), a Pennsylvania, where he was a Procter & Gamble Fellow. national sport association for basketball. Effective January After graduating from Wharton, he worked in Manila for 2009, MVP assumed the Chairman of the Amateur Boxing Philippine Investment Management Consultants Inc. (the Association of the Philippines (ABAP), a governing body PHINMA Group) and in Hong Kong with Bancom International of the amateur boxers in the country. In October 2009, Mr. Limited and American Express Bank, and thereafter with First Pangilinan was appointed as Chairman of the Philippine Pacific Company Limited. Disaster Recovery Foundation, Incorporated (PDRF), a non- Mr. Pangilinan founded First Pacific in 1981 and served stock, non-profit foundation established to formulate and as Managing Director until 1999. He was appointed Executive implement a reconstruction strategy to rehabilitate and rebuild Chairman until June 2003, when he was named as CEO and areas devastated by recent floods and other calamities. Mr. Managing Director. Within the First Pacific Group, he holds the Pangilinan is Chairman of Philippine Business for Social positions of President Commissioner of P.T. Indofood Sukses Progress (PBSP), a social action organization made up of Makmur Tbk, the largest food company in Indonesia. the country’s largest corporations, Vice Chairman of the In the Philippines, he is the Chairman of Philippine Foundation for Crime Prevention, a private sector group Long Distance Telephone Company (PLDT), the country’s organized to assist the government with crime prevention, dominant telecom company after serving as its President a member of the Board of Trustees of Caritas Manila and and CEO until February 2004. He also serves as Chairman Radio Veritas-Global Broadcasting Systems, Inc., a former of Smart Communications Incorporated - the largest mobile Commissioner of the Pasig River Rehabilitation Commission, phone operator in the Philippines - PLDT Communications and a former Governor of the Philippine Stock Exchange. In and Energy Ventures Incorporated (formerly Piltel), Beacon June 2012, he was appointed as Co-Chairman of the newly Electric Asset Holdings Incorporated, Metro Pacific organized US-Philippines Business Society, a non-profit society Investments Corporation, Landco Pacific Corporation, which seeks to broaden the relationship between the United Medical Doctors Incorporated, Colinas Verdes Corporation States and the Philippines in the areas of trade, investment, (operating the Makati Medical Center and Cardinal Santos education, foreign and security policies and culture. Medical Center, respectively), Davao Doctors Incorporated, Mr. Pangilinan has been awarded the Ten Outstanding Riverside Medical Center Incorporated in Bacolod City, Our Young Men of the Philippines (TOYM) for International Finance Lady of Lourdes Hospital, Asian Hospital, Incorporated, (1983), the Presidential Pamana ng Pilipino Award by the Maynilad Water Services Corporation (Maynilad), Mediaquest Office of the President of the Philippines (1996), Best CEO Incorporated, Associated Broadcasting Corporation (TV5), in the Philippines by Institutional Investor (2004), CEO of the Philex Mining Corporation, and Manila North Tollways Year (Philippines) by Biz News Asia (2004), People of the Year Corporation. On May 2009, he became a member of the by People Asia Magazine (2004)Distinguished World Class Board of Directors of the Manila Electric Company (Meralco) Businessman Award by the Association of Makati Industries, and recently became its Chairman after serving as its Inc. (2005), Man of the Year by BizNewsAsia (2005), and President and CEO from July 2010 to May 2012. Management Man of the Year by the Management Association Outside the First Pacific Group, Mr. Pangilinan was of the Philippines (2005). In May 2006, the Office of the a member of the Board of Overseers of The Wharton President of the Republic of the Philippines awarded him the School, University of Pennsylvania in the United States. He Order of Lakandula, rank of a Komandante in recognition of his was Chairman of the Board of Trustees of the Ateneo de contributions to the country. On December 2008, BizNewsAsia Manila University. He is currently the Chairman of the Board magazine awarded to Mr. Pangilinan the Business Icon
METRO PACIFIC INVESTMENTS CORPORATION 68 ANNUAL REPORT 2014 Gold Award “for having greatly contributed to the Philippine In 2006, some of MPC’s businesses were reorganized economy through achievements in business and society.” into Metro Pacific Investments Corporation (MPIC), where he In February 2010, the Philippine Sportswriters Association continues to serve as President & CEO. Aside from MPIC he (PSA), the country’s oldest media organization, named him is also currently a Director in the following MPIC subsidiary the Sports Patron of the Year for his invaluable contributions and affiliate companies: Beacon Electric Asset Holdings Inc.. to the Philippine Sports. In November 2010, Mr. Pangilinan Manila Electric Company Metro Pacific Tollways Corporation, was chosen by the Asia CEO Awards as the Global Filipino Manila North Tollways Corporation, Tollways Management Executive of the Year for 2010. In June 2012, FinanceAsia Corporation, Maynilad Water Services, Inc., Indra Philippines awarded Mr. Pangilinan as the Philippines Best CEO for 2012. Inc., Medical Doctors, Inc. (owner and operator of Makati Just recently in January 2014, Mr. Pangilinan received another Medical Center), Cardinal Santos Medical Center (Colinas recognition from the Philippine Sportswriters Association Verdes Hospital Managers Corporation) and Our Lady of (PSA) with the Executive of the Year award. Lourdes Hospital. He serves as Chairman of Davao Doctors Mr. Pangilinan has been awarded four Honorary Doctorate Hospital (Clinica Hilario) Inc., Asian Hospital and Riverside in Humanities (Honoris Causa). First to confer him was San Medical Center in Bacolod. Mr. Lim is also President of the Beda College in 2002. Second was the Xavier University in Metro Strategic Infrastructure Holdings, Inc. (MSIHI) which 2007. Holy Angel University in Angeles, Pampanga awarded holds a minority ownership in Citra Metro Manila Tollways him his third degree in 2009. In April 2010, Far Eastern Corp. (Skyway). University awarded him his fourth. He is active in the Management Association of the Philippines and has served as Vice-Chair of the Good JOSE MA. K. LIM Governance Committee from 2007 to 2009. He is a founding Born in the Philippines in April 1952, Mr. Lim graduated member and Treasurer of the Shareholders Association of from the Ateneo de Manila University, with a Bachelor of Arts the Philippines. degree in Philosophy. He received his MBA degree in 1978 from the Asian Institute of Management. DAVID J. NICOL After graduating from the Asian Institute of Management Accomplished and versatile business leader having in Manila, he managed a family-owned steel fabrication successfully held CEO and CFO positions in a wide range of business until 1987 when he joined the National Development industries in Europe and Asia. Voted by Institutional Investor Company as a Manager in the Privatization Unit, a task force as the top Conglomerate CFO all Asia in 2012 and 2013. created by and reporting to the Department of Trade and Mr. Nicol began his career with PricewaterhouseCoopers Industry. where he served for 10 years in London, New York and Hong Mr. Lim then worked as a senior officer for various local Kong. He joined First Pacific Company Limited in 1991 and in and foreign banking institutions from 1988 to 1995. He was 1994 moved to their Thai affiliate Berli Jucker PCL where he Director for Investment Banking of the First National Bank of served as CFO until 1998 and then as Group CEO until 2002 Boston from 1994 to 1995, and prior to that, Vice President when First Pacific exited Thailand. of Equitable Banking Corporation. In 1995, Mr Lim joined Fort From 2002 until 2010 when Mr. Nicol joined MPIC, Bonifacio Development Corporation (FBDC) as Treasury Vice he held positions as CEO Europe and Asia for SIRVA, Inc., President and eventually was appointed Chief Finance Officer CEO of Pinnacle Regeneration group and as a director of in 2000. Reconomy Limited in the UK’s waste and recycling sector. With the onset of the Asian financial crisis and the He has a consistent record of building shareholder value subsequent divestment of controlling interest in FBDC, Mr. through operational improvement, restructuring, mergers Lim assumed the position of Group Vice President and Chief and acquisitions and entering new markets. Finance Officer of FBDC’s parent company, Metro Pacific Corporation (MPC) on a concurrent basis from 2001 to 2003. He was then elected President & CEO of MPC in June 2003.
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 69 Board of Directors
EDWARD A. TORTORICI and September 2003. Mr. Nicholson has wide experience in Age 75, born in the United States. Mr. Tortorici received corporate finance and cross-border transactions, including a Bachelor of Science degree from New York University mergers and acquisitions, regional telecommunications, debt and a Master of Science degree from Fairfield University. and equity capital markets, corporate reorganizations and Mr. Tortorici has served in a variety of senior and executive privatization in China. Mr. Nicholson joined First Pacific’s Board management positions, including Corporate Vice President in 2003. for Crocker Bank and Managing Director positions at Olivetti Corporation of America and Fairchild Semiconductor AUGUSTO P. PALISOC JR. Corporation. Augusto P. Palisoc Jr. has been with the First Pacific Mr. Tortorici subsequently founded EA Edwards group of companies for 31 years. He is currently an Executive Associates, an international management and consulting Director of MPIC and is the President & Chief Executive firm specializing in strategy formulation and productivity Officer of Metro Pacific Hospital Holdings Inc, which is the improvement with offices in USA, Europe and Middle East. In group’s holding company for all hospital and healthcare 1987, Mr. Tortorici joined First Pacific as an Executive Director investments. He is a Director of Medical Doctors, Inc. (owner for strategic planning and corporate restructuring, and and operator of the Makati Medical Center), Davao Doctors launched the Group’s entry into the telecommunications and Hospital (Clinica Hilario) Inc. and Davao Doctors College, Inc., technology sectors. Presently, he oversees corporate strategy Colinas Verdes Hospital Managers Corporation (operator of for First Pacific and guides the Group’s strategic planning the Cardinal Santos Medical Center), Riverside Medical Center and corporate development activities. Mr. Tortorici serves Inc. and Riverside College Inc. in Bacolod, and Asian Hospital as a Commissioner of PT Indofood Sukses Makmur Tbk Inc., while he is Chairman of East Manila Hospital Managers and as Director of Metro Pacific Investments Corporation, Corporation (operator of the Our Lady of Lourdes Hospital), Philex Mining Corporation, Maynilad Water Services, Inc., FEC De los Santos Medical Center, MegaClinic Inc., and Central Resources Inc. of Canada and AIM-listed Forum Energy Plc. Luzon Doctors Hospital in Tarlac. Prior to joining MPIC, he was Mr. Tortorici serves as a Trustee of the Asia Society the Executive Vice President of Berli Jucker Public Company Philippines and is on the Board of Advisors of the Southeast Limited in Thailand from 1998 to 2001. Mr. Palisoc served as Asia Division of the Center for Strategic and International President and CEO of Steniel Manufacturing Corporation in the Studies, a Washington D.C. non-partisan think tank. He Philippines from 1997 to 1998. He has held various positions also served as a Commissioner of the U.S. ASEAN Strategy within the First Pacific group as Group Vice President for Commission. Corporate Development of First Pacific Company Limited in Hong Kong, and Group Managing Director of FP Marketing ROBERT C. NICHOLSON (Malaysia) Sdn. Bhd. in Malaysia. Before he joined First Pacific Mr. Nicholson is a graduate of the University of Kent, in 1983, he was Vice President of Monte Real Investors, Inc. in qualified as a solicitor in England and Wales and in Hong the Philippines. Mr. Palisoc earned his Bachelor of Arts Degree, Kong. He is an Executive Chairman of Forum Energy Plc, a Major in Economics (with Honors) from De La Salle University, Chairman of Goodman Fielder Limited (since March 2015), and his Master’s in Business Management (MBM) Degree from a Commissioner of PT Indofood Sukses Makmur Tbk and the Asian Institute of Management. Mr. Palisoc was born in a Director of MPIC, Philex Mining Corporation and Philex January 1958. Petroleum Corporation. Mr. Nicholson is also an Independent Non- Executive Director of Pacific Basin Shipping Limited RAMONCITO S. FERNANDEZ and Lifestyle Properties Development Limited. Previously, Ramoncito S. Fernandez is the President & Chief he was a senior partner of Reed Smith Richards Butler Executive Officer of Metro Pacific Tollways Corp. (MPTC) and from 1985 to 2001 where he established the corporate and Tollways Management Corporation (TMC) under Metro Pacific commercial department, and was also a senior advisor to the Investments Corporation (MPIC). He holds directorships board of directors of PCCW Limited between August 2001 in Metro Pacific Investments Corporation (MPIC), Metro
METRO PACIFIC INVESTMENTS CORPORATION 70 ANNUAL REPORT 2014 Pacific Tollways Corporation (MPTC), Manila North Tollways other telecom entities. He was responsible for reviewing the Corporation (MNTC), Tollways Management Corporation overall business environment in foreign and domestic telecom (TMC), Cavitex Infrastructure Corp., and some subsidiaries markets and determining strategic areas and initiatives to of PLDT including PLDT Subic Telecom, Inc., PLDT Clark optimize business potentials. He managed the formulation, Telecom, Inc., Pacific Global One Aviation Company, development, alignment and implementation of the company’s Inc., Tahanan Mutual Building and Loan Association, Inc. strategies to address customer requirements of international (“TMBLA”) and Easytrip Services Corporation. and domestic carriers. He is the 2009 PISM GAWAD SINOP Awardee, the In 2003, he was also appointed supervision over Asset highest award conferred by the Foundation of the Society of Protection and Management Group responsible for Property Fellows in Supply Management and the Philippine Institute Management, Risk Management (Insurance) and Facilities for Supply Management to outstanding achievers in the field Management. of supply management. Before joining PLDT in 2000, he had 12 years of experience Mr. Fernandez has varied experiences in international in the banking industry – Citibank; 13 years in other consumer carrier business, administration and materials management, multinational companies, notably Colgate- Palmolive industrial marketing and sales. He was the Head of Philippines, Union Carbide and Pepsi Cola. International and Carrier Business of PLDT and Smart and In the field of sports, he currently holds the position Global Access Group of Smart from 2007 until December 31, of President for the Amateur Boxing Association of the 2008. He was the Administration and Materials Management Philippines, appointed as Honorary Vice President of the Asian Head of Smart from 2000, and of PLDT from 2004, until Boxing Confederation (ASBC). He was elected Vice-Chairman December 31, 2007. He was the Executive Vice President for the Samahang Basketbol ng Pilipinas, Inc., the national in charge of marketing, sales and logistics of Starpack sports association for the Philippine Basketball, a member Philippines, Inc. until June 2000. Mr. Fernandez obtained of the Philippine Olympic Commission and International his Bachelor of Science Degree in Industrial Management Basketball Federation. He holds the position of Alternate Engineering from the De La Salle University and Master’s Governor of the Philippine Basketball Association, the nation’s Degree in Business Management from the Asian Institute of professional basketball league. Management. ANTONIO A. PICAZO VICTORICO P. VARGAS Antonio A. Picazo is currently a Senior Partner of Picazo Mr. Victorico P. Vargas is the President and CEO of Buyco Tan Fider & Santos Law Offices. He serves as a Maynilad. He formally took over the position in August 2010. Director and/or Corporate Secretary of several large Philippine He is a director of Metro Pacific Investments Corporation, corporations, including Metro Pacific Investments Corporation, Metropac Water Investments Corporation, and director and a position he has held since 2006. Mr. Picazo was born in Chairman of Philippine Hydro, Inc., a member of the Executive Manila in August of 1941 and obtained his Bachelor of Laws Committee of the First Pacific Leadership Academy, trustee degree from the University of the Philippines. He passed of the MVP Sports Foundation, Inc. and trustee of IdeaSpace the 1964 Philippine Bar Examinations with the 5th highest Foundation, Inc. rating. In 1967, he obtained a Master of Laws degree, Major in Prior to his appointment, Mr. Vargas was the Senior Taxation from the University of Pennsylvania. In 1976, he also Vice President for the Human Resources Group and Head of completed the Management Development Program course the Business Transformation Office of the Philippine Long at the Asian Institute of Management. He is currently also a Distance Telephone Company (PLDT), the nation’s no. 1 member of the Board of the PGH Medical Foundation, Haribon telecommunications entity. Foundation and the Gerry Roxas Foundation. Mr. Vargas was also designated to head the International & Carrier Business Group (ICBG) of PLDT in 2007, managing the business relations with foreign and domestic carriers and
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 71 Board of Directors
RAY C. ESPINOSA EDWARD S. GO Age 58, born in the Philippines. Mr. Espinosa has a (Independent Director) Master of Laws degree from the University of Michigan Edward S. Go currently serves as Chairman of the Board Law School and is a member of the Integrated Bar of the of Hyundai Asia Resources, Inc. and of ASA Philippines Philippines. He was a partner of SyCip Salazar Hernandez Foundation. He is an Independent Director of Metro Pacific & Gatmaitan from 1982 to 2000, a foreign associate at Investments Corporation, PLDT Communications and Covington and Burling (Washington, D.C., USA) from 1987 Energy Ventures, Inc. (PCEV) and Filipino Fund Inc. He is also to 1988, and a law lecturer at the Ateneo de Manila School Chairman of the PLDT Beneficial Trust Fund and member of of Law from 1983 to 1985 and 1989. He ranked first in the the Board of BTF Holdings Inc, Mediaquest Holdings, Inc., 1982 Philippine Bar examination. TV5 Network, Inc., Cignal TV, Inc., BusinessWorld Publishing He is a director of Philippine Long Distance Telephone Corporation, PhilSTAR Daily, Inc., AB Capital Investment Company (PLDT), Manila Electric Company (MERALCO), Corporation, Vicsal Investment Corporation, Union Galvasteel Metro Pacific Investment, Corporation, Roxas Holdings, Corporation and Trans-Asia Petroleum Corporation. He has Inc., and also an independent director of Lepanto over 40 years of management experience in banking and Consolidated Mining Company “Lepanto”). He is a director finance, starting as Executive Trainee with Citibank N.A. and of Meralco PowerGen Corporation, Mediaquest Holdings, became President of Philippine Bank of Communications in Inc., TV5 Network, Inc., and Mediascape, Inc. (Cignal 1974 and Chairman and Chief Executive Officer of Chinabank TV). He is the chairman of the Philstar Daily, Inc. and in 1985. Mr. Go is also Chairman of the Audit Committee of BusinessWorld Publishing Corporation, chairman of the MPIC and PCEV. He obtained his Bachelor of Arts Degree, Finance Committee of MERALCO, and chairman of the magna cum laude, and underwent postgraduate studies at Audit Committee of Lepanto. He is the General Counsel the Ateneo de Manila University, where he served as member of MERALCO and Head of PLDT’s Regulatory Affairs and of the Board of Trustees from 2008 until he stepped down Policy Office. He is also a trustee of the Beneficial Trust February. He was Chairman of the Board of Trustees during Fund of PLDT. the last four years. Mr. Espinosa joined First Pacific in June 2013. He is First Pacific Group’s Head of Government and Regulatory Affairs CHIEF JUSTICE ARTEMIO V. PANGANIBAN and Head of Communications Bureau for the Philippines. (Independent Director) AMADO R. SANTIAGO III A consistent scholar, retired Chief Justice Panganiban obtained his Associate in Arts “With Highest Honors” and later Amado R. Santiago III is the Managing Partner of his Bachelor of Laws with “Cum Laude” and “Most Outstanding the Santiago & Santiago Law Offices and is engaged in Student” honors. He placed sixth among 4,200 candidates the general practice of law. He specializes in corporate who took the 1960 bar examinations. A well-known campus litigation, which includes corporate rehabilitation leader, he founded and headed the National Union of Students proceedings under the Securities and Exchange of the Philippines. He is also the recipient of several honorary Commission Rules on Corporate Recovery, Interim Rules doctoral degrees. of Procedure on Corporate Rehabilitation and the Rules In 1995, he was appointed Justice of the Supreme Court, of Procedure on Corporate Rehabilitation, as well as and in 2005, Chief Justice of the Philippines. Aside from being taxation law. He acts as director, corporate secretary, a prodigious decision writer, he also authored eleven books and/or corporate counsel of various corporate clients. He while serving on the highest court of the land. His judicial graduated from the Ateneo de Manila School of Law in philosophy is “Liberty and Prosperity Under the Rule of Law.” 1992 and passed the Philippines Bar Examinations given He believes that the legal profession and the judiciary must not in the same year. He received his degree of Bachelor of only safeguard the liberty of our people but must also nurture Science in Legal Management in 1988 from the Ateneo de their prosperity and economic well-being. To him, justice and Manila University.
METRO PACIFIC INVESTMENTS CORPORATION 72 ANNUAL REPORT 2014 jobs, ethics and economics, democracy and development, nay, ALFRED A. XEREZ-BURGOS, JR. liberty and prosperity must always go together; one is useless (Board Advisor) without the other. On his retirement on 7 December 2006, his Alfred A. Xerez-Burgos, Jr. is presently Vice-Chairman colleagues acclaimed him unanimously as the “Renaissance and Executive Director of Landco Pacific Corporation, a Jurist of the 21st Century.” position he assumed as of March 2009. He was previously Prior to entering public service, Chief Justice Panganiban President, CEO and Chairman of the Executive Committee was a prominent practicing lawyer, law professor, business of the corporation starting 1990, after previously working entrepreneur, civic leader and Catholic lay worker. He was the with a major property company for nearly 20 years. He is only Filipino appointed by the late Pope John Paul II to be a also the President of Club Punta Fuego, Inc., a world class member of the Vatican-based Pontifical Council for the Laity development in Nasugbu, Batangas, as well as the President of for the 1996-2001 term. At present, he is a much sought-after Forest Lake Development Inc., a national provider of first-class independent director and adviser of business firms, and writes memorial parks. Mr. Xerez- Burgos also serves as Chairman a column in the Philippine Daily Inquirer. of the Philippine Red Cross Rizal Chapter, the largest Red Cross chapter in the country, and as a Board Member of the LYDIA BALATBAT-ECHAUZ Muntinlupa Development Foundation that has been helping the (Independent Director) underprivileged of Muntinlupa for over two decades. He earned Lydia Echauz is retired from academe. She was for ten a Masteral Degree in Business Management with Distinction years President of Far Eastern University and its three other from the Asian Institute of Management in 1971. Prior to this, affiliate schools. Prior to joining FEU in 2002, she served as he graduated among the top 25% of his class from the De La Dean of De La Salle University Graduate School of Business, Salle University in 1969 (Bachelor of Science in Mechanical Associate Director of the MBA program of the Ateneo de Engineering). Manila University Graduate School of Business, and Associate Professor of the University of the East, College of Business ALBERTO G. ROMULO Administration. She is currently a member of the Board of (Board Advisor) a few organizations, life member and former governor of Alberto G. Romulo, presently Advisor to the Board and Vice the Management Association of the Philippines, and past Chairman of Manila Bulletin. Served government almost 30 President of the Association of Southeast Asian Institutions years, as among others, Senator and Majority Leader, Executive of Higher Learning, RP Council. She has been awarded most Secretary, Secretary of Finance, Budget Minister, Secretary of outstanding Filipino and most distinguished alumna of ADMU, Foreign Affairs, Member Batasan Pambansa. Authored, among DLSU, and St. Theresa’s College. others, New Central Bank Act (RA 7653), Social Security Act (RA 8282) Veterans Pension (RA 6948), Philippine Veterans WASHINGTON Z. SYCIP Bank (RA7169), Military Benefits (RA 7696). He also introduced (Independent Director) the DFA E-Passport. Mr. Washington SyCip is the founder of the SGV Group. He is the Chairman Emeritus of the Board of Trustees and Board of Governors of the Asian Institute of Management, Philippines and a member of the Board of Overseers of the Columbia University Graduate School of Business, New York. He is a counselor in the Conference Board, a member of the International Advisory Board, Council on Foreign Relations (1995-2010) and an Honorary Life Trustee of The Asia Society- all in New York. He is a member of the Board of Directors of a number of major corporations in the Philippines and other parts of the world.
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 73 Senior Executives
MAIDA B. BRUCE REYMUNDO S. Vice President Group Controller COCHANGCO* and Information Technology Hospital Group Chief Financial Officer
JOSE NOEL C. DE LA PAZ* Hospital Group Director - Corporate Development
MELODY M. KARIM G. GARCIA DEL ROSARIO Vice President Vice President PR and Corporate Business Development Communications
*Transfered to Metro Pacific Hospital Holdings, Inc. beginning 1 January 2015
METRO PACIFIC INVESTMENTS CORPORATION 74 ANNUAL REPORT 2014 MAIDA B. BRUCE MELODY M. DEL ROSARIO Ms. Bruce joined MPIC in November 2009 and is Ms. Del Rosario has been with the Metro Pacific Group since responsible for strengthening and overseeing the Financial 1993, and has over 21 years of experience heading MPIC’s public Reporting, Budgeting & Forecasting and System enhancements and media relations, corporate communications, advertising and processes. Prior to joining MPIC, Maida held a CFO role with the corporate social responsibility (CSR). In these various capacities, top real estate company in the Philippines. She was responsible Ms. del Rosario is in charge of strengthening the credibility and for overseeing the financials of Ayala Lands’s Strategic corporate public image of MPIC by planning and overseeing Landbank Management Group including its other subsidiaries. the implementation of strategic corporate communication She has more than thirteen years of extensive experience in the programs, handling reputation and crisis management, as well banking industry under Citigroup Australia and Manila. She was as working closely with the corporate communication teams and VP for Special Purpose Vehicles under the Financial Control CSR heads of the group. Ms. del Rosario is also the Corporate Department of Citigroup Australia and has handled several roles Information Officer of MPIC for the Philippine Stock Exchange and responsibilities also in Citibank Manila. She was part of a and is a Trustee of the MPIC Foundation where she actively pioneer team that implemented, supported and continuously implements institutional programs on education, economic upgraded a proprietary global financial reporting system to empowerment and environmental awareness. multiple countries in the Asia-Pacific region. KARIM G. GARCIA REYMUNDO S. COCHANGCO Karim G. Garcia joined MPIC in January 2015. As Vice Mr. Cochangco has over 20 years of experience in finance, President for Business Development, he is responsible for new treasury, controllership, audit and business perations and has business expansion and integration into MPIC’s businesses. held various senior positions within the Metro Pacific and His mandate is to increase MPIC’s competitive advantage, by PLDTGroups such as VP for Corporate Development of Fort actively searching and developing new business ventures, and Bonifacio Development Corporation, CFO of SPI Technologies, executing M&A and RFP transactions, especially those with Inc., President and CFO of Stradcom Corporation, CFO of Colinas synergies to existing business. Within the energy industry, Karim Verdes Hospital Managers Corporation, and Comptroller & has over a decade worth of experience. Initially, he was an oil Treasurer of Philippine Cocoa Corporation. He also worked for trader for Chemoil Corporation, one of the largest independent SGV & Co. He holds a Bachelor of Science degree in Business fuel oil bunker service companies. He then moved to Houston, Administration and is a Certified Public Accountant. Texas and joined Enron Development Corp, where he managed several international green field power development projects, JOSE NOEL C. DE LA PAZ with a combined generation capacity of close to 1000MW, from Mr. de la Paz joined MPIC in 2007 and is responsible for concept to financial close. In addition, within energy venture the investment initiatives of MPIC for its healthcare portfolio, capital subsidiary, Enron Global Investments, he led Enron’s starting from origination, deal structuring and negotiation, Mergers & Acquisitions efforts in South East Asia. Also prior and all the way to due diligence and deal completion through to MPIC, Karim was Vice President for Strategic Planning for documentation. He deal managed 7 of the 8 hospitals currently Trans Asia Oil and Energy Development Corporation, a Phinma invested in by MPIC, and post-deal, assists in overseeing Company. He was responsible for the development of greenfield the management of the hospitals. He has over 20 years of power projects, and the acquisition of energy assets. He also investment banking experience, arranging debt and equity led Trans-Asia’s foray in to Liquefied Natural Gas and combined financings and rendering financial advisory services. Prior to cycle gas turbine power generation. Karim Garcia holds a joining MPIC, he was the Philippine Deputy Country Head for Bachelor’s of Science in Business Administration, from Boston New York-based Bankers Trust Company that originated and University and obtained a Masters of Business Administration lead managed global bond offerings and bank loan syndications, from the Marshall School of Business at the University of and worked on advisory engagements for major project Southern California. financings in the country. He brings this Corporate Finance experience in setting up bank working capital lines, syndicating term loan facilities and managing equity rights offerings of the hospitals.
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 75 Senior Executives
FERDINAND G. ATTY. JOSE JESUS INACAY* G. LAUREL Vice President Vice President Legal Business Development
MABINI F. PABLO Vice President Government Relations
ALBERT W. L. ROBIN MICHAEL PULIDO L. VELASCO Vice President Vice President Investor Relations Human Resources
*President of MRail, Inc. as of 1 January 2015
METRO PACIFIC INVESTMENTS CORPORATION 76 ANNUAL REPORT 2014 FERDINAND G. INACAY Minister, Assistant Secretary, and Undersecretary of the DPWH. Mr. Mr. Inacay joined MPIC in July 2010 and his focus is to Pablo’s extended membership in the DPWH Executive Committee pursue the various transport infrastructure related projects. as well as in the boards of major government infrastructure He liaises with project proponents from the government‘s corporations such as the Philippine Ports Authority, Philippine implementing agencies of projects rolled-out under the PPP National Railways, Light Rail Transit Authority, Toll Regulatory program. He undertakes operations evaluation and analysis. His Board, and the Cabinet Assistance System has led to his direct work involves bid development and bid strategy development, and intense involvement in diverse policymaking issues, and has enterprise and operational review, developing project contacts helped him develop the strategic perspective that he holds today. in the different levels of the project organization and identifying He was recently elected as Governor of the Philippine Red Cross, and establishing working relationships with potential partners where he explores how businesses can contribute to national for the venture. Prior to MPIC, he worked for 14 years with Asian well-being not through limited notions of community service but Terminals, Incorporated. He is a transport professional with through private companies’ utilization of their core strengths and over 20 years of collective experience in the management and assets in assisting in major humanitarian efforts. operations of the various modes of transport and transport facilities. He was a former Director of the Philippine Corn Board, ALBERT W. L. PULIDO an organization established under the office of the President of Albert has managed the Investor Relations function at Metro the Philippines. Mr. Inacay is also a member of the Cold Chain Pacific Investments Corporation since the middle of 2009. In that Association of the Philippines. In 2013, Mr. Inacay is currently span of time he and his team have managed the transition - from taking-up Corporate Finance with the New York Institute of an IR perspective - to a truly public company via a public share Finance. re-launch in September 2009, increased the number of analysts covering the stock from 3 to 16, managed updates to investors on ATTY. JOSE JESUS G. LAUREL a primary share issuance of US$200 million in July 2011, US$150 Prior to joining MPIC, Atty. Laurel was Vice President for million in January 2013 and US$200 million in February 2015, and Legal and External Affairs, General Counsel and Corporate coordinated over 500 investor meetings over the past two years. Secretary for Petron Corporation and concurrently President Prior to MPIC, Albert was with the NY offices of Lehman of Petron Foundation. Before working for Petron, he was Vice Brothers (now Barclays Capital) from 2003 to 2008 in various President for Corporate Services of Energy Development capacities including: Creditor Relations, Financial Planning & Corporation (EDC) where he headed Legal, HR, Purchasing, Analysis, Rating Agency Relationships and Consumer Deposit Planning and Finance. Prior to EDC, he served at the Securities Platform Development. Before this, he served as a business and Exchange Commission (SEC) for 9 years as securities development officer for a couple of Philippine banks originating analyst, prosecutor, hearing officer and as deputy executive corporate clients. He has an MBA from Erasmus University and director (General Counsel). Concurrent with the above positions, is a graduate of De La Salle University with a Bachelor of Science he also served as Law Dean of Lyceum of the Philippines and degree. law professor for 27 years at Ateneo de Manila Law School. He graduated from Ateneo de Manila with degrees in A.B. Economics ROBIN MICHAEL L. VELASCO and Law. He placed 6th in the 1981 bar. He also has a Masters of Mr. Velasco joined the company in July 2009 and is Laws from Yale University. responsible for ensuring that MPIC and all its subsidiaries and future acquisitions have the right People Strategies to support MABINI F. PABLO the growth required to achieve business plans. He has also EQ Pablo’s role at MPIC involves initiating critical liaising improved the Performance Management and Rewards system initiatives that allows the Company and its government partners to ensure a culture of performance driven meritocracy. He led to meet shared objectives in increasingly meaningful ways. His the creation of an HR Council which is an organization of all HR tasks involve providing strategic input to MPIC on government’s Heads in the First Pacific Group. He brings with him 24 years of national goals in diverse sectors, securing government approval management experience garnered from Global Multinationals such for new projects as well as for operational matters, expanding as Procter & Gamble, Johnson & Johnson and Synovate. He has MPIC’s network of partner agencies, obtaining government been exposed to various facets of management which includes counterpart funding, guiding responses to new legislative Finance, Supply Chain, Manufacturing, Research & Development, developments, negotiating with national and local government Technical Services, Market Research, Quality Assurance and HR units, and leading problem-solving efforts for different operational Management. He spent the last 5 years of his career prior to MPIC issues concerning government. Prior to joining MPIC, Mr. Pablo in Singapore as HR Director for Asia Pacific, Talent Management supported Metro Pacific Tollways Corporation as Senior Advisor for Johnson & Johnson, and then as HR Director for Asia for for similar government relations undertakings. He was also the Synovate, leading 12 Asian countries in all HR aspects. He has also Undersecretary for Administration and Finance, Department of spent 6 years of his career as a Professor of the Graduate School Public Works and Highways (DPWH) from1994 to 2003. He was a of Business and the Business Management Dept. of LSalle where career public servant, having served under 10 DPWH Secretaries he taught Strategic Management, Ethics, Stock Market Trading, and 5 Presidents in positions including Special Assistant to the Production Management and HR Management.
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 77 Senior Executives
SANTHEA V. OSLEC G. DELOS SANTOS LOPEZ* Assistant Vice President Assistant Vice President Chief Risk Officer Business Development
RICARDO M. PILARES III Assistant Vice President Legal
LOUDETTE M. MELANIE G. ZOILO BENDIJO Assistant Vice President Assistant Vice President Human Resources Treasury
*Seconded as Chief Operating Officer of AF Payments Inc. as of September 2014.
METRO PACIFIC INVESTMENTS CORPORATION 78 ANNUAL REPORT 2014 SANTHEA V. DELOS SANTOS RICARDO M. PILARES III Ms. Delos Santos joined the Company in February 2007 Mr. Pilares is the Assistant Vice President for Legal of Metro and has performed functions like financial and management Pacific Investments Corporation. He graduated Valedictorian reporting, planning, analysis and budget. In 2013, she was also from the Ateneo Law School in 2006 and passed the Philippine designated as the Company’s Chief Risk Officer. She has over 15 Bar Examinations in 2007 with the second highest ranking. years of experience in finance and audit where she was exposed Before joining Metro Pacific Investments Corporation in 2010, to diverse industries including utilities, telecommunication, Mr. Pilares was an associate in ACCRA Law Offices, and media, power and shared services. She was part of a team who subsequently in Puno and Puno Law Offices, where he handled successfully shadowed and backfilled one of the most critical litigation cases and special corporate projects for various reporting processes in an integrated power company in North clients. He also acts as legal counsel of the various subsidiaries America and migrated these processes to the Philippines. of MPIC. He is also a member of the faculty of the Ateneo Law She worked as well with a group of companies where she School. implemented process improvements in its consolidation and reporting system, migrated their accounting system and helped LOUDETTE M. ZOILO in getting ISO certification for processes of a holding company. Ms. Maliksi-Zoilo joined MPIC in September 2009. She She also worked with SGV and Co. where she gained her currently heads MPIC HR and has been instrumental in audit experience. With her diverse and extensive experience in managing and improving the MPIC organization’s People Finance, she has been involved in helping senior management related Organizational Strategies. She brings with her craft investment and funding strategies for the Company. She 18 years of Human Resources experience, gained from holds a Bachelor of Science with a degree in Accountancy and is PricewaterhouseCoopers where she was a Manager of the a Certified Public Accountant Global Human Resources Solutions team, an HR Consulting team of the firm which services a vast array of industries OSLEC G. LOPEZ including but not limited to, Utilities, Consumer, Banking, Mr. Lopez joined MPIC in June 2012. He is currently Government, NGOs and others. Her project exposure included seconded to AF Payments, Inc. (AFPI) the incorporated vehicle HR Consulting, Risk Management and Process Improvement of the First Pacific Group and Ayala Group Consortium. He projects. She was also part of the management team of is helping out AFPI with its strategies and operation as he Corporate Human Resources Group of Philamlife who oversaw performs the role of Chief Operating Officer. His responsibilities the HR function of almost 21 affiliates where she instituted include Business Development beyond the Rail Concession, improvements in policies and procedures of the group. Prior Operations for Card Issuance & Merchant Acquisition and the to joining MPIC, she was the HR Head of Jollibee Worldwide Maintenance of the Fare Collection System for the LRT1, LRT2 Services, a shared-service organization of the Jollibee Group of and MRT3 Lines. Before his secondment, he was responsible for Companies. Business Development and Project Management for the MPIC Hospital Group. Prior to this he also did Project Management MELANIE G. BENDIJO for Special Projects under the Office of the President & CEO and Ms. Bendijo has been with Metro Pacific Group since 2004 was involved in strategic planning by driving the implementation and has over 13 years of experience in the field of Treasury and and monitoring of corporate strategies. He coordinated with Fund Management. She is responsible for the Company’s overall the various Operating Companies to monitor for the CEO their Treasury Operations and Controls. She has been instrumental alignment with agreed key action plans and monitored their in various fund raising activities of the Company’s major performance versus set metrics. Mr. Lopez had 16 years of investments, including securing a foreign loan to support our banking experience before joining MPIC. Up to June 2010 he Don Muang Tollway investment. was Executive Vice President of EastWest Banking Corporation. Prior to that he spent 7 years in Security Bank Corporation and was First Vice President in charge of setting up the Fixed Income Securities Division. In 2003, he completed his Executive MBA from the Asian Institute of Management and graduated with Distinction.
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 79 Management Teams
VICTORICO V. VARGAS President and Chief Executive Officer RANDOLPH T. ESTRELLADO Chief Financial Officer
OSCAR S. REYES President and Chief Executive Officer
BETTY C. SIY-YAP Chief Financial Officer
From left to right: LAURENCE R. ROGERO President
MIKKEL M. GUTIERREZ Chief Operating Officer / Director - Corporate Development
JULIUS CAESAR S. IGLESIA Vice President for Engineering and Technology
METRO PACIFIC INVESTMENTS CORPORATION 80 ANNUAL REPORT 2014 From left to right: RAMONCITO S. FERNANDEZ President and Chief Executive Officer MPTC, TMC
RODRIGO E. FRANCO President MNTC
CHRISTOPHER C. LIZO Chief Financial Officer MPTC
Metro Pacific Hospitals Holdings, Inc.
From left to right: REYMUNDO S. COCHANGCO Chief Financial Officer
AUGUSTO P. PALISOC, JR. President and Chief Executive Officer
JOSE NOEL C. DE LA PAZ Director for Business Development
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 81 Hospital Management Teams
Makati Medical Center Davao Doctors Hospital
ROSALIE BENJAMIN ARNOLD RAYMUND NOEL PAUL MONTENEGRO ALIMURUNG OCAMPO DEL VAL VILLANUEVA CAMANGIAN President and Chief Medical Director Chief Financial President and Chief Medical Director Chief Financial Executive Officer Officer Executive Officer Officer
Riverside Medical Center Cardinal Santos Medical Center
GENESIS GOLDI JOSE MARIA SOCCORO PILAR NENUCA ZENAIDA UY ELIZABETH GOLINGAN CORUÑA VICTORIA ALMIRA Medical Director DANTES President and Chief Medical Director DE LEON President and Chief Chief Financial Executive Officer Chief Financial Executive Officer Officer Officer
Our Lady of Lourdes Hospital Asian Hospital
LEILA JOSE EMELITA LIGAN ANDRES LICAROS JUAN LUCAS GRACE ABA HERNANDEZ CHRISTOPHER Chief Financial President and Chief ROSAS Chief Financial President and Chief SANCHEZ Officer Executive Officer Medical Director Officer Executive Officer Medical Director
METRO PACIFIC INVESTMENTS CORPORATION 82 ANNUAL REPORT 2014 De Los Santos Medical Center
RAUL NICO DE LOS AUGUSTO PAGDANGANAN SANTOS CARASIG President and Chief Medical Director Chief Financial Executive Officer Officer
Central Luzon Doctors Hospital
FERDINAND GODOFREDO ORNIDA CALMA FRANCIS MA. DUNGCA, III Chief Financial DL. CID Medical Director Officer President and Chief Executive Officer
MegaClinic
LYLE A. MORRELL MARITESS BO-OT MARILEN President General Manager GONZALES Finance Manager
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 83 Corporate Governance
Corporate Governance at MPIC is defined as the framework we FOR SHAREHOLDERS use to ensure the following: We keep a running two-way dialogue with shareholders. We keep minority shareholders abreast of developments and any Internal Standards changes to strategy. From the over 291 meetings we have had 1. Long-term strategy is for the benefit of all stakeholders – with them in 2014, we aggregate their concerns and bring those with shareholders at the forefront up to Senior Management and our Board for review. Although 2. Align the interests of management with shareholders we do not run our company via focus group discussions, these 3. Sufficient Board oversight of management’s tactical concerns are taken into consideration when we implement implementation our strategy. In the process, management is given aggressive targets and is required to provide constant updates in order External Evaluation to measure progress and quickly address any concerns. They 1. Clearly communicate strategy and business drivers to are evaluated against those targets and compensation is equity analysts and shareholders driven by a mixture of core income progression and share price 2. Join organizations to benchmark versus best practices performance. and peers FOR MANAGEMENT Our commitment to Corporate Governance is borne out of Having clear moral guidelines, aggressive targets and a our belief in its importance to our success. We invest in and transparent culture make for a fertile ground to nurture and manage companies that provide basic services and are, to one sustain talent. Cream rises to the top and self-policing becomes extent or another, regulated by Government. Because of this, we the norm as everyone is incentivized to push the company and our investee companies operate under intense government forward and keep stakeholders happy. and public scrutiny. In addition, our situation is different to most We have continuously done several initiatives to improve access companies listed in developed markets. We have a majority to information and strengthen processes for our shareholders. shareholder who is well represented on our Board of Directors To improve access to information, we have consistently updated and we therefore put a higher priority on minority shareholder our website. Statistics on financial and operating information is rights than principal-agent issues between equity holders and now more easily viewable for each of our investee companies management. and we have included the ability to download historical information. Our Board has always reviewed the Risk profile of As a result, we have focused on putting together a framework the Company as well as its portfolio investments. that emphasizes transparency, accountability and integrity. The Company confirms its full-compliance with the code of BOARD OF DIRECTORS corporate governance as mandated by the Securities and Our Board sets strategy, oversees implementation by Exchange Commissions, the Philippine Stock Exchange and management and ensures the Company implements a robust other applicable government regulatory agencies. governance framework. It is made up of fifteen members, four of whom are independent directors. They represent a wide FOR THE GOVERNMENT AND THE PUBLIC spectrum of skills at the highest level (descriptions of each All our dealings with Government are in the public domain Board member are included in pages 66 to 71 of this report) and we provide consumers with enough information for them and include leaders of each of our business lines to ensure the to determine our performance versus service standards. Our Board is in tune with developments in our portfolio. companies stand behind their products and take pro-active steps to rectify any service issues. In addition, we are invested in the Country just as much as our companies and we are always pushing ourselves to take positions that benefit everyone and not just our bottom line.
METRO PACIFIC INVESTMENTS CORPORATION 84 ANNUAL REPORT 2014 BOARD ATTENDANCE The board of directors meetings are scheduled at the beginning of the year taking into consideration the scheduled meetings of the subsidiaries and other operating companies in order to ensure that conflicts in meeting schedules will be avoided. The dissemination of the scheduled board of directors meetings are handled by the office of the Corporate Secretary as assisted by the PR and Corporate Communications Department of the Company.
Aside from the regular and special board meetings, the independent and non-executive directors of the Company meet separately at least once every year without any executives present.
Director Special Regular Organizational Total
Director (5) (4) (1) (10)
Manuel V. Pangilinan 4 4 0 8
Jose Ma. K. Lim 5 4 1 10
David J. Nicol 5 4 1 10
Edward A. Tortorici 3 4 0 7
Augusto P. Palisoc, Jr. 4 4 1 9
Ramoncito S. Fernandez 5 1 1 7
Victorico P. Vargas 5 4 1 10
Robert C. Nicholson 3 3 0 6
Antonio A. Picazo 5 3 1 9
Ray C. Espinosa 4 4 1 9
Amado R. Santiago III 4 4 1 9
Edwardo S. Go 4 4 0 8
Artemio V. Panganiban 5 4 1 10
Lydia B. Echauz 5 4 1 10
Washington Z. Sycip 5 3 1 9
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 85 Corporate Governance
Training and Continuing Education Programme
Name of Date Program Name of Director/Officer of Training Training Institution Manuel V. Pangilinan 12/04/2014 Corporate Governance: What to Expect from SEC Chairperson Teresita J. Herbosa and Mr. the SEC; Corporate Governance Trends and Graham Winter, Makati Shangri-la, Makati City Practices in Advanced Economies - 10/15/2014 Synopsis on Legal and Regulatory issues: Graham Winter Revised Listing Rules on connected transactions. 04/01/2014 Briefing on Corporate Governance Mr. Garth W. Bray Partner, Sullivan & Cromwell Requirements Under U.S. Laws and LLP Regulations and Foreign Corrupt Practices Act Of 1977 12/02/2013 Ensuring Effective Board Oversight of Ethics Mr. Winthrop Swenson and Compliance: Emerging Trends and Lessons Learned 11/19/2012 First Pacific Companies: Navigating the New Thomas Donaldson World of Business The Wharton School 08/29/2012 Corporate Governance Practices for Listed Ms Cecelia Ng Company’s Directors Under The New Listing Rules Jose Ma. K. Lim 12/04/2014 Corporate Governance: What to Expect from SEC Chairperson Teresita J. Herbosa and Mr. the SEC; Corporate Governance Trends and Graham Winter, Makati Shangri-la, Makati City Practices in Advanced Economies - 11/19/2012 First Pacific Companies: Navigating the New Thomas Donaldson World of Business The Wharton School David J. Nicol 12/04/2014 Corporate Governance: What to Expect from SEC Chairperson Teresita J. Herbosa and Mr. the SEC; Corporate Governance Trends and Graham Winter, Makati Shangri-la, Makati City Practices in Advanced Economies - 08/15/2012 Corporate Governance Asia’s First Philippine Aldrin Monsod International CG Forum: Marching Towards Corporate Governance Asia Economic Sustainability New Initiative Media Limited Rm 2301, 23th Floor, World Wide House 19 Des Voeux Road, Central, Hong Kong Edward S. Go 12/04/2014 Corporate Governance: What to Expect from SEC Chairperson Teresita J. Herbosa and Mr. the SEC; Corporate Governance Trends and Graham Winter, Makati Shangri-la, Makati City Practices in Advanced Economies - 11/19/2012 First Pacific Companies: Navigating the New Thomas Donaldson World of Business The Wharton School
METRO PACIFIC INVESTMENTS CORPORATION 86 ANNUAL REPORT 2014 Name of Date Program Name of Director/Officer of Training Training Institution Augusto P. Palisoc, Jr. 12/04/2014 Corporate Governance: What to Expect from SEC Chairperson Teresita J. Herbosa and Mr. the SEC; Corporate Governance Trends and Graham Winter, Makati Shangri-la, Makati City Practices in Advanced Economies - 11/19/2012 First Pacific Companies: Navigating the New Thomas Donaldson World of Business The Wharton School 8/17/2012 MVP “Back to School Lecture” Series Ateneo de Manila University 8/8-9/2012 Competitive Intelligence & Business Wargaming Kamia Room, G/F, EDSA, Shangri-La 5/21/2012 Innovation Forum: The First 90 Days Scott Anthony First Pacific Leadership Academy Antipolo City, Philippines 04/18-19/2012 Leading the Self First Pacific Leadership Academy First Pacific Leadership Academy Antipolo City, Philippines 03/15/2012 Executive Talks: On Higher Ground Archbishop Luis Antonio Tagle
First Pacific Leadership Academy Antipolo City, Philippines 02/02-03/2012 “Future Proofing our Business” Mr. Karl Ronn and Mr. Bob Johansen, First Pacific Leadership Academy Facilitators thru the invitation of First Pacific Antipolo City, Philippines Leadership Academy 01/12/2012 UBS Global Outlook 2012 Rigodon Ballroom, The Peninsula Manila Antonio A. Picazo 12/04/2014 Corporate Governance: What to Expect from SEC Chairperson Teresita J. Herbosa and Mr. the SEC; Corporate Governance Trends and Graham Winter, Makati Shangri-la, Makati City Practices in Advanced Economies - 11/19/2012 First Pacific Companies: Navigating the New Thomas Donaldson World of Business The Wharton School Amado R. Santiago III 2012 Corporate Governance Course Douglas Henck Vice Chairman of the Asian Corporate Governance Association
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 87 Corporate Governance
Name of Date Program Name of Director/Officer of Training Training Institution Artemio V. Panganiban 12/04/2014 Corporate Governance: What to Expect from SEC Chairperson Teresita J. Herbosa and Mr. the SEC; Corporate Governance Trends and Graham Winter, Makati Shangri-la, Makati City Practices in Advanced Economies - 04/01/2014 Briefing on Corporate Governance Mr. Garth W. Bray Partner, Sullivan & Cromwell Requirements Under U.S. Laws and LLP Regulations and Foreign Corrupt Practices Act Of 1977 03/31/2014 ASEAN Corporate Governance Scorecard Mr. Ricardo Nicanor N. Jacinto - President & Orientation CEO, Institute of Corporate Directors 11/19/2012 First Pacific Companies: Navigating the New Thomas Donaldson World of Business The Wharton School 08/15/2012 Corporate Governance Asia’s First Philippine Aldrin Monsod International CG Forum: Marching Towards Corporate Governance Asia Economic Sustainability New Initiative Media Limited Marriot Hotel, Resorts World Manila, Rm 2301, 23th Floor, World Wide House, 19 Philippines Des Voeux Road, Central, Hong Kong Ramoncito S. Fernandez 12/04/2014 Corporate Governance: What to Expect from SEC Chairperson Teresita J. Herbosa and Mr. the SEC; Corporate Governance Trends and Graham Winter, Makati Shangri-la, Makati City Practices in Advanced Economies - 05/15-17/ 2011 Interoperability and All Electronic Toll IBTTA Collection Workshop Dallas, Texas, USA 03/1/2011 Orientation Course on Corporate Governance The Institute of Corporate Directors Makati City 3/1/2011, Professional Directors Program The Institute of Corporate Directors 3/8/2011, Makati City 3/17/2011, 9/5/2011, 9/6/2011 11/23-24/2011 Evaluating Enterprise Risk Management The Institute of Internal Auditors – Philippines At Eastwood Richmonde Hotel, Bagumbayan, Centre for Professional Development Q.C. 11/19/2012 First Pacific Companies: Navigating the New Thomas Donaldson World of Business The Wharton School 02/15/2012 Seminar-Workshop on New Media Strategies Creative Point International, Inc. for Issues Management Discovery Suites, Pasig City 11/8/2012 PPP and Infrastructure Forum British Embassy Manila and The UK Trade and New World Hotel, Makati City Investment (UKTI) 11/19/2012 First Pacific Companies: Navigating the New First Pacific Leadership Academy World of Business Topic: Corporate Government Enhancement Guest Speaker: Thomas Donaldson, The Wharton School
METRO PACIFIC INVESTMENTS CORPORATION 88 ANNUAL REPORT 2014 Name of Date Program Name of Director/Officer of Training Training Institution Ramoncito S. Fernandez 03/4-9/2013 Advanced Management Program University of Asia and the Pacific Module 2: Business Executive as Global Entrepreneur In Jakarta, Indonesia 04/22-27/2013 Advanced Management Program University of Asia and the Pacific Module 3: Business Executive as Value Creator In Cebu City 06/19/2013 2013 Mid-Year Business Economics Briefing University of Asia and the Pacific (Gearing UP for the Asean Economic Community) 07/06/2013 MVP Lecture Series (last session) MVP/Ateneo Chiang-Tan Room,School of Management 111, Ateneo 08/22/2013 AIM CEO Forum | The Creation of Corporate AIM Culture: “Building Values as the Basis of Corporate Culture” at Meralco Caseroom, Ground floor, AIM Building, Makati 09/10/2013 11th MAP International CEO Forum Conference: MAP Sept. 10, 2013 from8am to 5:30pm Rizal Ballroom, Makati Shangrila Hotel, Makati City Conference Theme: Business Beyond Borders: Global Perspectives, Domestic Dynamics 09/19-26/2013 81st IBTTA Conference in Vancouver, Canada IBTTA 11/07/2013 FPLA’s Series: The Business of Innovation: First Pacific Leadership Academy Transcending Business Through Innovation SMX Convention Center, SM Aura, The Fort 11/27/2013 2013 Year-end Economics Briefing entitled University of Asia and the Pacific Infrastructure Spending: Sustaining Philippine Growth: Nov. 27, 2013 from 1pm-5pm at Li Seng Giap Auditorium, UA&P 12/02/2013 Joint Corporate Governance Symposium of First Pacific Leadership Academy MVP Companies: Dec. 2 , 10am to 1:30pm Makati Shangrila Hotel 11/22/2012 PPP: On the Road to Investment Grade Economic Journalists Association of the Manila Peninsula Hotel, Makati City Philippines (EJAP) 01/14-19/2013 Advanced Management Program University of Asia and the Pacific Module 1 : Business Executive as Corporate Citizen Venue: Oakwood Hotel, Ortigas
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 89 Corporate Governance
Name of Date Program Name of Director/Officer of Training Training Institution Lydia B. Echauz 11/07/2013 FPLA’s Series: The Business of Innovation: First Pacific Leadership Academy Transcending Business Through Innovation SMX Convention Center, SM Aura, The Fort 11/27/2013 2013 Year-end Economics Briefing entitled University of Asia and the Pacific Infrastructure Spending: Sustaining Philippine Growth: Nov. 27, 2013 from 1pm-5pm at Li Seng Giap Auditorium, UA&P 12/02/2013 Joint Corporate Governance Symposium of First Pacific Leadership Academy MVP Companies: Dec. 2 , 10am to 1:30pm Makati Shangrila Hotel 11/28-29/2013 Corporate Governance Seminar The Institute of Corporate Directors 11/19/2012 First Pacific Companies: Navigating the New Thomas Donaldson World of Business The Wharton School Edward A Tortorici 12/04/2014 Corporate Governance: What to Expect from SEC Chairperson Teresita J. Herbosa and Mr. the SEC; Corporate Governance Trends and Graham Winter, Makati Shangri-la, Makati City Practices in Advanced Economies - 10/15/2014 Synopsis on Legal and Regulatory issues: Graham Winter Revised Listing Rules on connected transactions. 12/5/2012 “Synopsis on Legal and Regulatory, First Pacific Company Limited, Hong Kong.” 2/2-3/2012 “Future Proofing our Business” Mr. Karl Ronn and Mr. Bob Johansen, First Pacific Leadership Academy Facilitators thru the invitation of First Pacific Antipolo City, Philippines Leadership Academy 8/29/2012 “Corporate governance practices for listed Cecelia Ng, Director of Ernst & Young company’s directors under the new Listing Rules” First Pacific Company Limited, Hong Kong 8/29/2012 “Effective risk management and internal Tim Clough, Keith Stephenson and Wong controls” Hung Han, Risk & Controls Solutions, Price First Pacific Company Limited, Hong Kong Waterhouse Coopers Ray C. Espinosa 12/04/2014 Corporate Governance: What to Expect from SEC Chairperson Teresita J. Herbosa and Mr. the SEC; Corporate Governance Trends and Graham Winter, Makati Shangri-la, Makati City Practices in Advanced Economies - 04/01/2014 Briefing on Corporate Governance Mr. Garth W. Bray Partner, Sullivan & Cromwell Requirements Under U.S. Laws and LLP Regulations and Foreign Corrupt Practices Act Of 1977 03/31/2014 ASEAN Corporate Governance Scorecard Mr. Ricardo Nicanor N. Jacinto - President & Orientation CEO, Institute of Corporate Directors 11/20/2012 First Pacific Companies: Navigating the New Thomas Donaldson World of Business The Wharton School
METRO PACIFIC INVESTMENTS CORPORATION 90 ANNUAL REPORT 2014 Name of Date Program Name of Director/Officer of Training Training Institution Robert C. Nicholson 12/4/2014 Corporate Governance: What to Expect from SEC Chairperson Teresita J. Herbosa and Mr. the SEC; Corporate Governance Trends and Graham Winter, Makati Shangri-la, Makati City Practices in Advanced Economies - 02/2-3/2012 “Future Proofing our Business” Mr. Karl Ronn and Mr. Bob Johansen, First Pacific Leadership Academy Facilitators thru the invitation of First Pacific Antipolo City, Philippines Leadership Academy 08/29/2012 “Corporate governance practices for listed Cecelia Ng, Director of Ernst & Young company’s directors under the new Listing Rules” First Pacific Company Limited, Hong Kong 08/29/2012 “Effective risk management and internal Tim Clough, Keith Stephenson and Wong controls” Hung Han, Risk & Controls Solutions, Price First Pacific Company Limited, Hong Kong Waterhouse Coopers 08/30/2012 Directors’ Training Lifestyle Properties Development Limited Lifestyle Properties Development Limited Victorico P. Vargas 12/4/2014 Corporate Governance: What to Expect from SEC Chairperson Teresita J. Herbosa and Mr. the SEC; Corporate Governance Trends and Graham Winter, Makati Shangri-la, Makati City Practices in Advanced Economies - 11/07/2013 Executive Series: The Business Innovation: First Pacific Leadership Academy Transcending Business Through Innovation SMX Convention Center, SM Aura Premier Bonifacio Global City 12/02/213 Corporate Governance Enhancement Session First Pacific Leadership Academy Makati Shangri-La, Makati City 02/02-03/2012 “Future Proofing our Business” Mr. Karl Ronn and Mr. Bob Johansen, First Pacific Leadership Academy Facilitators thru the invitation of First Pacific Antipolo City, Philippines Leadership Academy 03/15/2012 Executive Talks: On Higher Ground Archbishop Luis Antonio Tagle
First Pacific Leadership Academy Antipolo City, Philippines 04/18-19/2012 Leading the Self First Pacific Leadership Academy First Pacific Leadership Academy Antipolo City, Philippines 05/21/2012 Innovation Forum: The First 90 Days Scott Anthony First Pacific Leadership Academy Antipolo City, Philippines 11/19/2012 First Pacific Companies: Navigating the New Thomas Donaldson World of Business The Wharton School Washington Z. SyCip 12/04/2014 Corporate Governance: What to Expect from SEC Chairperson Teresita J. Herbosa and Mr. the SEC; Corporate Governance Trends and Graham Winter, Makati Shangri-la, Makati City Practices in Advanced Economies - 12/02/2013 Executive Talks: Corporate Governance Manila AB, Makati Shangri-la Hotel Enhancement Session 11/19/2012 First Pacific Companies: Navigating the New Thomas Donaldson World of Business The Wharton School
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 91 Corporate Governance
Several committees have been set-up to help the Board It is important to note that during the Company’s recent oversee and evaluate the performance of the Company and calendar years or any subsequent interim periods, there was management. Each committee is chaired by an Independent no instance when the Company’s public accountants have Director to ensure impartial execution of each committee’s resigned or have indicated that they decline to stand for re- function. election or have been dismissed or where the Company had any disagreement with its public accountants on financial Corporate Governance Committee – ensures overall disclosure issues. governance framework is robust and compares favorably with best in class practices. An integral part of that is the annual The ARMC has outsourced its Internal Audit function to review of the Company’s Manual on Corporate Governance and Punongbayan and Araullo, who will report directly to the sponsorship of any improvements for the Board of Directors’ Committee on the soundness and adequacy of the Company’s approval. internal control processes and procedures.
Members Attendance As part of their oversight of Risk Management, the Committee recently appointed Santhea Delos Santos as Chief Risk Officer Artemio V. Panganiban - Chairman 2/2 (CRO). For Risk Management, the goal is to identify risk exposures and the steps that need to be undertaken to monitor Amado R. Santiago III - Member 2/2 and mitigate them. The CRO is now conducting a company- Edward S. Go - Member 2/2 wide risk assessment for evaluation by the ARMC in 2014.
Audit and Risk Management Committee (ARMC) – has Members Attendance oversight of financial reporting, internal controls and Edward S. Go - Chairman 5/5 risk management of the Company. It is responsible for recommending the external auditor and ensuring that non audit Lydia B. Echauz - Member 5/5 work does not compromise their independence. The ARMC also approves the Internal Audit function and its scope of work. Amado R. Santiago III - Member 5/5
The ARMC reviews and pre-approves all audit services of our Compensation Committee – directly oversees compensation independent and external auditor, Sycip Gorres Velayo & Co. and bonus of senior executives and overall compensation (SGV) before these services are performed. In connection with framework for all employees. They ensure bonus targets are this, the Committee approved the audit and related fees of set aggressively and management is motivated for the long P24.0 million for 2014 and P23.1 million in 2013. term.
The audit fees include the year-end audit and quarterly review Members Attendance of the Company’s financial statements, and other services that are normally provided by the independent auditor in connection Lydia B. Echauz - Chairman 1/1 with statutory and regulatory filings or engagements. This Edward S. Go - Member 1/1 category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of Manuel V. Pangilinan - Member 1/1 interim financial statements.
METRO PACIFIC INVESTMENTS CORPORATION 92 ANNUAL REPORT 2014 Nomination Committee – responsible for vetting and Recent accolades received are: recommending members for nomination to the Board Finance Asia of Directors, including membership in the various Board Best Managed Companies in the Philippines – 10th Place Committees. The Nomination Committee has the authority Best Corporate Governance – 6th Place to utilize professional search firms or other external sources Best Investor Relations – 2nd Place of candidates when searching for candidates to the board Best Corporate Social Responsibility – 9th Place of directors pursuant to its Charter which provides that the Nomination Committee has the authority to avail of resources IR Magazine Awards and authorities appropriate to discharge its functions, duties Grand Prix for Best Investor Relations (Small/Mid Cap) for and responsibilities including the authority to obtain advice Southeast Asia – 1st Place from external consultants and functional specialists within the Best IR by a Philippine Company – 1st Place Corporation. Institutional Investor Most Honored Company in the Philippines – 2nd Place Members Attendance Asia’s Best Investor Relations (Industrials) – 3rd Place (sell side) Edward S. Go - Chairman 1/1 Asia’s Best IR Professional (Industrials) – 3rd Place (sell side)
Lydia B. Echauz - Member 1/1 Corporate Governance Asia Robert C. Nicholson - Member 1/1 Asian Corporate Director of the Year to Jose Ma. K. Lim Icon for Corporate Governance Award Jose Ma. K. Lim - Non Voting Member 1/1
These citations are an indication that we are following the right As we implement our governance framework, we continuously path. Rest assured that we are aiming for better performance test against best practices and peers by joining organizations in the years ahead. focused on Corporate Governance and submitting to outside evaluation against our peers and recognized standards. To date we have joined, through our Corporate Governance Officer, the Institute of Corporate Directors (ICD) and the Ethics and Compliance Officers Association (ECOA). These institutions regularly meet to discuss current best practices and conduct seminars on developments in Corporate Governance. In addition, our employees have attended various seminars on governance throughout the year in order to expand their knowledge of past misdeeds and potential pitfalls in order to better prepare for any eventuality.
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 93 Risk Management
As an investment and management company, Metro Pacific opportunity, they will participate in the risks and rewards of the Investments Corporation (MPIC) undertakes risk management business alongside MPIC. at two distinct levels: 1. management of the financial stability of the holding company Financing for new investments is through a combination of itself including oversight of its investment activities and; debt and/or equity by reference to the underlying strength of 2. within the operating company investments. the cashflow of the target business and the overall financing position of MPIC itself.
FINANCIAL STABILITY OF THE HOLDING COMPANY MPIC’s geographic focus is still predominantly the Philippines RISK MANAGEMENT WITHIN THE OPERATING COMPANIES within which its management team has extensive experience. MPIC has recently bagun expanding its operations in Southeast Operational Risks Asia through its equity investments in Don Muang Tollways in Each of the operating companies has a full management team Thailand and in CII Bridges and Roads Investments in Vietnam. which is responsible for having their own plan to manage risk which is reviewed annually by the MPIC Audit and Risk
Prior to making a new investment, any business to be acquired Management Committee, together with MPIC’s Chief Risk is subject to an extensive due diligence including financial, Officer, and each of the respective operating companies’ board operational, regulatory and risk management as well as dispute of directors. resolution mechanisms. Risks to investment returns are then calibrated and specific measures to manage these risks are Political and Regulatory determined. The Company is highly selective in the investment The majority of MPIC’s invested capital is deployed into opportunities it examines. Due diligence is conducted on a businesses which are directly regulated by arms of the state: phased basis to minimize costs of evaluating opportunities electricity distribution; water supply and distribution along with that may ultimately not be pursued. sewage treatment; and tollroads. Each of these businesses has concession or franchise agreements which involve a
MPIC does not guarantee the borrowings of its investee operating degree of operating performance obligation in order to retain companies and there are no cross default provisions from our rights and earn our expected returns. In some cases, one investee operating company to another. Financial stability these agreements provide for retrospective assessment of the of the holding company, including its dividend commitment extent of our overall operational and financial performance to shareholders, is managed by reference to the ability of the sometimes over a period of years. investee companies to remit dividends to MPIC to cover operating costs and service borrowings. We avoid currency and investment Risks arising from these types of businesses include the cycle mismatches by borrowing only in Pesos using primarily long potential for differences with regulators involving interpretation term instruments with fixed rates. The Company sets the level of the relevant agreements – either during the period in question of debt on its own balance sheet so as to withstand variability of or in retrospect. To manage these risks, the investee companies dividend receipts from its operating companies associated with have established dedicated regulatory management groups with regulatory and other risks described below. experienced personnel. Their duty is to manage the relationship with regulators, keep management up-to-date on the status of
MPIC’s investments involve - to varying degrees - a partnership the relationship and ensure companies are well prepared for any approach with MPIC taking a controlling position and key forthcoming regulatory changes or challenges. operating partners providing operational and technological input and thereby mitigating risks associated with investing Competition and Market in new business areas. These partners are equity partners There is a strong competition in bidding for the various Public - and having co-invested with the Company in a particular Private Partnership (PPP) projects offered by the Philippine
METRO PACIFIC INVESTMENTS CORPORATION 94 ANNUAL REPORT 2014 Government which in recent years has, consequently, driven efficiently and effectively in upgraded facilities and with better down forecast equity returns. MPIC manages the risks equipment. associated with this by adhering to the holding company’s investment disciplines outlined above. The primary risk is that investment runs ahead of demand and patient ability or willingness to pay. We mitigate this Excluding PPP, competitive and market-driven demand risks are risk by ensuring we know our target market and scale most pronounced in Meralco, MPTC and the Healthcare group. our improvements to their ability to pay. The pace of medical innovation is accelerating. This requires increased MERALCO carries a degree of market risk and its returns in management of the risks that costly equipment may become the short term may be influenced by consumers who elect to out of date before its cost is fully recovered and traditional self-generate and disconnect from the distribution grid. We are healthcare delivery models may be disrupted. mitigating that risk by improving efficiencies to the point that makes it largely uneconomic to self-generate. The water company has some supply side risk in that: (i) it secures almost all of its supply from a single source – the With the move to Open Access from June 2013, Meralco has Angat dam; and (ii) this water source is shared by another taken on new risks associated with buying and selling power water concessionaire, a hydroelectric plant, and the needs on its own account instead of on a pass through basis. Meralco of farmers for irrigation. A water usage protocol is in place has put in place an experienced management team to lead this to ensure all users receive water as expected within the new business. constraints of available supply. Following significant water supply disruptions in the past arising indirectly from typhoons, Meralco is now also invested in power generation with the business has experienced periods of lower water supply attendant demand volume and price risks and fuel source price than allowed for in its concession. We have worked to and supply risks. The primary mitigants are contracting to moderate our reliance on Angat by developing the Putatan match demand and supply side volumes where possible and Water Treatment Plant. However, our regulator does not now employing highly experienced power market professionals to wish us to invest further in alternative water sources and this manage any open positions by trading in the market. means the logical way to mitigate our supply side risk is now largely prohibited to us. MPTC sets tariffs on new road projects based on traffic projections agreed with the regulator. Rising fuel prices, Financial alternative means of transport and existing or prospective The financial risks of MPIC’s investee operating companies are alternative routes are all factors that can affect the number of primarily: interest rate risk, foreign currency risk, liquidity risk, vehicles that use our roads. credit risk and equity price risk. The Board of Directors of each company reviews and approves policies for managing each We alleviate this risk by choosing our projects carefully. of these risks as discussed in detail in Note 35 of MPIC’s 31 Existing high traffic density, difficulty in securing competing December 2014 Consolidated Audited Financial Statements. routes, a high potential for growth given demographic changes and conservative growth estimates, even with the prior factors included in the assessment, are the important variables we consider when committing to traffic projections with the regulator.
For the Hospitals group, investment is taking place to enable more qualified personnel to better serve patients more
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 95 Audit and Risk Management Committee Report
The Board of Directors Metro Pacific Investments Corporation
The Audit and Risk Management Committee (ARMC) is composed of three directors, two (2) of whom are independent, as determined by the Board of Directors, all of whom possess the professional qualifications as required by the applicable corporate governance laws and rules.
For the year 2014, we confirm that the ARMC had four regular meetings and one special joint meeting with the Corporate Governance Committee.
Further, we confirm the following:
• We reviewed and approved all audit and review services provided by SGV & Co. to MPIC, and the related fees for such services; • We reviewed and discussed the unaudited quarterly financial statements of the Group as of and for the three quarters ended March 31, 2014, June 30, 2014 and September 30, 2014, as reviewed by SGV & Co., and the audited financial statements of MPIC Group as of and for the year ended December 31, 2014 with the MPIC Group’s management, which has the primary responsibility for the financial statements, and with SGV & Co., the MPIC Group’s independent auditor, who is responsible for expressing an opinion on the conformity of the MPIC Group’s audited financial statements with Philippine Financial Reporting Standards (PFRS); • We discussed with SGV & Co. the matters required to be discussed by the prevailing applicable Auditing Standard, and we have received written disclosures and the letter from SGV & Co. as required by the prevailing applicable Independence Standards (Statement as to Independence) and discussed with SGV & Co. its independence from the MPIC Group and MPIC Group’s management; • Based on the reviews and discussions referred to above, in reliance on the MPIC Group’s management, and SGV & Co., and subject to the limitations of our role, we recommended to the Board of Directors and the Board has approved, the inclusion of the MPIC Group’s audited financial statements as of and for the year ended December 31, 2014 in the MPIC Group’s Annual Report to the Stockholders and to the Philippine Securities and Exchange Commission (SEC) on Form 17-A; • Based on a review of SGV & Co.’s performance and qualifications, including consideration of management’s recommendation we recommended the appointment of SGV & Co. as External Auditor of MPIC, for approval of the Board of Directors and then the shareholders of MPIC; • During the year, we also reviewed and assessed MPIC Group’s processes of monitoring compliance with laws and regulations, as well as business practices and ethical standards. • We obtained assurance on the adequacy and effectiveness of the Company’s internal control system and evaluated its effectiveness based on our review of internal audit reports and discussion with the Company’s outsourced Internal Auditor and with MPIC Group’s management. • For the year 2014, we have appointed MPIC’s Chief Risk Officer. We have reviewed and recommended to the Board the Enterprise Risk Management (ERM) Policy and key risks profile of MPIC. Throughout 2014, we have also been abreast of management’s evaluation of the key business risks of the Group and corresponding mitigation strategies.
EDWARD S. GO LYDIA B. ECHAUZ AMADO R. SANTIAGO III Chairman Member Member
METRO PACIFIC INVESTMENTS CORPORATION 96 ANNUAL REPORT 2014 Statement of Management’s Responsibility for the Consolidated Financial Statements
The Management of Metro Pacific Investments Corporation and Subsidiaries (the Company) is responsible for the preparation and fair presentation of the consolidated financial statements as at December 31, 2014 and 2013 and for the three years in the period ended December 31, 2014, including the additional components attached therein, in accordance with Philippine Financial Reporting Standards. This responsibility includes designing and implementing internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies, and making accounting estimates that are reasonable in the circumstances.
The Board of Directors reviews and approves the consolidated financial statements and submits the same to the stockholders.
SyCip Gorres Velayo & Co., the independent auditors, appointed by the stockholders has examined the consolidated financial statements of the Company in accordance with Philippine Standards on Auditing, and in its report to the stockholders, has expressed its opinion on the fairness of presentation upon completion of such examination.
Signed under oath by the following:
MANUEL V. PANGILINAN Chairman of the Board JOSE MA. K. LIM DAVID J. NICOL President and CEO Chief Financial Officer
Signed this 26th day of February 2015
SUBSCRIBED AND SWORN to before me this day of March 2015 affiant(s) exhibiting to me his/their Residence Certificates, as follows:
NAMES PASSPORT NO. DATE OF ISSUE PLACE OF ISSUE Manuel V. Pangilinan EC1452578 June 20, 2014 Manila Jose Ma. K. Lim EB5936209 July 16, 2012 Manila David J. Nicol E4115548 October 22, 2013 Australia
Doc. No. 411 Page No. 96 Book No. 2 Series of 2015
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 97 Financial Statements
Contents
99 Management Discussion and Analysis of Financial Condition and Results of Operation 129 Independent Auditors’ Report 130 Consolidated Statements of Financial Position 132 Consolidated Statements of Comprehensive Income 133 Consolidated Statements of Changes in Equity 135 Consolidated Statements of Cash Flows
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METRO PACIFIC INVESTMENTS CORPORATION 128 ANNUAL REPORT 2014 Independent Auditors’ Report
Metro Pacific Investments Corporation The Stockholders and the Board of Directors We have audited the accompanying consolidated financial statements of Metro Pacific Investments Corporation and Subsidiaries, which comprise the consolidated statements of financial position as at December 31, 2014 and 2013, and the consolidated statements of comprehensive income, statements of changes in equity and statements of cash flows for each of the three years in the period ended December 31, 2014, and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Philippine Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Metro Pacific Investments Corporation and Subsidiaries as at December 31, 2014 and 2013, and their financial performance and their cash flows for each of the three years in the period ended December 31, 2014 in accordance with Philippine Financial Reporting Standards.
SYCIP GORRES VELAYO & CO.
Julie Christine O. Mateo Partner CPA Certificate No. 93542 SEC Accreditation No. 0780-AR-1 (Group A), February 2, 2012, valid until March 31, 2015 Tax Identification No. 198-819-116 BIR Accreditation No. 08-001998-68-2012, April 11, 2012, valid until April 10, 2015 PTR No. 4751308, January 5, 2015, Makati City
February 26, 2015
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 129 Metro Pacific Investments Corporation and Subsidiaries Consolidated Statements of Financial Position (Amounts in Millions)
December 31 2014 2013
ASSETS
Current Assets Cash and cash equivalents and short-term deposits (Notes 7, 35 and 36) P=25,758 =15,263P Restricted cash (Notes 7, 35 and 36) 2,367 1,827 Receivables (Notes 8, 35 and 36) 3,676 3,749 Due from related parties (Notes 21, 35 and 36) 140 229 Other current assets (Notes 9, 35 and 36) 2,458 3,821 34,399 24,889 Assets held for sale (Notes 8, 10 and 33) 1,370 – Total Current Assets 35,769 24,889
Noncurrent Assets Restricted cash (Notes 7, 33, 35 and 36) 889 – Receivables (Notes 8, 35 and 36) 263 593 Due from related parties (Notes 21, 35 and 36) – 65 Available-for-sale (AFS) financial assets (Notes 10, 35 and 36) 2,162 2,770 Investments and advances (Notes 11, 35 and 36) 65,175 48,854 Goodwill (Note 12) 18,308 18,308 Service concession assets (Note 13) 98,260 94,540 Property and equipment (Note 14) 7,368 6,859 Property use rights (Note 14) 608 649 Other noncurrent assets (Notes 15, 35 and 36) 5,210 3,057 Total Noncurrent Assets 198,243 175,695
P=234,012 =200,584P
LIABILITIES AND EQUITY
Current Liabilities Accounts payable and other current liabilities (Notes 16, 35 and 36) P=12,049 =13,476P Income tax payable 254 260 Due to related parties (Notes 21, 35 and 36) 7,279 93 Current portion of: Provisions (Note 17) 5,545 4,677 Service concession fees payable (Notes 18, 35 and 36) 500 603 Long-term debt (Notes 19, 35 and 36) 3,573 3,512 Total Current Liabilities 29,200 22,621 (Forward)
METRO PACIFIC INVESTMENTS CORPORATION 130 ANNUAL REPORT 2014 Metro Pacific Investments Corporation and Subsidiaries Consolidated Statements of Financial Position (Amounts in Millions)
December 31 2014 2013 Noncurrent Liabilities Noncurrent portion of: Provisions (Note 17) P=228 =312P Service concession fees payable (Notes 18, 35 and 36) 7,271 7,909 Long-term debt (Notes 19, 35 and 36) 57,494 47,536 Deferred tax liabilities (Note 29) 4,228 3,774 Other long-term liabilities (Notes 20, 35 and 36) 6,019 5,152 Total Noncurrent Liabilities 75,240 64,683 Total Liabilities 104,440 87,304
Equity (Note 22) Owners of the Parent Company: Capital stock 26,096 26,076 Additional paid-in capital 42,993 42,933 Equity reserves 6,245 2,643 Retained earnings 27,525 21,882 Other comprehensive income reserve 836 927 Total equity attributable to owners of the Parent Company 103,695 94,461 Non-controlling interest 25,877 18,819 Total Equity 129,572 113,280
P=234,012 =200,584P
See accompanying Notes to Consolidated Financial Statements.
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 131 Metro Pacific Investments Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (Amounts in Millions, Except Earnings Per Share Figures)
Years Ended December 31 2014 2013 2012 OPERATING REVENUES Water and sewerage services revenue P=18,363 =16,895P =15,883 P Toll fees 8,641 8,154 6,784 Hospital revenue 6,677 5,700 5,034 School revenue 151 128 106 33,832 30,877 27,807 COST OF SALES AND SERVICES (Note 23) (13,082) (11,845) (11,168) GROSS PROFIT 20,750 19,032 16,639 General and administrative expenses (Note 24) (6,823) (6,261) (5,384) Interest expense (Note 26) (4,301) (4,001) (3,679) Share in net earnings of equity method investees (Note 11) 3,167 2,286 1,765 Interest income (Note 26) 385 462 652 Construction revenue and other income (Note 27) 8,491 8,113 10,115 Construction costs and other expenses (Note 27) (7,887) (7,559) (9,239) INCOME BEFORE INCOME TAX 13,782 12,072 10,869 PROVISION FOR (BENEFIT FROM) INCOME TAX (Note 29) Current 1,160 1,061 1,097 Deferred 48 (468) 565 1,208 593 1,662 NET INCOME 12,574 11,479 9,207 OTHER COMPREHENSIVE INCOME (OCI) (Note 28) Net OCI to be reclassified to profit or loss in subsequent periods (24) (14) 21 Net OCI not being reclassified to profit or loss in subsequent periods (52) 398 581 (76) 384 602 TOTAL COMPREHENSIVE INCOME P=12,498 =11,863P =9,809P Net income attributable to: Owners of the Parent Company P=7,940 =7,209P =5,907P Non-controlling interest 4,634 4,270 3,300 P=12,574 =11,479P =9,207P Total comprehensive income attributable to: Owners of the Parent Company P=7,849 =7,550P =6,485P Non-controlling interest 4,649 4,313 3,324 P=12,498 =11,863P =9,809P EARNINGS PER SHARE (Note 30) Basic Earnings Per Common Share, Attributable to Owners of the Parent Company P=0.305 =0.278P =0.240P Diluted Earnings Per Common Share, Attributable to Owners of the Parent Company P=0.304 =0.277P =0.239P
See accompanying Notes to Consolidated Financial Statements.
METRO PACIFIC INVESTMENTS CORPORATION 132 ANNUAL REPORT 2014 Metro Pacific Investments Corporation and Subsidiaries Consolidated Statements of Changes in Equity For the Years Ended December 31, 2014, 2013 and 2012 (Amounts in Millions)
Year Ended December 31, 2014 Attributable to Owners of the Parent Company Additional Other Paid-in Equity Retained Comprehensive Non-controlling Capital Stock Capital Reserves Earnings Income Reserve Interest (NCI) (Note 22) (Note 22) (Note 22) (Note 22) (Note 22) Total (Note 22) Total Equity At January 1, 2014 =26,076P =42,933 P =2,643 P =21,882 P =927P =94,461 P =18,819 P =113,280 P Total comprehensive income for the period: Net income – – – 7,940 – 7,940 4,634 12,574 Other comprehensive income (Note 28) – – – – (91) (91) 15 (76) Total comprehensive income – – – 7,940 (91) 7,849 4,649 12,498 Executive Stock Option Plan (ESOP) (Note 31): Exercise of stock option 20 60 (21) – – 59 – 59 Cost of ESOP – – 64 – – 64 – 64 Gain on sale to NCI (Note 22) – – 5,967 – – 5,967 3,509 9,476 Acquisition of NCI (Note 22) – – (2,408) – – (2,408) (787) (3,195) Cash dividends declared (Note 22) – – – (2,297) – (2,297) – (2,297) Dividends declared to non-controlling stockholders (Note 6) – – – – – – (1,045) (1,045) Other changes in NCI (Note 33) – – – – – – 732 732 At December 31, 2014 =26,096P =42,993 P =6,245 P =27,525 P =836P =103,695 P =25,877 P =129,572 P
Year Ended December 31, 2013 Attributable to Owners of the Parent Company Additional Other Paid-in Equity Retained Comprehensive Non-controlling Capital Stock Capital Reserves Earnings Income Reserve Interest (NCI) (Note 22) (Note 22) (Note 22) (Note 22) (Note 22) Total (Note 22) Total Equity At January 1, 2013 =24,664P =38,097 P =707P =15,688 P =487P =79,643 P =14,747 P =94,390 P Total comprehensive income for the period: Net income – – – 7,209 – 7,209 4,270 11,479 Other comprehensive income (Note 28) – – – – 341 341 43 384 Total comprehensive income – – – 7,209 341 7,550 4,313 11,863 Executive Stock Option Plan (ESOP) (Note 31): Exercise of stock option 82 188 (46) – – 224 – 224 Cost of ESOP – – 18 – – 18 – 18 Equity raising (Note 22) 1,330 4,648 – – – 5,978 – 5,978 Gain on equity transfer and others (Note 22) – – 1,964 (100) 99 1,963 1,583 3,546 Cash dividends declared (Note 22) – – – (915) – (915) – (915) Dividends declared to non-controlling stockholders (Note 6) – – – – – – (2,107) (2,107) NCI in a business combination (Note 4) – – – – – – 283 283 At December 31, 2013 =26,076P =42,933 P =2,643 P =21,882 P =927P =94,461 P =18,819 P =113,280 P
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 133 Metro Pacific Investments Corporation and Subsidiaries Consolidated Statements of Changes in Equity For the Years Ended December 31, 2014, 2013 and 2012 (Amounts in Millions)
Year Ended December 31, 2012 Attributable to Owners of the Parent Company Additional Other Paid-in Equity Retained Comprehensive Non-controlling Capital Stock Capital Reserves Earnings Income Reserve Interest (NCI) (Note 22) (Note 22) (Note 22) (Note 22) (Note 22) Total (Note 22) Total Equity At January 1, 2012 =24,643P =38,056 P =706P =10,449 P (P=91) =73,763P =12,667 P =86,430 P Total comprehensive income for the period: Net income – – – 5,907 – 5,907 3,300 9,207 Other comprehensive income (Note 28) – – – – 578 578 24 602 Total comprehensive income – – – 5,907 578 6,485 3,324 9,809 Executive Stock Option Plan (ESOP) (Note 31): Exercise of stock option 21 41 (12) – – 50 – 50 Cost of ESOP – – 13 – – 13 – 13 Cash dividends declared (Note 22) – – – (668) – (668) – (668) Dividends declared to non-controlling stockholders (Note 6) – – – – – – (1,470) (1,470) Other changes in NCI – – – – – – 226 226 At December 31, 2012 =24,664P =38,097 P =707P =15,688 P =487P =79,643 P =14,747 P =94,390 P
See accompanying Notes to Consolidated Financial Statements.
METRO PACIFIC INVESTMENTS CORPORATION 134 ANNUAL REPORT 2014 Metro Pacific Investments Corporation and Subsidiaries Consolidated Statements of Cash Flows (Amounts in Millions)
Years Ended December 31 2014 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES Income before income tax P=13,782 =12,072P =10,869P Adjustments for: Interest expense (Note 26) 4,301 4,001 3,679 Amortization of service concession assets (Note 23) 2,958 2,818 3,073 Depreciation and amortization (Notes 23 and 24) 1,049 947 772 Share in net earnings of equity method investees (Note 11) (3,167) (2,286) (1,765) Dividend income (Note 27) (471) (405) (561) Interest income (Note 26) (385) (462) (652) Gain on sale of AFS financial asset (Note 27) (222) – – Unrealized foreign exchange loss (gain) - net (230) 159 201 Gain on bargain purchase (Notes 4 and 27) – (22) – Reversal of contingent liabilities (Note 27) – – (687) Reversal of accrued interest payable to MWSS (Note 27) – – (378) Adjustment to amortized cost due to change in expected cash flows (Note 27) – – 374 Refinancing costs and others 472 569 522 Operating income before working capital changes 18,087 17,391 15,447 Decrease (increase) in: Restricted cash (540) (467) 556 Receivables (934) 359 (598) Due from related parties 154 (83) 93 Other current assets (377) (257) 267 Increase (decrease) in: Accounts payable and other current liabilities (1,532) (1,375) 587 Provisions 784 833 477 Accrued retirement cost 106 121 27 Net cash generated from operations 15,748 16,522 16,856 Income taxes paid (1,166) (984) (990) Interest received 603 333 561 Net cash from operating activities 15,185 15,871 16,427 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of subsidiaries, net of cash acquired (Note 4) – 808 (208) Decrease (increase) in short-term deposits 633 (3,613) 9 Increase in other noncurrent assets (1,270) (311) (64) Dividends received from: Equity method investees (Note 11) 533 327 276 Beacon Electric’s preferred shares (Note 11) 405 405 561 AFS financial asset (Note 10) 66 – – Collection of or proceeds from sale/disposal of: Available-for-sale financial assets (Note 10) 1,320 1,151 – Property and equipment (Note 14) 21 20 12 Notes receivable (Notes 8) – – 954 Additions to/issuance of: Service concession assets (Note 13) (6,678) (5,780) (6,752) Investments in equity method investees (Note 11) (6,329) (1,846) (6,262) Available-for-sale financial assets (Note 10) (4,351) (4,238) (50) Deferred project cost (Note 15) (1,869) – – Property and equipment (Note 14) (1,508) (1,343) (825) Notes receivable (Notes 4 and 8) – (101) (6,797) Net cash used in investing activities (19,027) (14,521) (19,146) (Forward)
METRO PACIFIC INVESTMENTS CORPORATION ANNUAL REPORT 2014 135 Metro Pacific Investments Corporation and Subsidiaries Consolidated Statements of Cash Flows (Amounts in Millions)
Years Ended December 31 2014 2013 2012 CASH FLOWS FROM FINANCING ACTIVITIES Receipt of or proceeds from: Notes payable and long-term debt (Note 19) P=13,905 =41,254P =5,030P Sale to non-controlling stockholders (Note 22) 10,108 3,533 – Contribution from non-controlling stockholders and other movements (Note 33) 698 4 – Issuance of shares (Notes 22 and 31) 61 6,343 49 Due to related parties – – 6 Payments of/for: Interest and other financing charges (3,215) (4,871) (3,059) Notes payable and long-term debt (Note 19) (3,677) (40,573) (1,588) Service concession fees payable (Note 18) (1,184) (1,266) (1,116) Due to related parties (12) (4) (5) Acquisition of non-controlling interests (Note 4) (3,116) – (696) Transaction costs on issuance of shares – (140) – Debt issuance cost (162) (199) – Dividends paid to owners of the Parent Company (Note 22) (2,297) (915) (668) Dividends paid to non-controlling stockholders (Notes 6 and 22) (1,178) (1,985) (1,231) Net cash from (used in) financing activities 9,931 1,181 (3,278)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS 6,089 2,531 (5,997)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 11,636 9,105 15,102
CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 7) P=17,725 =11,636P =9,105P
See accompanying Notes to Consolidated Financial Statements.
METRO PACIFIC INVESTMENTS CORPORATION 136 ANNUAL REPORT 2014 Corporate Information
HEADQUARTERS: PRINCIPAL BANKERS: 10th floor, Makati General Office Building Banco de Oro Universal Bank Legazpi corner Dela Rosa Streets Metropolitan Bank and Trust Company Legazpi Village, 0721 Makati City Philippine National Bank Philippines Union Bank of the Philippines Telephone (632) 888-0888 Facsimile (632) 888-0813 LEGAL ADVISERS: Email [email protected] Picazo, Buyco, Tan, Fider & Santos Website http://www.mpic.com.ph 19th floor, Liberty Center 104 H.V. De la Costa Street SHARE LISTING INFORMATION: Legazpi Village, Makati City Metro Pacific Investments Corporation Telephone (632) 888-0999 is traded in the Philippine Stock Exchange Facsimile (632) 888-1011 under the ticker symbol “MPI” Listing date: 15 December 2006 Sycip Salazar Hernandez & Gatmaitan SSHG Law Center AMERICAN DEPOSITARY RECEIPTS: 105 Paseo de Roxas ADR Ticker: MPCIY Makati City, 1226 Metro Manila CUSIP: US59164L2007 Telephone (632) 817-9811 Ratio: 1 ADR : 200 ordinary shares Facsimile (632) 818-7562 Depositary Bank: Deutsche Bank Trust and Company Americas STOCK TRANSFER AGENT: Stock Transfer Services, Inc. AUDITORS: 34th Floor, Unit D SyCip Gorres Velayo & Co. Rufino Pacific Tower 6769 Ayala Avenue 6784 Ayala Avenue, Makati City 1226 Makati City Telephone (632) 4032410/ (632) 4032412 Philippines 10th Floor, Makati General Office Building Legazpi corner Dela Rosa Streets Legaspi Village, 0721 Makati City, Philippines
www.mpic.com.ph