NEW BEGInnINGS ANNUAL REPORT 2009 The Lopez Credo We, the Lopez Group of Companies, believe that our primary reason for being is to serve the Filipino people. Thus we shall do business and in all ways act in a manner that will result in the long-term mutual benefit of the Lopez Group and the various publics and communities that we serve. We will be responsible stewards of all our resources, ever mindful of our obligation to present and future generations of Filipinos. In our service to the Filipino people, we will be guided by the following distinct Lopez Values—a pioneering entrepreneurial spirit, business excellence, nationalism, team work, strong work ethic, integrity, social justice, and concern for employee welfare and wellness. We know from generations of experience that it is by living according to these values that a company can be built to last. Since 1928, and in the years and generations to follow, our commitment to the Lopez way of service and the distinctive Lopez values will not change. We will remain committed to serve the Filipino. ABOUT OUR COVER First Holdings experienced ‘New Beginnings’ in 2009 primary of which was the decision to reduce exposure in power distribution, NEW BEGINNINGS and substantially support power generation. Today, First Holdings is taking off from a higher plane—financially stable, organizationally strong, and strategically positioned to benefit from a world of opportunities The Group continues its advocacy for green energy and is making significant investments in clean and renewable energy initiatives, including solar power systems manufacturing. As global competition intensifies, the summit of success is ever rising; but First Holdings has kept pace and responded with even greater vigor to the ANNUAL REPORT 2009 challenges of the moment, embracing the sun and sky daily and determined to see ‘New Beginnings’ to their intended ends. 2 2009 ANNUAL REPORT FIRST PHILIPPINE HOLDINGS CORPORATION Lopez Credo IFC At A Glance 2 Financial Highlights 4 Investment Summary 5 Message of the Chairman 6 Message of the President 16 Message of the Chief Finance Officer 22 Board of Directors 30 Senior Management 34 Corporate Governance 36 Board Committees 42 Business Excellence 44 Corporate Social Responsibility 48 Operations Review Power Generation First Gen Corporation (First Gen) 50 Energy Development Corporation (EDC) 54 Power Distribution Manila Electric Company (Meralco) 56 Panay Electric Company (PECO) 60 Manufacturing First Philippine Electric Corporation (First Philec) 62 First Philippine Solar Corporation (First Philec Solar) 66 Property Rockwell Land Corporation (Rockwell Land) 68 First Philippine Industrial Park (FPIP) 73 Infrastructure and Others First Balfour, Inc. (First Balfour) 74 First Philippine Industrial Corporation (FPIC) 76 Securities Transfer Services, Inc. (STSI) 78 Asian Eye Institute (AEI) 78 Corporate Directory 80 Business Mission, Credo and Commitments and Acknowledgements IBC 1 At A Glance POWER GENERATION POWER DISTRIBUTION MANUFACTURING PROPERTY INFRASTRUCTURE AND OTHERS Business Profile First Gen is the country’s Meralco is the country’s largest vertically-integrated largest power distribution power generation company company with the largest today with a capacity of franchise area comprising 2,887 MW. 4.7 million customers. PECO is the only private electricity distributor in the island of Panay. Operating Companies • First Gen Corporation • Manila Electric Company (First Gen) (Meralco) • Energy Development • Panay Electric Company Corporation (EDC) (PECO) • First Gas Power Corporation (FGPC) • FGP Corp. • Bauang Private Power Corporation (BPPC) • First Gen Hydro Power Corporation (FGHPC) • First Gen Renewables Inc. (FGRI) 2009 Operational Highlights • First Gen’s net income • Meralco’s consolidated attributable to Parent net income attributable increased by 16% year- to Parent was 114% on-year primarily due to better than in 2008. higher contribution of • Systems loss recorded at EDC 8.61% is below 9.5% cap and lowest since 1981. 2 2009 ANNUAL REPORT FIRST PHILIPPINE HOLDINGS CORPORATION POWER GENERATION POWER DISTRIBUTION MANUFACTURING PROPERTY INFRASTRUCTURE AND OTHERS First Philec is the Rockwell Land is a premiere First Balfour is a triple holding company for all mixed use inner city A construction and manufacturing businesses of developer. FPIP is the engineering company with First Holdings. country’s leading industrial 40 years experience. park. FPIC is the country’s largest pipeline operation. • First Philippine Electric • Rockwell Land Corporation • First Balfour, Inc. (First Corporation (First Philec) (Rockwell Land) Balfour) • Philippine Electric • First Philippine Industrial • First Philippine Industrial Corporation (Philec) Park (FPIP) Corporation (FPIC) • First Electro Dynamics • Securities and Transfer Corporation (FEDCOR) Services, Inc. (STSI) • First Sumiden Circuits, Inc. • Asian Eye Institute (AEI) (FSCI) • First Philec Solar Corporation (First Philec Solar) • First Philec Manufacturing Technologies Corporation (FPMTC) • First Philippine Power Systems, Inc. (FPPS) • First Philec’s net income • Rockwell’s net income • First Balfour registered increased 71% year-on- grew by 5%. record revenues of P25 year. • FPIP received Hall billion arising from the • FPSC registered of Fame Award completion of St. Luke’s revenues of US$52 for Environment Medical Center in Taguig. • FPIC is the first company in million in its first full year Performance from the Asia to achieve gold status of operations. Philippine Economic in Investors in People. Zone Authority (PEZA). 3 Financial Highlights December 31 2009 2008 OPERATING RESULTS (In million Php)1 Revenues 58,873 60,248 Sale of electricity 48,243 53,293 Sale of merchandise 4 ,341 2,455 Share in project revenue of joint ventures 1 ,979 1,527 Equity in net earnings of associates 1 ,876 1,405 Contracts and services 1 ,390 1,302 Sale of real estate 1 ,044 266 Finance costs (6,897) (7,286) Foreign exchange loss (442) (314) Provision for income tax 2,027 2,378 Gain on sale of investment in shares of stock 8,957 - Gain on sale of a subsidiary - 2,762 Net income for the year 12,853 5,454 Net income attributable to equity holders of the parent 8,510 1,192 FINANCIAL POSITION (In million Php)2 Total assets 148,806 227,007 Investments and deposits in associates 63,308 27,394 Total debt 86,236 147,154 Total long-term debt 54,852 87,651 Total liabilities 88,920 157,860 Total equity attributable to equity holders of the parent 38,470 27,851 Total equity attributable to equity holders of the parent - adjusted3 53,642 45,328 Total equity 59,886 69,147 Total equity - adjusted3 75,058 86,624 FINANCIAL RATIOS Return on equity4 17.20% 2.77% Dividend payout ratio5 49.86% 0.00% Current Ratio (times)6 1.41 0.86 Debt to equity (times)7 1.15 1.70 PER SHARE DATA (In Php) Earnings per share8 Basic 13.46 1.86 Diluted 13.41 1.84 Book value per share9 83.58 69.60 Price earnings ratio10 3.57 8.20 Market price 48.00 15.25 Cash dividend per share11 1.00 - Number of shares issued and subscribed 594,326,513 590,340,305 Weighted average number of shares Basic 590,355,623 589,482,417 Diluted 592,805,699 596,217,753 Number of stockholders 13,019 13,131 1 The results for the years ended December 31, 2009 and 2008 are set out on the consolidated financial statements. 2 The statement of financial position as of December 31, 2009 and 2008 is set out on the consolidated financial statements. 3 Equity - adjusted excludes cumulative translation adjustments (CTA) and share in CTA of an associate, share in other comprehensive income of associates, and equity reserve pertaining to effect of dilution of a subsidiary and effect of acquisition of minority interests 4 Return on equity = net income for the year attributable to equity holders of the parent / ave. total equity attributable to equity holders of the parent - adjusted 5 Dividend payout ratio = dividends paid to common shareholders by parent / last year’s net income attributable to equity holders of the parent 6 Current ratio = current assets / current liabilities 7 Debt to equity ratio = total debt / total equity - adjusted. The details of the total debt are set out on the notes to consolidated financial statements (note 35). 8 The EPS computation for the years ended December 31, 2009 and 2008 is set out on the notes to the consolidated financial statements (note 32). 9 Book value per share = (total equity attributable to equity holders of the parent - adjusted less preferred equity) / no. of shares issued and subscribed 10 Price-Earnings ratio = market value per share / basic earnings per share 11 Cash dividend per share = cash dividends declared to common shareholders / no. of common shares issued and subscribed 4 2009 ANNUAL REPORT Investment Summary FIRST PHILIPPINE HOLDINGS CORPORATION 2009 Investment Summary (In Thousand Php) % Ownership5 Revenues Net Income Total Assets Total Liabilities Total (loss)6 Equity6 POWER GENERATION AND POWER RELATED1 First Gas Power Corporation 4 39.74 32,203,185 3,400,771 38,745,953 29,709,834 9,036,119 Energy Development Corporation 17.88 22,066,880 3,322,662 84,774,938 54,443,076 28,802,101 FGP Corp. 4 39.74 15,999,653 2,495,978 17,588,802 9,531,522 8,057,280 First Gen Hydro Power Corporation 37.22 1,247,178 114,069 7,617,847 3,793,444 3,824,403 Bauang Private Power Corporation 4 24.70 972,989 600,878 4,892,981 2,415,537 2,477,444 FG Bukidnon Power Corp. 66.23 39,959 13,424 149,490 19,634 129,856 POWER DISTRIBUTION Manila Electric Company2 13.23 184,872,000 6,005,000 172,129,000 110,983,000 57,369,000 Total assets 148,806 227,007 Panay Electric Company 30.00 3,200,102 307,510 2,009,974 1,090,044 919,930 Investments and deposits in associates 63,308 27,394 Total debt 86,236 147,154 MANUFACTURING3 Total long-term debt 54,852 87,651 First Sumiden Circuits, Inc.