2010 Annual Report - Aboitiz Equity Ventures

RESULT OF OPERATIONSenergy, while in the second half this figure increased more than threefold to 710 GWh. Theseoutputs work out to aggregate plant factors of 11% and 35%, respectively, for those periods.In terms of ancillary services, both hydros were also able to up accepted offers for ancillaryservices by more than 250% in the second half, thereby providing greater stability to theLuzon grid. To get an idea of how dry it was, Magat Hydro shut down from March to earlyJune.As we look at the year that Magat and Binga Hydro have had, we cannot help but look backwith wonder at how these assets have completely changed their roles in the Luzon grid. Theyused to provide baseload generation (with limited ancillary services) when owned by NPC.After we acquired both plants, we slowly transformed their roles into peaking plants andmaximized their technical capability to provide significant ancillary services for the stabilityand reliability in the Luzon grid. Today, both plants are very comfortable with the strategicservices they provide and the team running those plants is doing a wonderful job.Crucial to thepositive results of thegeneration unit in 2010was ensuring the plantswere in a positionto deliver as muchcapacity as the unitswould allow when thegrid needed the power.Readiness to deliverCrucial to the positive results of the generation unit in 2010 was ensuring the plants were in aposition to deliver as much capacity as the units would allow when the grid needed the power.In Luzon, for example, the system suffered from fuel shortages, major planned maintenance,unexpected breakdowns, the effects of El Niño, or a combination of all factors.With a combination of output optimization measures and structured fuel procurementpractices that ensured coal supply, your Company’s plants were able to sell substantialquantities of power to the Luzon spot market when, in stretches during 2010, conditionsdrove spot spices to unexpectedly high levels and power supply shortfalls affected the grid.The fuel position for 2011 is fully secured. In the first quarter of 2011we saw increasing oil and coal prices, and the hedged position allowsyour management team to breathe a sigh of relief.Looking out for acquisitionsWe will continue to keep a watchful eye for acquisition opportunitieslike our March 2011 Memorandum of Agreement with Pacific Hydrothat will give us full ownership of Luzon Hydro’s 70-MW Bakun plant.We will also actively participate in the privatization of targetedNPC assets being bid out by Power Sector Assets and LiabilitiesManagement (PSALM) Corporation.Antonio R. MorazaExecutive Vice PresidentChief Operating OfficerPower Generation GroupAnnual Report 2010 13