Posted on May 10, 2017 - By Victor V. Saulon, Sub-Editor
FIRST GEN Corp. is willing to reduce its stake in its proposed $1-billion liquefied natural gas (LNG), as long as the project pushes through, company officials said on Tuesday.
Francis Giles B. Puno, First Gen president and chief operating officer, said the company is looking to keep a minimum stake of 35% in the project.
“But we’ll see. It depends. We’ll be flexible to even go down or even higher to make sure that the project will push through,” he told reporters on the sidelines of the company’s annual stockholders meeting at the Tektite building in Ortigas.
The project is crucial for First Gen as it has four power plants that run on natural gas. Of the company’s power generation mix, 57.9% is produced by burning the resource, which is considered to be the cleanest of fossil fuels.
But the fuel’s source, the Malampaya gas field off Palawan island, is expected to be depleted starting in 2024, thus the need to import natural gas and to build an infrastructure to receive it in its transportable liquefied form and its conversion into gas.
“We’re more motivated to make sure that the project pushes through and we have a good consortium that will support it. And we think that there are a number of players that will support it because it’s an important infrastructure for the country,” he said.
Federico R. Lopez, First Gen chairman and chief executive officer, said the company was preparing to develop the country’s capability to import LNG as “indigenous gas sources taper down in the next seven to 10 years.”
“This component is essential as we believe natural gas plants will play a key role in keeping the lights on in the transition to a clean, decarbonized energy paradigm,” he said.
Mr. Puno said First Gen had held discussions with state-led Philippine National Oil Co. (PNOC) to look at “possible options available,” including the development of the terminal in the company’s property in Batangas, the site of its gas-fired power plants.
“On the equity front, we’ve always been flexible,” he said. “Right now, we’re solely underwriting the risk. But the whole idea is bring in partners and to cooperate with a number of partners for LNG to be able to make sure that the LNG terminal is built.”
“What we’d like to be is to have a significant ownership. What that means is it can be as little as 30% and have others doing it, depending on who will comprise the total consortium,” he said.
Mr. Puno said there would be “plenty of room” for PNOC and other strategic partners.
“It’s not in an advance phase where we can sign anything,” he said, referring to talks with PNOC and possible partners to form a consortium to build the project.
Mr. Puno said the company was in the process of selecting a contractor for the project.
“We hope we can choose a partner in the next 12 months,” he said. “What we want to do is to be in a position where we can make that final investment decision at the tail-end of 2018 because we also need financing.”
As of end 2016, First Gen’s power generation capacity reached 3,471 MW, up from 2,959 MW, with the completion of its 414-MW San Gabriel and 97-MW Avion natural gas power plants.
The steady contribution from the two plants partly accounted for the 19.3% increase in the company’s attributable net income in 2016 to $199.6 million from $167.3 million previously. Dollar is First Gen’s functional currency because bulk of its revenues are in that currency.
Q1 PROFIT FALLS 11%
In the first quarter, First Gen posted a recurring net income attributable to equity holders of the parent firm of $45 million, down 11% from $51 million a year ago. The company said its merchant plants, or those whose output are not contracted to power users, suffered from the lower revenues from the “seasonally soft” wholesale electricity spot market prices.
Emmanuel P. Singson, First Gen senior vice-president, told reporters yesterday that the company was setting aside $40-$50 million this year, excluding that of subsidiary Energy Development Corp. (EDC), for capital expenditures.
“LNG facility, site improvements and the rest, would probably be $15 million to $20 million,” he said.
Last year, the company’s capital expenditure was $300 million, and $200 million in 2015, Mr. Singson said.
“Our capex (this year) is relatively low because we spent all our capex in the last couple of years,” Mr. Puno said, adding this year’s funding will be internally generated.
On Tuesday, shares in First Gen fell by 7.16% to P19.96 each.