First Gen profit drops 82% to $13.3M in H1

By Ted P. Torres (The Philippine Star) Updated August 17, 2011 12:00 AM


MANILA, Philippines - Lopez-owned First Gen Corp. registered an 82-percent drop in net earnings in the first semester to $13.3 million, from $74.9 million in the same period a year ago.


First Gen attributed the lower earnings to the shutdown of subsidiary Energy Development Corp.’s geothermal power plant in Negros Island.


The company said it incurred a P5-billion impairment charge, which is a non-cash loss resulting from the decommissioning of EDC’s 49-megawatt (MW) Northern Negros power plant.


“The write-down resulted in EDC’s loss contribution to First Gen of $24.6 million in the first semester of 2011. In contrast, EDC contributed earnings of $36.5 million in the same period last year,” it said.


EDC, the country’s largest geothermal energy developer, earlier closed the Negros plant after studies on the facility found it could not be operated at its full capacity because of technical constraints.


Located in Bago City in Negros Occidental, it was the first fully-owned power generating facility of EDC. The power facility was completed in 2007 or the year before the Lopez Group took over the company from the government.


The plant had been persistently affected by uncontrolled calcite clogging of its geothermal wells, which prevents the wells from releasing the steam from its very source underneath the earth.


“The Northern Negros plant’s sustainable steam capacity of (five-megawatt to 10-megawatt) was reached after two prolonged testing periods conducted over the last three years. We are now moving forward with out plans to find a suitable site for the power plant,” Giles Puno, First Gen president, said in the report.


Aside from the shutdown of the plant, First Gen said its unit First Gen Hydro Corp., owner of the 132-MW Pantabangan-Masiway hydroelectric power plants, contributed lower revenues due to limited water availability coupled with a decline in the wholesale electricity spot market prices.


First Gen Hydro’s year-to-date income contribution of $1.3 million was significantly lower compared with $17.9 million in the same period last year.


Despite the reduced contributions from its two units, First Gen’s revenues were higher by $38.3 million, or 6.3 percent, to $646.8 million over the same period.


The increased revenues reflected the higher dispatch and fuel prices of First Gen’s 1,000-MW Sta. Rita and 500-MW San Lorenzo natural gas power plants. For the first six months of 2011, the gas plants delivered earnings of $37.6 million to the company.


Also, the loss from EDC was cushioned by lower interest expenses as a result of the reduced debt levels and interest rates incurred by First Gen and wholly-owned Red Vulcan Corp., which directly owns 40 percent of EDC.