Natural Gas

 

The 1,500-MW Santa Rita and San Lorenzo Natural Gas Power Plants.

We continuously develop and strengthen our natural gas portfolio. As the world transitions to a clean energy future, we believe our natural gas platform is well-positioned to deliver clean, flexible, and reliable power that best complements the intermittencies of the grid, which becomes especially important as it increases its dependence on renewable energy.

The natural gas-fired power plants are incorporated through the following wholly-owned subsidiaries of First Gen: First Gas Power Corporation (FGPC) for Santa Rita, FGP Corp. (FGP) for San Lorenzo, First NatGas Power Corp. (FNPC) for San Gabriel, and the Prime Meridian PowerGen Corporation (PMPC) for Avion.

Santa Rita

Santa Rita booked higher revenues in 2018 due to higher net generation (7,259.9 GWh in 2018 compared to 6,845.4 GWh in 2017), higher NDC (1,094 MW in 2018 compared to 1,080 MW in 2017), and higher average gas prices (USD 8.6 per MMBtu in 2018 compared to USD 7.5 per MMBtu in 2017).

For 2018, Santa Rita’s higher operating income can be attributed to the aforementioned increase in its NDC and lower G&A expenses. Lower interest expenses and the absence of a one-time interest rate swap termination cost and an unamortized debt issuance cost write-off from the refinancing of FGPC’s long-term debt in May 2017 further contributed to its net income which increased by 18.8 percent to USD 101.7 million in 2018 from USD 85.6 million in 2017.

San Lorenzo

San Lorenzo had a higher net generation of 3,606.7 GWh in 2018 compared to 3,538.0 GWh in 2017, higher NDC of 560 MW in 2018 compared to 538 MW in 2017, and higher average gas prices of USD 8.7 per MMBtu in 2018 compared to USD 7.5 per MMBtu in 2017. Consequently, revenues increased by 10.9 percent to USD 341.7 million in 2018 from USD 308.2 million in 2017.

San Lorenzo’s net income of USD 42.7 million in 2018, which declined by 6.4 percent from USD 45.6 million in 2017 can be attributed to its provision for deferred income taxes in 2018 of USD 3.5 million versus a deferred income tax benefit of USD 1.9 million in 2017. This was primarily due to the effect of unfavorable foreign exchange movements in 2018.

“Net income from First Gen’s natural gas platform amounted to USD 177.6 million in 2018, 48.5 percent higher than in 2017″

San Gabriel

The San Gabriel Combined Cycle Power Plant in the First Gen Clean Energy Complex.

San Gabriel booked revenues of USD 199.4 million in 2018, more than double the USD 98.6 million earned in 2017. This was attributed mainly to higher average WESM selling prices when it was operating as a merchant plant in the first half of 2018. This was further supplemented by the commencement of FNPC’s sale of its full capacity to Meralco on June 26, 2018 under a six-year PSA. Consequently, San Gabriel booked a net income of USD 35.2 million in 2018, a positive reversal from the net loss it booked in 2017 of USD 7.9 million.

“San Gabriel’s net capacity factor improved from 38.4 percent in 2017 to 61.0 percent in 2018.

Avion

The 97-MW Avion Open Cycle Power Plant.

Avion booked lower revenues in 2018, largely due to the unfavorable movement of the foreign exchange rates, which was used to translate its Philippine Peso- denominated revenues to U.S. Dollars. The decrease in revenues was partially offset by lower rent, insurance expense, and professional fees, and a higher average WESM selling price at PHP 7.2 per kWh in 2018 compared to PHP 5.4 per kWh in 2017.

In 2018, Avion booked a lower net loss of USD 1.9 million, compared to a net loss of USD 3.7 million in 2017. The improvement was mainly due to the aforementioned higher average WESM selling price, as well as lower cost of sales and G&A expenses.

Santa Rita’s NDC improved to an average of 1,094 MW in 2018 from an average of 1,080 MW in 2017, marking an increase of 1.3 percent or 14 MW. San Lorenzo’s NDC likewise improved to an average of 560 MW in 2018 from an average of 538 MW, marking an increase of 4.1 percent or 22 MW during the period.

San Gabriel’s net capacity factor improved from 38.4 percent in 2017 to 61.0 percent in 2018, mainly due to an increase in power sold in the WESM in the first half of 2018 when it was a fully merchant plant. This was supplemented by the commencement of its PSA on June 26, 2018 with Meralco, which contracted all of its baseload capacity.

“The Avion power plant celebrated its safety milestone of 500,000 man-hours without any Lost Time Incident in August 2018.

Avion’s dispatch dipped to 14.5 percent due to some outages in 2018. Beyond 2018, PMPC is looking at offering a portion of Avion’s capacity in the ancillary services market as its flexibility complements the requirements of the grid. Avion’s annual scheduled outage was likewise successfully completed in September 2018, assisted by MTU Maintenance Berlin-Brandenburg GmBh (MTU-BB) in accordance with a three-year Maintenance Service Agreement (MSA) between PMPC and MTU-BB.

INTERNATIONAL STANDARDS

In 2018, First Gen’s natural gas-fired power plants received certifications and recognition for their operations. In April 2018, FGPC and FGP were audited and recertified for Occupational Health and Safety (OHSAS 18001:2007). They likewise received ISO certifications for Quality (ISO 9001:2015) and Environment (ISO 14001:2015).

Moreover, the First Gen Clean Energy Complex received a plaque of recognition during the Environmental Summit conducted last July 24, 2018. The award recognizes First Gen for being an active partner of the Department of Environment and Natural Resources- Environmental Management Bureau in the implementation of R.A. 9003 or the Ecological Solid Waste Management Act of 2000.

The Avion power plant celebrated its safety milestone of 500,000 man-hours without any Lost Time Incident (LTI) in August 2018. Avion marked this milestone with a “Safety Day” of promotional activities, including the recognition of various employees, contractors, and subcontractors for keeping the workplace accident-free.

RECENT DEVELOPMENTS

Now that the PSA between FNPC and Meralco is in effect, FNPC is awaiting the Final Approval of the PSA from the ERC. The PSA enables San Gabriel to generate a stable stream of revenues, while providing Filipino consumers with clean, reliable, and cost-competitive power.

Developing the LNG terminal

First Gen remains committed to advancing the DOE’s vision for an LNG terminal in the country. The development of the LNG industry is vital to the Philippines’ energy security, especially with the ending of the existing natural gas supply contracts and the eventual depletion of the Malampaya gas field.

LNG, or liquefied natural gas, is a clear, colorless, non-toxic liquid that is formed when natural gas is cooled to minus 162.0 degree Celsius, which also reduces the volume of the gas by 600 times, making LNG capable of being transported by specialized ocean-going LNG carriers.

When LNG reaches its destination, it can be stored and then turned back into a gaseous form for use when needed by simply raising its temperature through the LNG regasification terminal, such as that proposed by First Gen, which can then be used as natural gas to generate electricity or for industrial, commercial or transportation purposes.

LNG can be imported from many countries and is the fastest growing source of natural gas. LNG will improve the energy security of the country by providing the means to ensure that the only existing indigenous natural gas source in the Philippines is replaced or supplemented, and that clean, competitively-priced natural gas will continue to be available to meet the needs of existing and future customers.

First Gen’s planned LNG import and regasification terminal, located at the First Gen Clean Energy Complex in Batangas City, has already completed the initial phase of site development. Over the past seven years, numerous pre-development studies and activities have been successfully completed including environmental clearance, extensive onshore and offshore geotechnical surveys, raising and leveling of the site, and the installation of a site drainage system, making the site “construction-ready.”

On December 5, 2018, First Gen signed a JDA with Tokyo Gas, a world leader in LNG and Japan’s largest provider of gas. Tokyo Gas’ 20.0 percent participating interest further signifies its confidence in First Gen’s LNG terminal project as this is Tokyo Gas’ first overseas investment in an LNG regasification terminal.

On December 21, 2018, FGEN LNG Corporation (FGEN LNG), a wholly-owned subsidiary of First Gen, submitted its application for an NTP permit to the DOE, which was subsequently granted on March 7, 2019. The NTP allows FGEN LNG to continue with the development of its LNG terminal, thus the company is now working to secure outstanding permits and present proof of financial closing within the NTP period in order to attain the prescribed Permit to Construct. For 2019, both FGEN LNG and Tokyo Gas have set their sights on achieving a Final Investment Decision.