Partnership of Kepco, First Gen may not push through (9/13/2010)

First Gen Corp. and Korea Electric Power Co. (Kepco) may not be able to join forces in bidding for the 40 percent stake in BG Group as this may result in some legal issues, a top First Gen official said.

“Although Kepco is a well-respected company, we have to understand what their plans are, and if it runs with conflict with our plans, then that partnership with Kepco may not be necessarily be feasible,” First Gen president Francis Giles Puno said.

It would be noted that both First Gen, through its subsidiary First Gas Corp. and Kepco, through its arm Kepco-Ilijan Philippines Inc., have stakes in natural gas industry.

Their engagement in natural gas businesses makes the two firms basically “competitors” with each other. This may result in some problems in reconciling their business agenda if they would partner with each other in buying the BG Group’s stake in First Gas.

BG Group had announced intentions to sell its 40 percent stake in the 1,000 MW Sta. Rita and 500 MW San Lorenzo gas fired power plants which it co-owns with the Lopezes.

According to Puno, they do not want to encounter conflict of interest in the near future should they partner with Kepco.

“The only one in the gas business right now is Kepco so they are our direct competitor. If we feel that the conflict is something that we cannot leave with, then we have to look at options, then the option would be right of first refusal and the other option would be bringing in another partner that we would prefer,” he said.

Moreso, Puno said they are also eyeing same opportunities in the natural gas industry.

“If we bid against them (Kepco) then they will know what our plans are going to be,” he said, noting that they are both vying for the 300-megawatt excess capacity of the Malampaya natural gas project in Palawan.

“The issue that we are looking at is, for example, we have a gas expansion, is that in potential conflict with the likes of Kepco? If we feel that it is potentially conflicting or if they could be construed as competitor, then certainly from our agreement, we may have a problem with that,” he said.

http://www.philstar.com/Article.aspx?articleId=611418&publicationSubCategoryId=66

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First Gen gets $142-M term loan facility (9/08/2010)

Lopez-controlled First Gen Corporation has inked a $142-million 6-year and 7-year term loan facilities arranged by BDO Capital and Investment Corporation as issue manager and sole bookrunner.

In a disclosure to the Philippine Stock Exchange (PSE), First Gen noted that the facility was raised from a consortium of foreign and commercial banks composed of Banco de Oro, Security Bank, Bank of the Philippine Islands, Maybank, Rizal Commercial Banking Corporation, Union Bank of the Philippines, Mizuho Corporate Bank, Allied Bank Corporation and Robinsons Savings Bank.

“The loan has a grace period of 74 and 36 months from drawdown, respectivety.

Funds will be made available until February 28, 2011,” the company said.

It added that the “proceeds of the loan will be used to fund investments, finance capital requirements for various growth initiatives of the company, partially refinance outstanding indebtedness, and fund other general corporate purposes.”

First Gen is among the local companies eyeing to expand its power generation power portfolio from the near to the medium-term.

The company noted that, together with its subsidiaries, it still has room for capacity expansion of up to 1,500 megawatts – as referenced on the prescribed market cap under the Electric Power Industry Reform Act.

The business strategy of the conglomerate, primarily its wholly-owned subsidiary Energy Development Corporation (EDC), would be to harness more renewable energy resources such as geothermal and wind technologies.

For its planned wind power facility in Ilocos Norte, it has been emphasized that it will initially pump in capital investment of $100 million as a component of its equity portion in the project.

http://www.mb.com.ph/articles/275883/first-gen-gets-142m-term-loan-facility

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First Gen records $50-M profit from natgas, geothermal plants (8/13/2010)

PROFITS OF Lopez-led First Gen Corp. jumped by 158% in the first half due to higher electricity sales and stronger performance of affiliates.

In a statement, First Gen said it earned $50 million in the first half of the year, from $19.4 million in the same period last year. Total revenues grew by 24% to $655.4 million from $526.3 million.

Electricity sales from the 1,000-megawatt (MW) Sta. Rita and 500-MW San Lorenzo gas-fired power plant increased by 16% to $599.1 million in the first half from the previous period’s $517 million.

“With the scheduled maintenance outage of the Malampaya platform in February and March 2010, the Sta. Rita and San Lorenzo plants were operated reliably on liquid fuel and helped stabilize the power supply situation in the Luzon grid at the peak of the summer months when the El Niño phenomenon was being felt. Operations of hydroelectric plants at that time were mostly curtailed due to low water levels,” the company said in its statement. Sta. Rita and San Lorenzo profited $63.8 million for the period.

First Gen’s earnings were also supplemented by the strong performance of affiliates Energy Development Corp. (EDC) and First Gen Hydro Power Corp. EDC contributed earnings of $36.5 million, up from $23.6 million the previous year. First Gen Hydro Power contributed $17.9 million, also up from $14.9 million.

“We are very pleased with the operating and financial performance of our gas, hydro and geothermal power portfolio. Our financial normalization program continues to be a priority for First Gen. And while our First Gas plants continue to contribute solid results, the positive effects of the management focus we are putting to improve the value of EDC is clearly evident in its stronger results having successfully acquired all the generating plants that are located in its steam fields,” First Gen President Francis Giles B. Puno said.

http://www.bworldonline.com/main/content.php?id=15840

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First Gen mulls exercising preemptive rights in BG’s equity sale in First Gas (8/01/2010)

First Gen Corporation of the Lopez group is seriously considering to exercise its preemptive rights in the planned equity sale of BG Asia plc, its foreign partner in the 1,000-megawatt Sta. Rita and 500-MW San Lorenzo gas-fired plants.

“Yes we do have (right of first refusal), I guess at the right time, we will look at exercising that option,” First Gen chairman and chief executive officer Federico R. Lopez said.

The reported prospective third party taker of the 40% shareholdings of its British partner in the First Gas plants is Korea Electric Power Corporation. Given the right of first refusal option though, First Gen may acquire the BG shares by matching Kepco’s offer.

While facing several transitions in the industry though, First Gen is keen on reinforcing both its presence in the domestic power industry and even planned forays for overseas investments. The company is cementing not only its short-term expansion plan but also its long-term strategies.

With nuclear power gaining traction as likely solution for the country’s long-term energy security, First Gen chairman emeritus Oscar M. Lopez likewise indicated the conglomerate’s willingness to look at it as an option for the future.

When asked by reporters on the group’s interest in nuclear power, the older Lopez indicated that “it’s not an impossibility. I guess that would still be clean, as long as it is clean energy.”

Part of the business growth strategy spelled out by the company would be to at least maximize local investment potential within the prescribed market share caps of 30 percent per grid and 25 percent on a national level; and that shall allow them to expand by another 1,500 megawatts in the near term.

“We cannot grow very much because each group is limited to 25-percent …to keep growing, we’re looking for new directions, we are a pioneering group, so we’re looking for something new,” he stressed, reiterating that overseas investments will definitely part of that growth agenda.

The company also emphasized that it will backpedal on selling its remaining shares in Manila Electric Company (Meralco). “Not for now, we want to continue to hold the stake,” Lopez noted on queries if there is any plan to dispose further its equity in the country’s largest power distribution firm.

And while they apparently set preference on pursuing clean energy alternatives, the Lopez son intimated that, as a company with aspirations for growth and diversity, “when we say clean, it’s like we never say never. But what we are prioritizing are cleaner resources.”

Referencing on the firm’s recent interest to bid for the contract of the 650-megawatt Malaya thermal power facility, the First Gen chief executive stressed that such shall be anchored on helping provide supply security in the grid. “When there’s a need for these plants which are for peaking, even coming from a different resource, we also look at plants that can help provide security over time,” he stressed.

Alongside plans for expansion, First Gen and its subsidiaries, like the Energy Development Corporation (EDC), are also scouring for opportunities that will further help shore up bottom line.

“A lot of focus of what we’re doing, like for First Gen, is revving up and bringing it to its full potential. And with that, you really need to work also with the existing management of EDC to bring synergies within the two companies,” the younger Lopez stressed.

http://www.mb.com.ph/articles/270019/first-gen-mulls-exercising-preemptive-rights-bg-s-equity-sale-first-gas

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Lopez power subsidiary weighs prospects of using nuclear energy (8/01/2010)

As the government revives plans to use nuclear energy, the Lopez-led First Gen Corp. said it was also considering the prospects of nuclear energy development in the country.

In a talk with reporters, First Gen chair Oscar Lopez said it was “not an impossibility” for the company to consider nuclear power.

“I guess [nuclear energy] would still be clean,” Lopez added.

As early as 2007, First Gen already disclosed plans to study the prospects of nuclear energy as an additional investment option for the power generation sector. The company, however, said that detailed studies would be needed prior to embarking on such projects.

The Aquino administration has made pronouncements that it would study the possible use of nuclear power to address the country’s growing energy requirements. A small group of Filipinos has started training in nuclear technology in preparation for the government’s possible foray in nuclear energy.

“We are doing all the preparations already,” said Froilan A. Tampinco, president of the state-run National Power Corp.

Tampinco stressed that Malacañang has not given formal directions but the various options of using nuclear power had already been discussed.

Energy Secretary Jose Rene D. Almendras explained that aside from energy security, nuclear power was also expected to help bring down energy prices in the country in the long run, when oil prices are expected to have gone up.

The energy chief disclosed that a number of local governments have expressed willingness to host a nuclear facility in their respective cities and provinces.

“In the interest of their own development and economic growth, they realize they need to find a sustainable source with a sustainable generating capacity that is applicable to them,” Almendras said.

However, Almendras said the Aquino administration has permanently shelved plans to rehabilitate and operate the mothballed 620-megawatt Bataan Nuclear Power Plant (BNPP) because of the political questions and safety concerns surrounding it.

“BNPP is not an option anymore,” he stressed.

According to the Department of Energy, the first 600-MW nuclear power plant of the country should be in place by 2025. This is expected to contribute 0.885 million ton oil equivalent (MTOE) to the projected energy mix and reach up to 3.54 MTOE by 2035.

http://business.inquirer.net/money/topstories/view/20100801-284417/Lopez-power-subsidiary-weighs-prospects-of-using-nuclear-energy

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Lopez to focus on ‘clean’ energy projects (6/04/2010)

Alluding to climate change risks as key differentiating factor, the Lopez group laid down plans that future investments in the electric power industry will revolve only around clean energy technologies.

“Geothermal power, hydro, solar power, wind power – these are the spaces that we intend to exploit,” Oscar M. Lopez, patriarch of the Lopez group noted when he relinquished his post as chairman and chief executive officer of First Philippine Holdings Corporation (FPHC) to his son, Federico R. Lopez, recently.

He acknowledged though that their choice of solutions for the fresh wave of power investments “will be more difficult and perhaps more expensive.”

Albeit he qualified that the cost factor is nothing compared to the damaging effect on the environment that other fuel technologies may wrought if they are to provide for the country’s future energy needs.

“We will have to be innovative and imaginative in the way we search for solutions,” Lopez added.

In an area where other industry competitors have already taken steps ahead, the Lopez group is also making its mark in the “rebranding game”, claiming its spot in the genre of “clean power” providers in the domestic industry.

The Lopez patriarch recognized the country’s near-term need for “adequate and economically-priced power”, but with the industry’s ongoing restructuring and the world’s drive for low-carbon energy path, the challenges ahead will be different and “it is much more difficult and complex.”

For prospective project developers, Lopez noted that many may cling to that tendency of building power plants utilizing cheaper fuel, like heavy fuel oil and coal.

Yet he noted that “unfortunately, these are also the technologies most damaging to the environment.”

Given the pressing challenges confronting the global energy sector today, “it requires the exercise of conscience,” Lopez averred, qualifying further that “this is something the business sector is not often known for.”

He thus added “it is our responsibility, not only to do our part to provide the cheap and reliable power needed by the country, but to do so in a way that will not further damage our environment. This view is reflected in the choice of projects that we have undertaken and the technologies we are investing in.”

http://www.mb.com.ph/articles/260249/lopez-focus-clean-energy-projects

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Lopezes eye geothermal business expansion abroad (5/31/2010)

THE Lopez group said it is keen to expand its geothermal investments abroad this year to avoid breaching the generation capacity cap prescribed by the Electric Power Industry Reform Act (EPIRA). Oscar Lopez, First Philippine Holdings Corp. chairman, told reporters that the company is looking at expanding its geothermal business to Chile and Indonesia.

“We have to go abroad because we have a limited 25-percent cap [under the law]. We cannot exceed that,” Lopez said.

Under EPIRA, a company or a related group is prohibited to own, operate or control more than 30 percent of the installed generating capacity of a grid and/or 25 percent of the national installed generating capacity. This is done to prevent monopoly and market power abuse and to promote competition among industry players.

Lopez said the group would partner with a foreign company to be able to venture overseas.

First Holdings has interests in power generation, through First Gen Corp., and distribution, through Manila Electric Co. and Panay Electric Co. First Gen holds 40 percent of Energy Development Corp. (EDC), the largest geothermal energy producer in the country.

EDC owns and operates the Unified Leyte plants, which consists of the 125-megawatt Upper Mahiao, 180-megawatt Mahanagdong, 232-megawatt Malitbog and 51-megawatt optimization plants. It also has the 52-megawatt Mindanao 1 and 54-megawatt Mindanao 2 power plants in North Cotabato.

This year, EDC is adding the 150-megawatt Bacon-Manito (BacMan) geothermal plant in Sorsogon to its portfolio of power generation assets after bagging the plant for of $28.25 million.

The company allotted P8.6 billion in capital expenditure this year to expand its geothermal capacity. Its earnings rose to P3.80 billion during the first three months from P2.27 billion in the same period in 2009.

FPHC shares climbed to P56.5 on Friday from Thursday’s P55.5 while EDC shares rose to P4.95 from P4.85 each.

http://www.manilatimes.net/index.php/business-columns/18451-lopezes-eye-geothermal-business-expansion-abroad

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First Gen scraps plan to sell stake in Red Vulcan after settling its financial obligations (10/27/09)

LISTED POWER holding company First Gen Corp. of the Lopez group said it has put on hold plans to sell part of its stake in Red Vulcan Holdings Corp. after it was able to refinance its debts. Red Vulcan is the controlling shareholder of listed geothermal giant Energy Development Corp. (EDC). “[Plans to sell are] off already. Indefinitely,” said Richard B. Tantoco, First Gen executive vice- president and chief operating officer. Mr. Tantoco said First Gen initially intended to sell a portion of its stake in Red Vulcan to raise funds with which to refinance its obligations. Proceeds from the supposed sale were initially intended to refinance the company’s staple loan amounting P13.9 billion. “At the time we were looking for partners, the balance sheet of First Gen was very stretched,” Mr. Tantoco said. Instead, First Gen would now focus on further developing EDC as investors now have renewed confidence in First Gen following the settlement of its obligations. First Gen shares yesterday closed at P16.25, higher than last Friday’s close of P15.75. EDC shares yesterday closed at P4.10, higher than last Friday’s close of P4. Before being publicly listed, EDC was a wholly owned subsidiary of the state-owned Philippine National Oil Co., which has units in the exploration, development and production of energy. EDC became a subsidiary of Lopez-owned Red Vulcan Holdings Corp. two years ago after parent First Gen Holdings Corp. bought a majority stake in the geothermal company for P58.5 billion. A supposed partner in the EDC purchase, Netherlands-based Spalmare Holdings B.V., did not pursue the acquisition. EDC unit Green Core Geothermal, Inc. yesterday formally took over the 112.5-megawatt (MW) Tongonan and 192.5-MW Palinpinon geothermal power plants after paying P3.9 billion, which represents 40% of the purchase price to the Power Sector Assets and Liabilities Management Corp. First Gen is 66% owned by First Philippine Holdings Corp. also of the Lopezes, which has units in the power and infrastructure sector. EDC said the acquisition of the Palinpinon-Tongonan geo-thermal facilities would increase their current portfolio of geo-thermal power generation assets to 1,049 MW. — Jose Bimbo F. Santos

http://www.bworldonline.com/BW102709/content.php?id=044

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