First Gen to beef up its capacity

First Gen to beef up its capacity
By Donnabelle L. Gatdula
The Philippine Star 01/30/2006

First Generation Corp. (First Gen), the country’s largest Filipino-owned independent power producer (IPP), is planning to beef up its capacity by 1,500 MW by putting up new natural gas power plant and acquiring assets of the National Power Corp. (Napocor), a latest corporate research of CLSA Ltd. disclosed.

CLSA said First Gen would establish a 550-MW Greenfield natural gas power plant which will be in full commercial operation in three to four years or by 2009 to 2010.

According to the firm, they expect First Gen to spend at least $450 million for this particular project.

It said First Gen may fund the project through 30 percent equity and 70 percent via a 10-year loan. It said First Gen may also tap its existing partner British Gas to own up to 40 percent of the project.

Aside from the Greenfield project, CLSA said First Gen is also likely to acquire 1,000 MW brownfield plants at $1 million per MW. This move, it said, may increase the power firm’s earnings by P4.4 billion a year.

"First Gen’s net debt to equity may deteriorate from 30 percent in 2005 to 155 percent in 2006 assuming the acquisition is wholly-funded by debt but would steadily improve to 20 percent in 2009 inclusive of the 550 MW Greenfield expansion," it said.

First Gen is aggressively expanding its exposure in the power industry to encourage investors to take part in its $200-million initial public offering (IPO) on Feb. 10. Proceeds from the IPO amounting to about P11.2 billion will be used to acquire power generation assets of state-owned National Power Corp. (Napocor) and develop greenfield projects.

Incorporated in December 1998, First Gen is the primary holding company for the Lopez Group’s power generation business. It has been operating in the industry since 1993 through its parent First Philippine Holdings (FPH).

FPH made its first major investment in power generation via Bauang Private Power Corp. (BPPC). So far, First Gen has installed capacity of 1,727 MW and equity of 986 MW.

First Gen’s subsidiaries-First Gas Power Corp. (FGPC) and FGP Corp. developed, financed and now operate the 1,000 MW Santa Rita and 500-MW San Lorenzo plants, respectively.

These plants are in Batangas province and supply the Luzon grid which in turn supplies the majority of Filipino manufacturing industries. BPPC’s 225-MW plant, in which, First Gen effectively holds a 37.3 percent stake, is in La Union province and also feeds the Luzon grid.

In March 2005, First Gen acquired the 1.6 MW Agusan Mini-Hydro power plant from the Power Sector Assets and Liabilities Management Corp. (PSALM).

It also developed and operated through 50 percent-owned subsidiary Panay Power Corp. a 72 MW bunker-fired diesel fuel plant in Iloilo City. First Gen however sold its 50 percent stake in PPC for P1.09 billion in June 2003 to Claredon Towers Holdings, a subsidiary of Mirant Global Philippines Corp.

Through First Gas Renewables Inc. (FGRI), First Gen also expects to continue developing power generation facilities that use renewable energy sources particularly through min-hydro power plants.

First Gen also intends to develop additional gas-fired facilities related infrastructure such as gas pipelines, to fully leverage its joint venture partnerships with BG Plc.