First Gen eyes participation in Pagbilao plant expansion
MANILA, Philippines - First Gen Corp., the power generation firm of the Lopez Group, said it plans to take part in the $700-million expansion of the Pagbilao coal-fired power plant in Quezon province.
This will allow the company to increase its portfolio even outside of renewable energy projects it prefer, a company executive said.
First Gen president Francis Giles B. Puno said TeaM Energy Philippines, a joint venture between Japanese firms Tokyo Electric Power Co. and Marubeni Corp., has given First Gen the rights to take part in the Pagbilao plant’s expansion.
“We are considering it. Because of again, the need for new capacity,” Puno said.
In March, TeaM Energy announced its partnership with the Aboitiz Group to expand the coal-fired power plant at a cost of between $600 million to $700 million.
“With the announcement, it triggers certain rights for us to be able to buy into the Pagbilao expansion,” Puno said.
Puno added that First Gen has the option to buy into as much as 30 percent of the expansion project. But since TeaM Energy partnered with the Aboitiz Group, First Gen can own only a third of the TeaM Energy’s 50-percent stake.
“We are not a major proponent, we are going to be a minority so things like coal supply is not our problem,” Puno said.
The third Pagbilao power plant will increase the available electricity in the Luzon grid by 400 megawatts (MW) in 2015.
The expansion will be outside the main thrust of First Gen, which is focused on renewable energy projects.
“It is a little bit of going against our religion but at the same time, we realize that the market is less interested with the cleaner renewable energy side than cheaper [energy],” Puno said.
“We are talking to them but we do not know yet how it is going to proceed,” Puno said, adding that they are waiting for updates from TeaM Energy.
TeaM Energy earns from and operates the 735-MW Pagbilao coal plant and the 1,200-MW Sual coal plant in Pangasinan.
Meanwhile, First Gen is still interested to purchase the stake of British Gas (BG) Group in First Gas Power Corp.
“We have always expressed interest in acquiring the BG stake,” Puno said. “They want to sell it but they are taking their time.”
First Gen owns 60 percent of First Gas, which owns and operates the 1,000-MW Santa Rita combined-cycle natural gas-fired power plant and the 500-MW San Lorenzo natural gas power plant, both in Batangas.
The remaining stake 40-percent stake worth $400 million in 2010 is owned by BG, which is publicly listed on the London and New York stock exchanges.
Puno said First Gen will have an easier time expanding the gas business without BG.
Late last month, the Securities and Exchange Commission approved the sale of up to P10 billion Series G perpetual preferred shares of First Gen.
For its affiliate Energy Development Corp., Puno said the company is focused on the rehabilitation of its power plants.
In February, EDC announced the start of the 18-month repair of the 150-MW Bacon-Manito (BacMan) geothermal power plant in Bicol.
Puno said the power plant only produces 50 MW so far, causing market disappointment.
First Gen’s net income attributable to equity holders of the parent firm slumped to $35 million last year from $70.2 million in the previous year amid lower income contribution from affiliate EDC.