First Gen allots $1.375B for 5-year expansion program

First Gen Corp., the holding company for the power generation and energy-related businesses of the Lopez group, has earmarked $1.375 billion (P65 billion) over the next five years for the continued expansion of existing plants, new gas pipeline and greenfield projects, and its foray into the international markets.

First Gen vice-chairman and chief executive officer Peter D. Garrucho Jr. said the amount does not include planned acquisitions of power assets to be put on the auction block by the state-run Power Sector Assets and Liabilities Management Corp. (PSALM).

Garrucho said the programmed capital budget will be used to fund the 550-megawatt San Gabriel gas plant, the 100-MW Panay clean coal (in joint venture with DMCI), the expansion of 400-MW Pagbilao and Pantabangan-Masiway, greenfield mini-hydro projects in Misamis Oriental, Agusan del Norte, and possible joint venture opportunities abroad.

First Gen senior vice-president and chief financial officer Francis Giles Puno said the company has an available cash of $250 million which it could use to finance its capex and planned acquisitions. The company may also tap the debt market to fund capital requirements.

"We won’t trigger borrowings until we actually need the financing. For the borrowings, we can either issue bonds or tap syndicated loans in pesos or dollars," Puno said.

Garrucho said the company is looking at a 60:40 debt to equity ratio for the financing of the capex.

"First Gen aspires to be the premier power generator in the Philippines and hopes to expand abroad.

Already, it is the largest Filipino-owned and controlled independent power producer but as government privatizes, market positions will shift dramatically with each major divestment," Garrucho said.

"To serve the Philippine market well into the future, we should also be proficient in geothermal and coal and improve our positions in hydro. At present, our principal area of activity is in Luzon. We have to increase our presence in the Visayas and Mindanao," he added.

Federico Lopez, president and chief operating officer of First Gen, said the firm is eyeing major power assets to be bid out by PSALM. These include the 600-MW Calaca coal plant, the 600-MW Masinloc plant, the 685-MW Tiwi/Makban plant, the 421-MW Ambuklao, Binga and Angat hydro plants and the 192-MW Palinpinon geothermal plant.

Garrucho said the company is also finalizing plans for the construction of a 100-MW coal plant in Panay and Luzon which is already experiencing power shortages and in need of cheap power.

He said the company has received offers from several

entities to participate in combined cycle, and gas projects in Southeast Asia.

First Gen is likewise in advanced negotiations with Cocochem, the country’s leading oleo-chemical company, for its first non-power gas deal.

"The journey to a much expanded First Gen will be challenging and will truly test the mettle of our organization. We are optimistic that we will succeed," Garrucho said.

Meanwhile, First Gen said its net profit rose 36 percent to $34 million in the first quarter of the year from $25 million the previous year. Revenues likewise grew 21.65 percent to $264 million from $217 million.

The significant increase in income was attributed to higher income contribution from the 112-MW Pantabangan/Masiway hydroelectric complex, the higher dispatch of the natural gas-fired plants and extraordinary income from insurance claims.

First Gen is the largest Filipino majority-owned and controlled independent power producer in the country with installed capacity of 1,838.6 mw as of end-2006.