First Gen to raise $400M to refinance nat-gas facilities

Lopez-controlled First Gen Corp. will tap the debt market next month to raise more than $400 million for the refinancing of its two natural gas-fired facilities.

 In a report to the company’s stockholders,  First Gen president and CEO Federico Lopez said “the company is pursuing its refinancing plans for Santa Rita and San Lorenzo, the proceeds of which will be used to further pay down the remaining short-term debt due in the second half this year and first half of 2009.”

Giles Puno, First Gen chief finance officer, said “we’re also in the process of firming out our short-term obligations by refinancing Sta.Rita and San Lorenzo. The net proceeds of both financing should net us about $400 million of long-term debt. We can use that to pay down the facilities at First Gen and Red Vulcan Holdings Corp..”

Puno said First Gen will acquire debts to pay up loans of its subsidiaries.

“The strategy right now is to have a lot of debt at the parent but over time what we want to do is to bring down that debt to the operating company such that the debt at the parent is reduced and our target to be in a position where the remaining debt of the parent will only be the convertible bond,” Puno said.

In February this year, First Gen issued some $260 million worth of five-year convertible bonds at 2.5-percent interest to pay up its short-term obligations.

First Gen is the largest vertically integrated power producer in the Philippines. It is also the largest Filipino owned and controlled independent power generation company in the Philippines with an installed capacity of 2,582.4MW. It accounts of approximately 16 percent of the country’s total installed capacity.

Meanwhile, First Gen reported a 52-percent drop in first quarter profits to $16 million compared to the same period last year.

Lopez said the sharp decline was primarily driven by an increase in interest expenses and financing charges resulting from debt incurred for the purchase of a controlling stake in the PNOC-Energy Development Corp. (EDC). 

PNOC-EDC is the largest geothermal producer in the country with an installed capacity of 1,149.4MW, this representing 60 percent of the country’s total geothermal capacity.

Other reasons for the decrease were the income tax payments of its 1,000 megawatt (MW) Santa Rita power plant, whose income tax holiday ended in May 2007; and the lower net income of the 112-MW Pantabangan/Masiway hydroelectric power complex.

 “Our net income was significantly lower than last year’s.  This was an expected result with the amount of debt we took on for EDC—a necessary step backward to ready us for our leap forward. Moreover, this does not detract from the strong operating performance of each of the First Gen power plant, specially our latest purchase EDC,” Lopez said.

First Gen’s consolidated revenues increased by more than half or 54 percent despite lower income level for the period. Lopez attributed the increase to the consolidation of EDC’s financials, following the November 2007 purchase of EDC shares from the government. 

Power plants of First Gas Corp., a subsidiary of First Gen., Santa Rita and San Lorenzo enjoyed higher revenues due to their increased net dependable capacities, which resulted from gas turbine upgrades and plant overhauls, combined higher average dispatch, and higher fuel charges.

Santa Rita and San Lorenzo posted an average rate of 84.9 percent during the three-month  period as against 83 percent for both plants in the first quarter in 2007.

At this developed, Lopez said it would offer to investors up to 40 percent of another Lopez-controlled Red Vulcan Holdings Corp., majority-owner of EDC.