First Gen profit up 158% to $50 million

MANILA, Philippines - First Gen Corp., the power generation unit of the Lopez group, reported yesterday a 158- percent increase in its net income to $50 million in the first semester of 2010, from $19.4 million in the same period in 2009.

The company attributed the improvement in earnings to higher sales during the period.

First Gen’s consolidated revenues jumped 24 percent to $655.4 million from last year’s $526.3 million.

Revenues from the sale of electricity of the 1,000-megawatt Santa Rita and the 500-MW San Lorenzo gas-fired power plants increased by $82.1 million, or 16 percent, to $599.1 million from $517 million in 2009.

With the scheduled maintenance outage of the Malampaya platform in February and March 2010, the Santa 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.

First Gen said operations of hydroelectric plants at that time were mostly curtailed due to low water levels.

For the period ended June 30, 2010, the Santa Rita and San Lorenzo gas projects continued to deliver stable earnings of $63.8 million, of which First Gen’s 60-percent equity share is $38.3 million. First Gen’s equity share in the gas projects is higher by $3.3 million as compared to same period last year.

The first half earnings of First Gen were further supplemented by the improved financial performance of its affiliates, Energy Development Corp. (EDC) and First Gen Hydro Power Corp. (FG Hydro). EDC contributed higher earnings to First Gen of $36.5 million in 2010, up by $12.9 million as compared to $23.6 million in 2009.

The improvement in EDC’s contribution resulted from the increase in its electricity sales from its 192.5-MW Palinpinon and 112-MW Tongonan geothermal power plants which were acquired in September 2009.

Adding to the positive variance is a hefty improvement in FG Hydro’s income contribution to First Gen, which increased by $14.9 million from $3 million in 2009 to $17.9 million in 2010. This increase in FG Hydro’s income was due to better prices in the wholesale electricity spot market (WESM).

First Gen affiliate, Red Vulcan Holdings Corp. likewise benefited from a deleveraging program made possible with the successful P15-billion rights offering of First Gen in January 2010.

Outstanding debt at Red Vulcan during the semester declined 40 percent to P8.3 billion in June 2010 from P13.8 billion during the same period last year. This decrease in Red Vulcan’s debt level has resulted to a $3.2-million reduction in interest expense.

“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 Giles Puno said.