First Gen to conclude buyout of joint venture partner this year

MANILA, Philippines - First Gen Corp., the power generation unit of the Lopez Group, said it hopes to conclude this year the buyout of its British partner in a natural gas power generation venture.

A full ownership of First Gas Power Corp. will increase the attributable generating capacity of the company, top company executives said yesterday.

“Hopefully we can conclude it soon,” said First Gen Corp. chairman and chief executive Federico R. Lopez. “Hopefully even within the first half.”

British Gas Group, which is publicly listed on the London and New York Stock Exchange, owns 40 percent of First Gas, with the majority stake held by First Gen.

First Gas owns and operates the 1,000-megawatt (MW) Santa Rita combined-cycle natural gas-fired power plant and the 500-MW San Lorenzo natural gas power plant, both in Batangas.

The 40-percent stake was worth $400 million in 2010.

The pricing, along with other terms and conditions, is currently being negotiated by both parties, First Gen chief finance officer Emmanuel Singson said.

“What is nice with it is if we come to a deal, it is just like acquiring another 600 MW but it will not contribute to caps [on generating capacity],” Lopez said.

The Energy Regulatory Commission sets the capacity limits of power generators based on the prescribed market share per grid and on a national level.

To date, First Gen and its units have a gross generating capacity of 2,763 MW, of which 1,500 MW is natural gas, 1,129 MW is geothermal and 134 MW is hydropower. It accounts for 18 percent of the country’s total installed power generation capacity.

Lopez said the company still has a leeway to increase capacity by another 1,700 MW.

The power generation firm yesterday listed 100 million Series ‘G’ perpetual preferred shares in the local bourse.

First Gen raised P10 billion from the sale of the cumulative, non-voting, non-participating, and non-convertible preferred shares.

Singson said proceeds of the share sale might be tapped to fund the buyout of British Gas.

“We do not foresee any more fundraising this year unless we land on a big acquisition then we will evaluate our balance sheet,” Singson said.

Fresh funds might also be used to pay existing bonds that will mature in February 2013.

Meanwhile, First Gen is also pursuing numerous renewable energy projects in the next few years.

Singson said the company will expand its portfolio in wind, geothermal and hydropower.

First Gen earlier announced its plan to spend P16 billion for 91 MW of new generating capacity through wind and hydropower projects.

“We can probably do it ourselves,” Lopez said when asked if the company needs partners for new power projects.

First Gen posted a 171-percent jump in profits to $52.1 million in the first quarter from $19.2 million a year ago.

The company is targeting to triple its earnings this year, from $35 million last year.