MANILA – First Gen is keeping its chin up amid a decline in first quarter earnings.
For the Lopez-led power generator, the 11% decline in first quarter earnings to $51 million is an expected effect of the seasonally cool weather at the start of the year that dampens demand for power.
With the onset of the summer season, however, First Gen said they expect a rebound for the second quarter.
Francis Giles Puno, First Gen president and COO, explained: “Because it has been seasonally cool we do expect the wholesale spot market prices to be quite depressed, but on the other hand in the summer months which is today, it will be dispatched higher because the capacity is needed.”
For this year, Puno said they aim to bring their recurring income to last year’s non-recurring level of $200 million.
With the completion last year of their 414 megawatt San Gabriel and 97 megawatt Avion natural gas plants, the company is also set to dial down on their expenses.
From $300 million last year, First Gen has earmarked $40-50 million for this year, bulk of which will be spent for initial ground works for its LNG terminal project in Batangas.
“Capex is relatively low because we spent all our capex in the past couple of years; so right now our priority is less capex-centric and more driven by how to make sure that we can prove to our shareholders that San Gabriel and Avion are good investments,” Puno said.
Once completed, the LNG receiving, storage and re-gasification terminal is expected to cost $1 billion. It will be operated by a consortium led by First Gen. For now, Puno said they are evaluating 5-6 contractors, and they hope to conclude and award the project within a year.
Puno added: “We hope that we can choose a partner within the next 12 months, because what we want to do is to be in a position where we can make that investment decision at the tail-end of 2018, next year because we also need financing, so depending on how the consortium will be formed, that will also determine what are the next steps to financial close.”
With growing competition in the sector, First Gen said they also aim to keep their expenses down.
According to Federico Lopez, First Gen chairman and CEO, “we will continue to drive our costs down as we expect even more intense competition among various fuels and technologies in the years to come.”
Though last year has been flattish at best for the company, First Gen said they expect their massive investments in renewables to take off, as the technology matures and stands at parity with conventional fossil fuels, eventually enabling renewable energy to stand on its own even without subsidies from the government’s feed-in tariff.
