FGen 2021 recurring earnings flat at P12.4 billion

MANILA, Philippines — Lopez-led First Gen Corp. posted flat recurring income last year as generation issues and steam field maintenance expenses tempered the rise in electricity sales.

In a disclosure to the Philippine Stock Exchange yesterday, First Gen said it earned $252 million or P12.4 billion, in recurring net income versus P12.6 billion in 2020.

The company benefited from higher electricity sales from its natural gas and hydroelectric platforms and higher wholesale electricity spot market (WESM) prices, but these were offset by lower earnings from Energy Development Corp. (EDC) due to generation and steam issues.

“First Gen generated higher revenues in 2021 as we saw power demand recover to pre-pandemic levels. Unfortunately, revenue growth was also an effect of higher fuel prices experienced all over the world and the supply restrictions in the grid that reflected in high spot market prices. Our gas-fired plants necessarily ran on liquid fuel to ensure adequate supply for the grid,” First Gen president and COO Francis Giles Puno said.

Last year, the Malampaya gas field had gas supply restrictions in March to June and in September, which have resulted in tight supply conditions in the Luzon grid and, in turn, pushed up electricity prices as some gas-fired power plants were forced to shift to more expensive liquid fuel or condensate.

First Gen hopes to resolve the Malampaya gas restrictions, which are expected to persist this year, with the completion of its liquefied natural gas (LNG) import terminal this year.

“We are working to address gas supply uncertainty and are confident this will be addressed once our LNG import terminal operates this year,” Puno said.

First Gen subsidiary FGEN LNG Corp. is developing the interim offshore LNG terminal to accelerate its ability to introduce LNG to the Philippines and the project is expected to be completed in the third quarter of next year and set to deliver LNG by fourth quarter.

The firm’s natural gas platform saw an eight percent increase in recurring earnings from P9.2 billion ($184 million) to P9.7 billion ($198 million).

The 97-megawatt (MW) Avion power plant benefitted from high electricity sales in the early part of the year as it supplied the grid with supplemental power during constraint periods.

However, the plant’s two units incurred damage in separate occasions – Unit 2 in August and Unit 1 in December, resuming operations in late October and February, respectively.

The older natural gas-fired plants, the 1,000-MW Santa Rita and the 500-MW San Lorenzo, reaped the benefits of lower income tax rates under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act and lower interest expenses from regular debt service payments.

These were partially offset by lower operating income from the 420-MW San Gabriel power plant due to outages and higher replacement power.

Renewable energy arm EDC registered an eight percent decline recurring attributable earnings from P4.5 billion ($90 million) to P4 billion ($82 million).

Despite generating higher revenues, EDC incurred higher power plant and steam field maintenance expenses last year as a result of deferred activities from 2020. These were partly offset by lower interest expenses and income taxes, the company said.

Meanwhile, the hydro platform’s recurring earnings contribution grew from P0.07 billion ($1.4 million) to P0.18 billion ($4 million).

First Gen said the 132.8-MW Pantabangan-Masiway power plants generated higher revenues as the commencement of its contract with Manila Electric Co. (Meralco) were augmented by merchant sales, but was slightly offset by higher expenses due to replacement power costs.

In terms of topline numbers, First Gen’s consolidated revenues from the sale of electricity in 2021 rose 18 percent from P91 billion ($1.83 billion) to P106 billion ($2.17 billion).

The natural gas portfolio accounted for 60 percent of First Gen’s total consolidated revenues. EDC’s geothermal, wind, and solar revenues accounted for 35 percent, while the hydro plants accounted for five percent of the total.

First Gen has 3,495 MW of installed capacity in its portfolio, which accounts for 19 percent of the country’s gross generation from clean and indigenous fuels such as natural gas, geothermal energy from steam, hydro-electric, wind, and solar power.