First Gen, the Philippines’ second-largest electricity producer, may invest as much as $3 billion in the next six years building power plants and a liquefied natural gas terminal in an effort to boost capacity by more than half, President Francis Giles Puno said.
“There’s room for additional capacity,” Puno said in an interview in his office in Manila yesterday. “We intend to meet the needs of the market by expanding our platform.”
The owner of two of the country’s three gas-fired power facilities will build another, which it will later expand, Puno said. The company will also invest in wind and hydroelectric projects, Puno added.
Power outages have hit some provinces in the country’s south this year. Luzon island, which accounts for three quarters of the nation’s electricity demand, will require at least 450 megawatts more in annual capacity starting in 2014, the Department of Energy says on its website.
The $225-billion economy expanded 5.9 percent in the second quarter, beating economists’ estimates, due to higher consumption and state spending. Growth for the year may be at the higher end of the government’s 5 percent to 6 percent target, Economic Planning Secretary Arsenio Balisacan said on Sept. 17
“Building infrastructure the country needs is a sure way to sustain the nation’s economic momentum,” BDO Unibank chief market strategist Jonathan Ravelas said. “Companies like First Gen are taking advantage of the low interest rates and the strong currency to support expansion.”
Profit at First Gen will more than quadruple this year to at least $150 million from $35 million in 2011 due to higher earnings at unit Energy Development, the country’s largest geothermal company. Its purchase of BG Group’s 40 percent stake in two gas plants they jointly own will also boost profit, Puno said.
Talks are ongoing with a group of banks for a $400-million loan due in 10 years “to reduce debt and have room for more investments,” Puno said.
The acquisition from BG worth $360 million will boost First Gen’s profit by $40 million a year and “unlock” the company’s opportunity to increase its gas portfolio, Puno said.
First Gen operates two gas plants with combined capacity of 1,500 megawatts, sourcing fuel from Royal Dutch Shell’’s Malampaya field under a contract set to expire in 2024. Natural gas accounts for 54 percent of the company’s generating portfolio.
The company plans to build a third gas plant with an initial capacity of as much as 400 megawatts to operate by 2014 with plans to possibly expand by an additional 800 megawatts after four years.
