Lopez Holdings

 

Remarks of Francis Giles Puno, President and COO of First Generation Corporation, at the San Gabriel Groundbreaking Ceremony
January 14, 2014 
San Gabriel, Batangas

Good morning and thank you once again for taking time to join the groundbreaking ceremony for our San Gabriel power plant project.

I’ll begin my short presentation with a brief background about First Gen Corporation, the parent company and developer of First NatGas Power Corporation and describe to you the key features of this landmark project.

First Gen stands out as the country’s leading private power developer of clean and renewable power generation facilities.

We earned that distinction in the local power generation business because First Gen’s portfolio has one of the lowest, if not the lowest carbon emission intensity.

We currently have fifteen power plants in our portfolio with a total installed capacity of 2,763 megawatts. In 2012, we generated approximately 30 percent of the electricity production in the country.

First, we have our two world-class natural gas-fired power plants: the 1,000-megawatt Santa Rita and the 500-megawatt San Lorenzo plants located here in Batangas City.

Our portfolio also includes eleven geothermal power plants from our subsidiary Energy Development Corporation or EDC. These geothermal plants are spread across Luzon, Visayas and Mindanao.

We likewise have two hydroelectric plants – the 132 megawatt Pantabangan Masiway hydroelectric plant complex in Pantabangan, Nueva Ecija, as well as the one point six-megawatt Agusan mini-hydro plant in Manolo Fortich, Bukidnon.

In addition, First Gen, through EDC, is currently constructing the 87 megawatt Burgos Wind Farm located in Ilocos Norte. The project, which we are already looking at expanding to 150 megawatts, is expected to operate by the fourth quarter of this year.

We, at First Gen, are also proud of our track record in pioneering private sector participation in support of the energy programs of the government.

They include a fast-track 225-megawatt Bauang project that we developed to help solve the power crisis of the early 1990s; the development of the natural gas projects in the late 90s; all the way to the government’s privatization program consistent with the power deregulation law. To this end, we have paid government a total of Php 76 billion (or US$ 1.8 billion) in acquiring various government-owned power assets including the hydro and geothermal plants of EDC.

We also played a critical role in assuring a market for indigenous natural gas from Malampaya. To recall, gas in commercial quantity was discovered in Malampaya in 1989. But to assure the gas find’s viability and development, someone had to build new gas-fired power plants that would consume the natural gas from the Malampaya field.

Today, we are once again responding to a call by the government for increased private sector participation in meeting the country’s growing need for additional electricity supply.

We are aware that in the Department of Energy’s 2012 Philippine Energy Plan, the Luzon grid will need an additional 600 megawatts of new, more efficient capacity to meet a growing demand for electricity supply starting 2016.

Without new power supply, consumers in the Luzon grid will suffer from rotating brownouts and/or pay for running the more costly and less-efficient oil-fired plants. The shortage will also disrupt the country’s positive growth momentum and hamper government’s efforts to create more jobs.

Mister President, we don’t want brownouts to recur. That’s the reason we are implementing the San Gabriel power project and undertaking its construction even without any long term agreements. The San Gabriel project is best positioned to meet the Luzon grid’s immediate demand for more power generation capacity and help avert the anticipated power shortage two years from now.

Here are some details of the San Gabriel power project to be owned and operated by our wholly-owned subsidiary First NatGas Power Corporation or FPNC.

Under the San Gabriel project, FPNC is developing three combined-cycle gas turbine power plant units, each with a 414-megawatt capacity or a total of over 1,200 megawatts. The groundbreaking today is for one unit of the San Gabriel project; we call it Unit 70. The additional two units of San Gabriel, which we refer to as Units 80 and 90, will benefit from synergies by utilizing common cooling pipes with Unit 70 and can be constructed and completed from 2017 onwards depending on market needs and the availability of additional Malampaya gas or imported LNG.

Last December 16, 2013, we signed with the Siemens Group contracts related to the full turnkey engineering, procurement and construction of the plant. Siemens will also be performing the operations and maintenance of the plant (no different from the services they provide to the Santa Rita and San Lorenzo plants).

San Gabriel will use the 8000-H gas turbine technology that is the most advanced, most efficient, state-of-the-art turbine in the market today. In layman’s language, the gas turbine technology for the San Gabriel plant will be capable of generating an amount of electricity that is higher than what other gas turbine technologies can generate from burning the same quantity of fuel. Compared to Santa rita and San Lorenzo’s efficiency of 55 percent, San Gabriel will even be more efficient at close to 60 percent based on local site conditions.

Other advantageous features of the San Gabriel plant include its operating flexibility that will allow it to ramp up to full capacity during the day and shutdown at night when the demand for electricty is low. It will also benefit from operations and-maintenance synergies with our existing Santa Rita and San Lorenzo plants. These advantages can help FNPC offer electricity at competitive rates.

San Gabriel will use Malampaya-sourced natural gas as fuel. It is designed as one single block with a 414-megawatt capacity and constructed in the barangays of Santa Rita Aplaya and Santa Rita Karsada, Batangas City, to serve mainly the Luzon grid.

At an estimated total project cost of US$ 600 million, the project will be financed with a combination of debt and equity on a 60:40 basis. The sixty percent debt will be provided by the export credit agency from Germany and the rest from commercial banks. The remaining 40 percent will come from First Gen as equity.

We are also in the process of finalizing the necessary permits and approvals to develop a fast-track solution for additional capacity through the development of the 100 megawatt Avion project. Using aeroderivative technology and with its modularized design, we can quickly expand this project to address spikes in electricity demand in the future. We are still hopeful to get this project constructed and completed by the end of this year.

It is worth noting that our current gas supply contracts from Malampaya will expire in about ten years’ time, so we are already preparing for a post-Malampaya gas world to provide replacement fuel for our new and existing power plants.

To complement the construction of the three San Gabriel units, we will pioneer the entry of imported liquefied natural gas by constructing the country’s first LNG regasification terminal located on land we own adjacent to our power plants here in Batangas City. This strategic asset will have the benefit of providing clean, efficient and reliable energy supply for the country’s future energy requirements.

For us to succeed, we will definitely need the continued support of the various key stakeholders such as the national and local government agencies including the Department of Energy. We will also need the support of the existing Gas Sellers, Meralco and the various markets that we serve, as well as the banking community.

Mister President, we can -- and we fully intend to -- complete the project’s construction and commence commercial operation by the first quarter of 2016 before your term ends.

The 414-megawatt capacity of the first unit of the San Gabriel plant can energize close to a million households.

We are honored to say that San Gabriel will form part of your administration’s legacy to the Filipino people. This legacy will hopefully contribute to our process of nation building. It is a legacy that is consistent with the Lopez Group DNA of pioneering and developing key infrastructure in the service of the Filipino.

With that, Mister President, I end my presentation.

Thank you.

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Lopez Holdings Corporation (formerly Benpres Holdings Corporation)
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