Lopez Holdings


Welcome Remarks of Federico R. Lopez, Chairman and CEO of First Gen Corporation at the Ground Breaking Ceremony of San Gabriel
January 14, 2014
San Gabriel, Batangas

Twenty years ago, in 1994, the land you are standing on today and that on which both the Sta. Rita and San Lorenzo natural gas power plants are sitting were literally underwater. They were once more than 13 hectares of mangroves and fishponds. In fact, when we would show aerial photos of the site to banks and potential equipment suppliers, they thought we were joking. I don’t recall us even having a ground breaking at that time; otherwise we would have been dressed in life vests and Speedos instead of barongs.

However, by the start of the new millennium six years later, those fishponds were transformed into a complex that housed some of the most efficient power plants in the world; part of the bigger Philippine Natural Gas Project, which was and probably still is the single largest industrial undertaking in the country so far. 

But this complex and integrated project which required many public and private parties to move in lockstep towards FID or Final Investment Decision date was significant not only in its size but because of what it achieved for our country. The Camago-Malampaya gas-to-power project ushered in natural gas as a fuel into the Philippine energy mix thereby making possible the large-scale use of Combined Cycle Gas Turbines, with thermal efficiencies exceeding 55%. 

Today, we’re breaking ground on a new plant --- the 414 megawatt natural gas fired San Gabriel. But this is more than just a simple expansion. Similar to the transformation that occurred here twenty years ago, what we are commencing today is likewise filled with significance. Let me expand on that thought.

First, despite some of the natural calamities that have set back our country in recent months, the Philippines is acknowledged to have many tailwinds in its favor. We are soon to be one of the few countries that will have a younger population relative to our peers in Asia and around the world. We will be blessed with a substantially large percentage of our population in that demographic sweet spot between the working ages of twenty and sixty-four. However, that sweet spot truly becomes a demographic dividend only if we can support it with the right level of social services, infrastructure and yes, a power system that can keep pace with the needs of a growing and vibrant economy. 

Mr. President, we know that your unwavering efforts towards good governance and sound policies for our country are enabling the Philippines to take its rightful place in the world. We will match that by investing our financial and human resources in helping build a healthy and thriving power sector that will not let the country down. Let today’s groundbreaking demonstrate our first determined step in that direction.

Second, as we speak, 65% of the country’s power generation capacity is already 15 years and older. And as plants get along in years, of course, maintenance and unplanned downtime naturally increases. Newer plants, when chosen properly, improve the reliability of our electricity supply and enable the use of technological advances and higher efficiencies. As First Gen President Giles Puno will expound on later, for San Gabriel and our succeeding plants we will not settle for anything less than the best technology and the most reliable equipment suppliers. 

Thirdly, expensive oil-fired power plants make up 3,074 megawatts or 18% of the country’s installed capacity. These plants have expensive power with average tariffs close to Php12.00 per kilowatt-hour. Although we acknowledge that they play a role in our electricity grid providing peaking and reserve power when less expensive plants cannot run, adding more capacity like San Gabriel will lessen our dependence on these expensive oil-fired peaking plants and have the effect of taming any opportunistic behavior that can ensue from tight supply conditions. 

I must also mention that we were hoping to also groundbreak today on a fast-track 100 megawatt project called Avion, which will be the first power plant in the country using aeroderivative turbines. However, we later decided to hold back from including it in this ceremony until we can secure all the needed permits and approvals. Our Avion project will likewise help tame opportunistic behavior by increasing competition and consumer choice for sources of peak power. Once we get these issues sorted out, we can still target to bring this additional 100 megawatt capacity into the grid before the end of this year 2014. That would mean both San Gabriel and Avion will be completed and operational within your term Mr. President.

Over the last few years, I’ve also been quite bothered by the fact that almost all announcements for new plants around the country have been for coal-fired capacity. We believe that coal-fired plants have a place in our energy mix but it must be counter-balanced by cleaner fossil fuels in the mix that can compete head to head with cheap and abundant coal. Economic growth should not come at the expense of having coal-polluted cities that shorten citizens’ lives or degrade the quality of life with respiratory diseases as in many large Chinese cities today. Furthermore, given the fact that we’ve seen how our countrymen are among the most vulnerable in the world to the ravages of climate change, it does make sense to find lower carbon alternatives than coal for powering our economy. 

This leads to my final point. As the transformation of those fishponds 20 years ago ushered natural gas into our country’s fuel mix, today’s groundbreaking will, in another sense, be quite trailblazing. This 414 megawatts of San Gabriel is really just the first of three such additional plants planned for this site. Our vision is to build an additional 1,342 megawatts between now and 2019 right here around where we laid the first spade today. That will bring our total capacity of LNG-fired plants to more than 3,000 megawatts by then. 

Further, we are already preparing for the end of indigenous Camago-Malampaya supply nine to ten years from now in 2023, with plans to erect our own Liquefied Natural Gas (LNG) import terminal on land we own contiguous to this complex. This LNG terminal could be powering all three units of San Gabriel by 2019, and by 2023 both the original saints as well --- Sta. Rita and San Lorenzo. 

Today as we speak, there’s a fracking revolution unlocking huge natural gas reserves in North America, also known as shale gas, and soon this technology will spread to other parts of the world. We believe that what we’ve started today will enable the country to participate in this revolution and bring a cleaner, lower carbon fuel into our energy mix on a sustained basis moving forward. 

 My father, our Chairman Emeritus, has always been our inspiration, driving us to think and act in pioneering, entrepreneurial ways for our country. So, as a son and as a Filipino, it makes me very proud to say that what we’ve broken ground on today will, literally and figuratively, fuel the dreams and aspirations of millions of our countrymen in the exciting decades to come.

Thank you and good morning to all.

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