First Gen Corporation (First Gen), the Lopez Group‘s energy company that provides clean and renewable electricity to consumers, reported increased revenues from the sale of electricity in the first semester of 2022 at Php 65.7 billion (US$1,273 million), a 21% positive change of Php 14.8 billion (US$219 million) from Php 50.8 billion (US$1,054 million) in the previous year.
The higher revenues are derived from electricity sales attributed to elevated fuel and Wholesale Electricity Spot Market (WESM) prices. The natural gas portfolio accounted for 65% of First Gen’s total consolidated revenues while 31% came from EDC’s geothermal, wind, and solar plants.
The remaining 4% balance comes from the hydro plants. The Company, however, reported a 13% reduction in recurring net income in the first half of 2022 to Php6.6 billion (US$128 million) in comparison to Php7.1 billion (US$148 million) in 2021. Both of the Company’s largest contributors, the natural gas and geothermal portfolios, suffered from reduced operating income.
“First Gen’s first half earnings were affected by fuel availability issues that specifically affected our natural gas, geothermal, and wind plants. We are at the mercy of nature to give us good wind conditions as was the case last year, but it unfortunately was the opposite this year.
Our geothermal system was affected by Typhoon Odette in early 2022 and is currently catching up on maintenance activities (as was planned for this year). As for the natural gas fleet, it was weighed down by gas interruptions at the Malampaya field that required us to import more costly liquid fuel. However, we experienced considerably less gas constraints by June and this has improved dispatch.
Moreover, the expected commercial operations of our LNG terminal by next year should ease that further,” First Gen President and COO Francis Giles B. Puno stated.The natural gas platform reported a 10% decrease in recurring earnings for the first six months of 2022 to Php5.0 billion (US$96 million) from Php5.2 billion (US$107 million) in 2021. Recall that the 97 MW Avion power plant’s Unit 1 experienced unscheduled outages due to turbine damage in December 2021 and was brought back to operations in February 2022. In addition, high fuel prices affected Avion’s margins when it operated in merchant mode. The 420 MW San Gabriel power plant likewise recognized lower capacity fees due to an insufficient availability of gas supply from Malampaya, as well as outage days to address equipment reliability issues. With non-recurring items, the natural gas platform’s attributable net income to parent decreased to Php4.8 billion (US$93 million) for 2022 from Php5.2 billion (US$108 million) in 2021. The gas platform also paid increased income taxes compared to the previous year.
The geothermal, wind, and solar platform, under Energy Development Corporation (EDC), suffered from lower wind generation at the Burgos project in 1H22 compounded by increased taxes as the Income Tax Holiday of the Burgos project expired in November 2021.
Although electricity produced from the geothermal business benefited from higher electricity prices, EDC’s earnings were affected by: (1) outages at Bacman and Leyte due to maintenance activities; (2) generation curtailment attributable to Typhoon Odette that created transmission constraints and reduced electricity demand; and (3) the expiry of power contracts in Mindanao that needed to be re-contracted despite an oversupply situation. EDC’s recurring and attributable earnings at Php1.9 billion (US$37 million) for the first half of 2022 was 20% lower than its recurring income of Php2.3 billion (US$47 million) and 19% lower than its attributable income of Php2.2 billion (US$46 million) last year.
The hydro platform’s contribution to First Gen’s recurring and non-recurring earnings was at Php0.4 billion (US$9 million) for the first semester of 2022 from Php0.3 billion (US$6 million) last year. The 132 MW Pantabangan-Masiway power plants generated higher operating income from its sales contract with Meralco, though it occasionally suffered from more costly replacement power purchased from WESM. Merchant sales declined, though counterbalanced by higher selling contract prices.
*U.S. Dollar balances were translated to Philippine Peso using the weighted average rate of US$1.00:Php51.546 for the period ended June 30, 2022 and US$1.00:Php48.218 for the period ended June 30, 2021.
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