Philiippines' First Gen seeks partners for US$2.7b of energy projects

[MANILA] First Gen Corp, the largest Philippine operator of gas-fired power plants, is seeking partners for three plants and a liquefied gas terminal to be built in the next five years for USUS$2.7 billion. The shares rose the most in six years.

By the end of the year, Manila-based First Gen wants to line up partners to help finance and operate the projects, President Giles Puno said in an interview. The company plans to keep majority control of the assets, he said.

First Gen is in talks with potential partners from Japan, Europe and the Philippines, Puno said, declining to name any of the companies because of confidentiality agreements. For the US$1.2 billion liquefied natural gas terminal, First Gen wants a partner that can operate and maintain the facility, he said.

The plan is to have the terminal up and running by 2021, before the nation's Malampaya gas field runs dry in 2024. The company, which owns two of the three plants running on Malampaya gas, plans to add three more, worth US$1.5 billion, by 2021.

"By making sure that we have good, supportive partners we can accelerate the development of additional facilities," Puno said. "The demand is there. We have the ability to supply, but the supply is dependent on capital expenditures."

First Gen shares jumped 9.5 per cent to 27 pesos at the close in Manila, their sharpest advance since March 2009. The stock recorded the biggest per centage gain on the benchmark Philippine Stock Exchange Index, which fell for a second day.

"Bringing partners puts First Gen in a better position to pursue and complete these projects on time," said James Lago, head of research at PCCI Securities Brokers Corp. "This expansion will increase and diversify First Gen's earnings, allowing investors to buy up the stock at a time when the equity market is weak."

The Southeast Asian nation's demand for electricity surged as its economy expanded. Consumption rose 50 per cent to 72,922 gigawatt hours in the 10 years to 2012, three times as much as the 16 per cent growth in generating capacity over the same period, according to latest government data.

The 414-megawatt San Gabriel plant, the first of three gas- fired generators First Gen wants to add, is already funded and will be operational next year. This will be followed by two plants with total capacity of 800 megawatts, which will be completed in 2018 and 2021, respectively, Puno said.

First Gen's existing two-gas fired power plants have 1,500 megawatts in combined capacity. Avion, a 97-megawatt plant that will run on Malampaya gas, will start operating in August.

With the additional natural gas-fired plants, the planned LNG terminal may eventually be expanded, Puno said. First Gen is in talks with suppliers that source LNG from Australia, the Middle-East and North America, he said, declining to name any of the parties because the talks are private.

First Gen plans to also double its generating capacity in the southern island of Mindanao in the next five years by adding 100 megawatts of hydroelectric capacity, Puno said.

Other companies seeking to meet the surge in electricity demand in the Philippines include Manila Electric Co and Japan's Osaka Gas Co, which are in talks over a joint LNG import and power-generation project.

Royal Dutch Shell Plc and Australia-listed Energy World Corp. have separately laid out similar LNG import plans, according to UK-based Interfax Energy, which provides news and analysis on the global gas industry.

BLOOMBERG