2016 ANNUAL REPORT

In pursuit of fuel security

First Gen continues to pursue and employ its pioneering efforts for natural gas by developing an import and regasification LNG terminal in the First Gen Clean Energy Complex in Batangas City. Its planned construction and operation is in preparation for the eventual depletion of the Malampaya gas field, and also to support the development of the Philippine natural gas industry. First Gen continues to work on various development activities to advance the project and make a final investment decision. First Gen has completed the Front End Engineering Design (FEED) of the LNG terminal and is now going through a tender for the engineering, procurement, and construction contract. In parallel, First Gen has also been working on early site development for the LNG terminal site.

Power Purchase Agreement

A Power Purchase Agreement (PPA) is a long-term agreement made between a wholesale energy purchaser and an independent power plant. A PPA secures the revenue streams of power plants, which are needed to finance the projects. The PPA often details the length of the agreement, the commissioning process, the purchase and sale of energy, the price terms, and the project milestones.

A PPA is legally binding once executed by the purchaser and the power company, and may last for five or more years. The price terms of the PPA may vary, as it usually reflects the cost of the project financing, the quality and cost of the fuel resource, and the prevailing market prices, among other considerations.