2016 ANNUAL REPORT

FINANCIAL PERFORMANCE

We ended 2016 with an attributable net income of USD199.6 million, which was a 19.3 percent increase from USD167.3 million last year. This is attributable to the steady contribution of earnings from our natural gas business, including the newly inaugurated 414-megawatt (MW) San Gabriel and 97- MW Avion natural gas power plants, which brought our power generation capacity to 3,471 MW from 2,959 MW. Now that the two newest plants are operational, we expect a corresponding uptick to our revenue to be reflected in 2017.
First Gen had a capital-intensive year as we completed the tail-end of the construction of San Gabriel and Avion, and the continued typhoon-proofing and maintenance upgrades of our geothermal power plants. This was partially offset by liquidated damages received by First NatGas Power Corp. from its contractor amounting to USD47.8 million, following San Gabriel’s construction delay. It was further supplemented by the receipt of insurance claims amounting to USD32.0 million by EDC relating to unscheduled interruptions that affected the BacMan plant’s operation in early 2016. Our hydro business likewise contributed significant earnings due to improved power generation. FG Hydro’s attributable net income increased to USD13.5 million compared to USD8.4 million in 2015, or a 60.3 percent increase amounting to USD5.1 million.
All things considered, our operating expenses amounted to USD1,063.6 million in 2016; this was 21.7 percent, or USD295.5 million lower, compared to our operating expenses of USD1,359.1 million in 2015. Our extensive maintenance efforts are already paying off in terms of improved reliability, efficiency, and capacity of our plants. Certainly, you may expect a more robust 2017 as a result of these upgrades.

NATURAL GAS

The competitive advantage of our two newest gas-fired plants is that they are able to operate with flexibility to deliver exactly what the market needs, when the market needs it. San Gabriel is a combined cycle plant, with the capability to synchronize with the grid in 15 minutes. More efficient than your typical baseload plant, it can run for 24 hours in a day, or it can be programmed to run only at peak hours and shut down during off-peak hours, when demand for power is low. Meanwhile, Avion is an open cycle plant envisioned to respond quickly to demand from the Wholesale Electricity Spot Market (WESM), as it can ramp up to full capacity in less than 20 minutes. Notably, both plants emit 70 percent lower emissions compared to your typical coal plant.
We are currently going through the process of selecting a contractor to build the approximately USD1.0 billion Liquefied Natural Gas (LNG) regasification terminal, the country’s first, to address the expected depletion of the Malampaya gas field in 2024. Our target for the completion of the LNG terminal, which will be located within the First Gen Clean Energy Complex in Batangas, remains to be between 2022 to 2023.
In the meantime, we are evaluating the construction of the 450-MW Sta. Maria and 450-MW St. Joseph gas-fired plants whose commissioning will be planned in coordination with the development of the LNG terminal.