Pantabangan-Masiway Celebrates 1st Year Anniversary
November 16, 2008
This 18th of November 2008, First Gen Corporation (First Gen) celebrates its first year anniversary of operating the 112MW Pantabangan-Masiway Hydro-electric Power Plant Complex (PMHC). In its twelve months of operation under First Gen, PMHC's positive impact to the company extends over and beyond the company's financial statements.
One year ago, the Power Sector Assets and Liabilities Management Corporation (PSALM) turned PMHC over to First Gen Hydro Power Corporation (FG Hydro), a 100.0%-owned subsidiary of First Gen. FG Hydro bested competition with a bid price of USD129.0 million. Even then, First Gen was fully aware of the growth and value that the plants could deliver to its stakeholders. The company fully intended to maximize this. With an overflowing reservoir at that time - a first in 28 years - PMHC was fully fuelled for a promising road ahead.
Surpassing expectations, PMHC has delivered strong financial and operating results to the company and has blended well with First Gen's portfolio. By September of this year, it has already generated revenues of USD37.4 million and a net income of USD23.6 million contributing 5% and 15% to First Gen's revenues and net income, respectively.
PMHC's contribution to the company is undeniably significant. But what makes it more important is how the asset has served as a platform for developing First Gen's capabilities and knowledge for competing in a deregulating market.
As part of its reform, the government pushed for the privatization of its power generation assets. To date, the Power Sector Assets and Liabilities Management (PSALM) has successfully privatized 39% of the 4,300MW that it plans to privatize. PMHC was the first sizable asset in the industry that was bid out successfully. From this experience, First Gen gained invaluable know-how in bidding for the PSALM assets up for privatization and operating such assets.
In its effort to bring electricity to market prices, the government established the WESM to enable the trade of electricity as a commodity in a competitive market. This move shall push power producers to fuel up their businesses in order to provide the market competitive electricity prices.
Through FG Hydro, First Gen became one of the first privately-owned generating companies to actively participate in the WESM. For the past year, First Gen has seen average electricity prices go down as low as Php2.7/kWh in October and as high as Php6.9/kWh in July. Despite this volatility and withstanding the effects of adverse climate changes to the reservoir's water level, FG Hydro continues to serve the market and maintain profitability. With this trading experience and having managed through the peaks and valleys of the WESM, First Gen is now growing more comfortable with and expects to perform even better in the spot market.
Furthermore, having PMHC in its portfolio allowed First Gen to expand its customer base by servicing small customers in the Luzon grid. PMHC currently services seven customers in Luzon. This year, it has renewed its contract with Nueva Ecija Electric Cooperative (NEECO 1), one of its bigger customers. These events signify First Gen's growing proficiency in this aspect of business.
As a momentous year marks its end and a new power market emerges, First Gen comes out equipped with its newfound proficiencies from many of its experiences with PMHC. Indeed, PMHC has contributed more than earnings to the company. The knowledge it acquired about the WESM, its customers, and plant acquisitions, among others, sets First Gen fuelled for competition.
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