First Gen Integrated Report 2019

Value Creation

Hydroelectric Performance

FINANCIAL HIGHLIGHTS

(In PHP Millions)

FG HYDRO revenues increased by PHP 526.3 million, or 28.2 percent, to PHP 2.4 billion in 2019 from PHP 1.9 million in 2018.This increase can be attributed to several factors, namely:

▷ Significantly higher dam elevation resulting in higher generation.
▷ High spot market prices and higher generation during the first half of 2019. High spot market prices were driven by several plant outages in the Luzon grid during the period.
▷ The accreditation of Pantabangan’s units by NGCP to provide Ancillary Services to the Luzon Grid under Automatic Generation Control Mode.

FG BUKIDNON revenues decreased by PHP 10.7 million, or 23.1 percent, to PHP 35.6 million in 2019 from PHP 46.3 million in 2018. This decrease was caused by the following:

▷ Lower generation due to El Niño
▷ Increase in Real Property Tax (RPT) from PHP 0.3 million to PHP 1.1 million

OPERATIONAL HIGHLIGHTS

FG Hydro’s strong revenue for the year was due to the plants’ higher dam elevation that equated to higher generation. At the beginning of 2019, FG Hydro recorded a dam elevation of 217.3 meters above sea level (masl), 6.2 percent or 12.7 masl higher compared to 204.6 masl in 2018. Other factors that contributed to the higher generation were the following:

IMPLEMENTATION OF “MAAGANG TANIM, MASAGANANG ANI” PROGRAM

▷ Implemented by the National Irrigation Administration (NIA), the program was executed to increase palay harvest during the farmlands’ rest period and irrigation canal maintenance.

▷ Through this program, water was released from the Pantabangan dam, irrigating lands and creating an opportunity for the Pantabangan and Masiway plants to generate more power.

PROVISION OF ANCILLARY SERVICES TO THE LUZON GRID

▷ Pantabangan's units were accredited by the NGCP.

▷ The ancillary service to the Luzon Grid (free Governor and Automatic Generation Control modes), including FG Hydro’s Automatic Generation Control (AGC)-capability, opened revenue opportunities for FG Hydro.

On the other hand, FG Bukidnon delivered lower generation for 2019. The plant delivered a net energy of 8.6 GWh, equivalent to a net capacity factor of 61.2 percent. This was 23.9 percent lower than in 2018, wherein the plant delivered 11.2 GWh, equivalent to a net capacity factor of 80.0 percent. The generation reduction was due to the following factors:

▷ Low water inflow caused by the El Niño that lasted for approximately eight months.

▷ Run-of-river plant’s lower reliability factor due to a plant outage that lasted 433 hours (from February 1-20, 2019). This was caused by the plant’s Main Power Transformer (MPT) breakdown due to defects in its tap changer which was immediately replaced.

2019 Key Achievements

FG Hydro and FG Bukidnon made improvements to its operations and programs in 2019, while achieving significant progress on on-going projects.

OPTIMIZING OPERATING FACILITIES

▷ FG Hydro and FG Bukidnon timed its plant maintenance during seasonally low water flows, thereby maximizing energy generation.

▷ Asset Management initiatives complementing regular maintenance programs to prolong plant life and preservation of reliability.

๐ Masiway’s re-wedging project to prolong the life of its generator.
๐ Replacement of Pantabangan’s power intake trash rack panel to ensure debris are properly filtered and will not enter the turbine.
๐ Replaced the blow-off valve at FG Bukidnon’s Forebay to ensure stable water flow from its power intake to the turbines.
▷ Operating facilities adopted the latest management standards and preserved their Integrated Management System certifications.

๐ ISO 9001:2015 for Quality Management System
๐ ISO 14001:2015 for Environmental Management System
๐ OHSAS 18001:2007 for Occupational Health and Safety Management System
๐ Ongoing migration from ISO 18001:2007 to ISO 45001:2018
๐ ISO 55001:2014 for Asset Management System for FG Hydro

NEW PLANT DEVELOPMENTS AND SYSTEM UPGRADES

▷ Development of the 100-MW Aya Pumped-Storage Project, utilizing the Pantabangan and Masiway Reservoirs (as its upper and lower reservoirs).

๐ Envisioned to be the country’s pioneering variable-speed pumped-storage facility.

๐ On December 2019, FG Hydro was granted by the DOE a Hydropower Service Contract (HSC) for the exclusive development of the project.

๐ The facility will provide energy during peak periods and Ancillary Services to the electricity grid for grid security and stability.

▷ First Gen continued developing its various run-of-river projects (i.e., Bubunawan, Tagoloan, Puyo and Cagayan 1N) while waiting for a more favorable regulatory regime for renewable projects.

▷ FG Hydro seamlessly upgraded its SCADA system and commissioned an ancillary monitoring system.
๐ These ensured that the Pantabangan plant could deliver all the ancillary reserves under the more stringent NGCP protocols for Ancillary Services, giving the facility flexibility to deliver energy by a) power generated for WESM or contracts, or b) reserves via the different Ancillary Services.

๐ FG Hydro is also certified to deliver reactive power and black start power to the grid.

▷ FG Hydro won Meralco’s 100-MW mid-merit Competitive Selection Process (CSP) bid that was conducted last September 11, 2019 at a levelized cost of electricity of PHP 5.3989/kWh inclusive of value-added tax (VAT).

RESILIENCY MEASURES

▷ Structural reinforcing of buildings and towers via cable supports and window shutters to withstand strong typhoons.
▷ Structural calculations for new buildings are designed to withstand wind speed of 320 kph and above.
▷ Regular drills and simulation of our Business Continuity Management (BCM) Plan for familiarity and identifying improvement areas.
▷ Capacity building of local government units (LGUs), like the rural health unit of Pantabangan and Brgy. Fatima, to respond to calamities and emergencies with the help of EDC’s Emergency Preparedness and Disaster Response Unit (EPDRU).
▷ Sequestered 86,814.0 tons of CO2 emissions (2008 to 2018) through the BINHI program.
▷ Requested contractors to plant trees after every completion of a site project, with a current total of 100 trees planted due to this initiative.

Creating Value for Stakeholders

The regular maintenance and monitoring of First Gen’s hydro platform, along with its ongoing developments, have had a significant contribution to the business and to its stakeholders.

Higher generation equates to higher tax contributions
(i.e., business tax, income tax, government share tax

Optimized assets resulting to higher plant availability

Displacement of over 380,000 tons of CO2 as part of the Company’s zero-carbon generation goal

A comprehensive biodiversity and assessment and monitoring of flora, fauna, and aquatic life in the Pantabangan watershed.

Forest cover restoration efforts in Pantabangan watershed that has sequestered 15.0 million pounds of CO2 since 2009. This was done under the Company’s BINHI program and in partnership with four farmers’ associations (FAs) in the municipality.

 

Establishment of a Bamboo Stirrer and Tea Processing Enterprise under the company’s BINHI 2.0 Program and in cooperation with the Villanueve Farmers’ Association and D’ Sustainable Planet/Bambuhay. Phase 2 of BINHI aims to sustainably utilize mature forest products established and maintained during Phase 1.

Regulations Affecting Our Operations

New regulations and circulars by the DOE have been considered by First Gen with regard to its hydro platform’s operations.

RENEWABLE PORTFOLIO STANDARDS

A market-based policy of the DOE, it promotes the use of RE by requiring distribution utilities, electric cooperatives, and retail electricity suppliers (RES) to source an agreed portion of their energy supply from eligible RE facilities.

NEW ANCILLARY SERVICES PROTOCOL

All accredited Ancillary Services providers are mandated to provide security and stability to the Grid as per the Philippine Grid Code of 2016. Ancillary Services are now monitored on a per second basis and FG Hydro has equipped itself with proper hardware and software to monitor its compliance and has trained its personnel on how to adjust turbine controller parameter settings to meet the requirement.

5-MINUTE ENERGY BIDDING

This circular from DOE has called for several changes, including shorter trading and dispatch interval (five minutes), automated pricing corrections, ex-ante pricing (forecast-based pricing) for every five-minute trading and dispatch interval, and a one-hour interval for settlement purposes based on a weighted average of the five-minute ex-ante prices. It has also removed the plant’s minimum output level (Pmin) constraint to comply with WESM’s market dispatch optimization model.

Strategy for Hydro

First Gen intends to maintain its operating facilities’ high reliability and resilience to climate change. Given the seasonal nature of hydro’s fuel resource, First Gen intends to adopt a more dynamic maintenance strategy to maximize the hydro resource. First Gen will also ensure that its facilities continue adopting new versions of international standards for quality, environment, and safety and health management systems. The Company has several resiliency initiatives aligned for future implementation.

DEVELOPING PLANT PROJECTS

Construction of Aya Pumped-Storage Project

The project seeks to address future needs of the grid. It can deliver all of the grid’s required types of Ancillary Services, and at the same time can store up to eight hours of equivalent energy.

Run-of-river projects

The Hydro business unit will continue working on its permitting requirements in 2020. For Cagayan 1N project, the Hydro Business Unit is seeking to complete all its technical studies.

Pipeline of 200 MW to 250 MW growth projects

First Gen currently has 133.6 MW of hydropower. The Company intends to pursue these projects, in line with the development of market conditions, and secure their social acceptability.

UPCOMING RESILIENCY INITIATIVES

Enhance the plants’ Energy Conservation Program to further reduce station power consumption

The ERP procedures and FG Hydro drills will be shared and integrated to NIA’s Dam and Reservoir Division’s (NRD’s) process.

Capacity building of NIA on Emergency Response Preparedness (ERP)

The ERP procedures and FG Hydro drills will be shared and integrated to NIA’s Dam and Reservoir Division’s (NRD’s) process.