First Gen Integrated Report 2019

Value Creation

Management Approach to Capitals

FINANCIAL CAPITAL

Financial capital is composed of the Company’s sources of funds for the provision of services. It is managed based on maximizing stakeholder value to contribute optimum economic and social performance. The Company adopts strategies that increase financial returns and that avoid, mitigate, or rectify risks. The process involves: a) identifying growth targets and initiatives that are value-adding, b) developing and refining the strategies to achieve targets, c) regularly identifying and quantifying the related risks and their mitigants, d) executing the action plans, and e) continuously monitoring results to verify actions and validate effectiveness of actions taken. Risks assessments on the economic, environmental and social aspects of the business are developed and conducted with guidance from the Management and the Board. Results are reported on a quarterly and annual basis through consolidated financial statements, which are prepared in accordance with Philippine Financial Reporting Standards that are effective in a given year. The annual consolidated financial statements prepared by management are audited in accordance with Philippine Standards on Auditing by the independent external auditors duly appointed by the stockholders. The same annual consolidated financial statements are reviewed and approved by the Board of Directors prior to issuance to the stockholders.

MANUFACTURED CAPITAL

First Gen’s manufactured capital consists of physical resources materials, and technological assets (power plants, buildings, equipment, tools, and other infrastructure assets) used by the Company to generate power for customers. The power plants are either acquired or constructed through turnkey Engineering, Procurement and Construction (EPC) Contracts.

All assets are managed and maintained through value preservation, high economic performance, safety, reliability, cost-effectiveness and sustainability of operations. The Company conducts planning, maintenance, and monitoring programs to provide reliable and dispatchable power. Periodic assessments and reviews on business risks and environmental risks are done for each asset. Stewarded by the Senior Management Risk Review Committee (SMRRC) and Board Risk Oversight Committee (BROC), appropriate measures are developed and implemented to address or mitigate risks and ensure the resilience of assets and continuity of business in situations brought about by climate change. A Business Continuity Management (BCM) System consists of: 1) Emergency Preparedness and Response that is made up of immediate plans, responsibilities to be taken on a strike of emergency condition, 2) Crisis management that deals with strategic communications and directions with regard to the position of the organization with the key stakeholders such as Philippine Electricity Market Corporation (PEMC), ERC, DOE and the media, and 3) Business recovery to ensure that mission critical business processes are recovered within required timeframes. Stringent security measures along with a good relationship with fence-line communities are also maintained to protect the assets.

INTELLECTUAL CAPITAL

First Gen’s intellectual capital encompasses the organization’s investments in selected software and manpower training, utilized by its various business units and critical support groups. The software, data, and information are managed by the business units together with the Information Technology Group. These intangibles are utilized in new business development and project development, effective and efficient asset management, and successful and streamlined operations in a highly competitive electricity market. Additionally, the Company’s First Gen Energy Solutions Group (FGES) uses internally-developed Demand Forecasting techniques and Wholesale Electricity Spot Market (WESM) trading strategies. New knowledge and skills are also derived from specialized training with Original Equipment Manufacturers (OEMs), immersion with Operations & Maintenance (O&M) contractors, training at conventions, and membership in technical societies. Preferred technical consultants are engaged to address capability gaps on specific technical issues, thereby expanding extent and sources of Intellectual Capital. First Gen and its subsidiaries’ Quality Management Systems are certified with the International Organization for Standardization (ISO) 9001:2015, which assures stakeholders that the Company operates on an internationally-recognized framework to achieve company objectives. Process leading indicators were also developed and monitored to anticipate parameters that potentially contribute adverse impact to the business operations and noncompliance with contractual obligations, and environmental and social-related regulatory requirements.

HUMAN CAPITAL

First Gen’s human capital lies on the knowledge, skillset, and capability of its management and employees to perform duties and responsibilities regardless of gender, ethnic background, age, and religion. Its manpower is driven by the Lopez values, and guided by company policies and procedures. They are accorded with training and other forms of learning to build their competence and perform effectively. An annual Performance Engagement Process (PEP) evaluates employee performance and employee development to aid professional and personal development.

The management fully supports the employees’ well-being by providing physical and emotional wellness programs, annual physical examination, information, and education campaigns on relevant environment, safety, and health issues. First Gen highly regards its employees’ health and safety, developing and implementing the Occupational Health and Safety Management System (OHSMS) to ensure safe and healthy workplace for the employees and all workers through the identification and assessment of all OHS hazards and risks; and the timely implementation of mitigating measures to address the significant OHS risks. Plants are also working on the migration of OSH Management Systems’ OHSAS 18001:2007 certification into ISO 45001:2018 certification. To protect the security of personnel and assets, stringent security measures are enforced. Security personnel are likewise trained to effectively conduct their duty with utmost regard for human rights.

First Gen complies with the national labor laws and standards in the Philippines, including hiring employees of legal age; fair and just compensation and benefits to its workforce; training; upholding the Anti-Sexual harassment Policy; gender equality and respect and other mandated health and safety related policies. It likewise provides the workforce the appropriate infrastructure, equipment and materials as part of the essential tools of the trade.

SOCIAL AND RELATIONSHIP CAPITAL

First Gen considers its stakeholders as valued partners. Various departments communicate and engage the stakeholders they directly interface with for effective convey of information and response to the stakeholders. The Investor Relations Group handles timely information dissemination through public disclosures and responds to investors’ queries at any given point in time. First Gen Energy Solutions and the Operations Groups manage customer communications such as responding to their concerns and obtaining customer feedback.

Engagements and plenary sessions are held with accredited contractors and outsourced service providers to ensure their awareness and adherence to the Company’s business requirements and policies and Contractor ESH Management (CESHM). Screening of contractors based on environmental and social criteria is done in alignment with First Gen’s environmental and occupational health and safety standards, national labor laws and other legal requirements.

Meetings and consultations with host communities and local government units discuss the corporate social responsibility (CSR) and community relations projects of the Company intended to improve the communities’ quality of life and promote their level of self-reliance. First Gen also recognizes the Indigenous Peoples (IP) as partners by upholding their territory rights and respecting their cultural integrity, as stipulated in the Company’s Cultural Heritage and Indigenous Peoples policy.

NATURAL CAPITAL

First Gen depends on natural capitals that serve as raw materials for its businesses and as the source of environmental services that benefit the Company’s employees, host communities, and facilities. To preserve the natural capital, the Company complies with all applicable national environmental laws and regulations, as well as all relevant international conventions on natural resources management, land use, biodiversity, waste management, and sustainable development.

First Gen’s power plants operate lawfully, focusing on the protection and conservation of the environment. Its operating power plants: FGPC, FGP, FNPC, FG Hydro, FG Bukidnon have their Integrated Management Systems on Quality, Environmental and Occupational Health and Safety certified to ISO 9001:2015, ISO 14001:2015 and OHSAS 18001:2007, respectively. EDC operating plants on the other hand, maintain their Environment Management System’s certification with ISO 14001:2015 and their testing and calibration laboratories’ certification with ISO/IEC 17025. An established policy on Environment, Safety, and Health guides the Company’s stewardship/ management of its environmental impacts, environmental protection through its low carbon emissions, responsible management of effluents and wastes, and efficient use of natural resources.

Considering the results of environmental assessment, including the effects of climate change and its financial impact to the business, the Company adopted the “Mitigation Hierarchy Principle,” and practices a) avoidance of activity to prevent potential adverse impacts, b) minimization of the intensity and duration of adverse impacts, c) restoration to re-establish the natural system’s composition, structure and function, and d) offsetting the adverse impacts on the operation. Meanwhile, First Gen’s adoption of the “Precautionary Principle” protects the ecosystems and prevents environmental degradation by ensuring that decisions with environmental implications are well studied and based on science.

While First Gen produces power, it also implements programs and projects on energy reduction through consumption monitoring, conservation programs, information campaigns, and use of solar panels.

First Gen manages its environmental impact through mitigation measures and monitoring processes preventing greenhouse gas emissions relative to natural gas-fired power plants. First Gen uses low NOx Burner Technology and natural gas with lower emissions. In times of natural gas unavailability, the O&M contractor utilizes liquid fuel with low sulfur content and water injection technology to reduce NOx emissions.

Together with its O&M contractors, the Company established an integrated waste management program to ensure that hazardous and nonhazardous wastes are stored, transported, treated and disposed of according to regulatory requirements and standards. Due diligence of third-party service providers is carried out in compliance with regulatory requirements.

First Gen’s impact on water resources occur during the withdrawal and consumption of water for processing, cooling and domestic use of the Sta. Rita, San Lorenzo, San Gabriel, Avion, and FG Bukidnon power plants. Regular monitoring of water withdrawal is conducted to ensure compliance with the extraction rate limits set by the National Water Resources Board for groundwater and seawater. The seawater used by thermal plants for condenser cooling employs a once-through system and returned back to the sea. Wastewater treatment facilities are provided to comply with effluent quality before discharge to receiving bodies of water. Effluent quality is regularly monitored before discharge in compliance with the Philippine Clean Water Act of 2004.

In EDC’s geothermal plant sites, water management is addressed at a larger scale, i.e., at the watershed level, with geographic information system-assisted Watershed Management Plan. In addition, climate modeling is conducted for EDC’s Burgos Wind Project for early detection of oscillation which will potentially affect wind resource.

The Company’s environment conservation program like the Center of the Center of M rine Shorefish Biodiversit Project has contributed to the conservation of the Verde Island Passage. The forest cover near geothermal plants is protected and propagated to ensure the delivery of optimum forest goods and services that help recharge geothermal and hydropower reservoirs and serve various publics and industries dependent on the watershed.

EDC’s in-house experts and specialists implement a comprehensive Biodiversity Conservation and Management Program (BCMP) which entails monitoring of flora, fauna, and freshwater macro invertebrates; mapping and protecting High Conservation Value Areas (HCVA) within our geothermal reservations; and adopting wildlife species. EDC also implements a holistic upland community management program that helps transform upland communities living within the vicinity of its project sites into effective stewards of watershed resources.

GRI 102-20 102-29 102-30 102-31 103-1 103-2 103-3, GRI 102-12 102-29 103-1 103-2 103-3 403-1, GRI 102-11 102-12 102-29 102-33 103-1 103-2 103-3 307-1, GRI 102-11 103-1 103-2 103-3 303-2 306-1