First Gen Integrated Report 2019

Value Creation

Natural Gas Performance

Financial Highlights

(In USD Millions)

First Gen’s natural gas platform performed well in 2019. The Company’s established natural gas power plants greatly contributed to its overall record earnings for the year. This increase can be attributed to several factors, namely:

The natural gas platform reported a net income of USD 201.2 million for 2019, a 13.2 percent increase from USD 177.7 million in 2018. This increase also contributed 67.9 percent to the Company’s overall earnings for 2019.
In 2019, SAN GABRIEL had a higher net income of USD 45.7 million a 29.8 percent increase from USD 35.2 million in 2018, due to the full-year PSA with Meralco.
AVION’s net income increased by USD 5.8 million due to higher dispatch and higher average WESM selling prices during the year.

Operational Highlights

First Gen’s natural gas plants operated reliably, each contributing to the success of the natural gas platform and helping curtail power outages in the Luzon grid in 2019.

1) COMPETITIVENESS OF GAS PLANTS

Natural gas is a competitive player in the energy industry.
▷ Based on Meralco’s Average Generation Costs, First Gen’s natural gas plants have provided cheaper all-in tariffs in comparison to coal plants for 7 out of 11 years from 2009-2011 and 2016-2019. This trend continued in 2019 allowing customers to enjoy affordable electricity prices.
▷ The San Gabriel plant helped lower Meralco’s average generation rate, producing electricity at PHP 0.46/kWh less than the 2019 Weighted Average Meralco Captive Rate.

2) CONTINUED EXCELLENCE OF OPERATIONS

Santa Rita and San Lorenzo plants continue to operate in excellent condition.
▷ San Lorenzo and Santa Rita operated at a 95 percent and 96 percent availability factor, respectively, or seven and eight percent higher than the 88 percent benchmark rate set by the Generating Availability Data System (GADS*).
▷ The high capacity factors of Santa Rita and San Lorenzo (approximately 76 percent) showcase how the two plants continue to be relied on to provide reliable baseload power to the grid.

3) EXPANSION OPPORTUNITIES

With the right infrastructure, natural gas can be explored and developed further for geography and utility use.
▷ Additional geographical use involves bringing gas-fired electricity to areas in Visayas and Mindanao.
▷ Electricity uutility use involves utilizing gas for transportation, residential, and commercial purposes.

*US GADS is a mandatory industry program that tracks information from
various conventional generating technologies that are 20 MW and larger.

2019 Key Achievements

First Gen’s natural gas platform made significant strides in 2019, all of which resulted in better performance, improved plant resilience, and significant progress in on-going projects.

PLANT PERFORMANCE

▷ Our three baseload natural gas plants, namely, Santa Rita, San Lorenzo, and San Gabriel, continued to operate reliably during critical red and yellow alert periods. The flexibility of the Santa Rita and San Lorenzo power plants to run on liquid fuel helped the grid overcome the restrictions of the Malampaya gas supply.

▷ San Gabriel’s full-year delivery for its PSA with Meralco allowed the Company to provide Meralco customers with one of the lowest generation costs in 2019 which, in turn, enabled the Company to provide affordable electricity to Meralco suppliers.

▷ The Avion plant displayed its capability to quickly ramp up and down to augment supply shortages, allowing it to provide electricity to the grid during periods of peak demand. In 2019, Avion achieved an all-time high for the plant’s dispatch.

RESILIENCY MEASURES

The FGCEC improved its plant reliability by employing resiliency measures such as:

▷ Constructing storm surge and flood barriers;

▷ Improving the retention of basin water discharge; and

▷ Improving site protocols during typhoons.

PROGRESS OF THE LNG PROJECT

First Gen’s Batangas LNG Terminal Project achieved key milestones in 2019. The project was also declared an “Energy Project of National Significance,” in recognition of its importance to national grid security. (For a full discussion of these milestones, see First Gen's LNG Project: An Update below)

Creating Value for Stakeholders

First Gen continues to develop its natural gas platform to provide its stakeholders with cleaner energy at competitive prices.

Customers

Lower generation costs for its customers, like Meralco.

Stockholders

First Gen’s natural gas platform contributed 67.9 percent to the Company’s attributable net income in 2019. Its competitive pricing and reliability make it a worthy investment.

Community

FGCEC continues to operate with minimal impact to its surrounding communities as it emits minimal amounts of particulate matter and does not leave behind harmful pollutants such as ash and sludge. Various environment and community initiatives have also been set up, such as coastal cleanup, educational programs, and health programs.

Environment

In 2019, First Gen’s Natural Gas Plants produced a total of 13,873 GWh of power avoiding the release of 8.6 million tons of greenhouse gas emissions* (tCO2e), equivalent to taking out the emissions of 1.9 million cars annually.

*vs. coal
NOTE: Reference for equivalent emissions for coal-fired power plant and passenger vehicles are based on U.S. Environmental Protection Agency (USEPA) Greenhouse Gas Equivalencies Calculator (https:// www.epa.gov/energy/greenhouse-gas-equivalencies-calculator)

First Gen's LNG Project: An update

The LNG terminal remains on-track to initiating commercial operations by 2022. The project was able to accomplish the following so far:

MARCH 2019

DOE awarded First Gen LNG Corporation a Notice to Proceed (NTP) permit for the LNG terminal.

MAY 2019

First Gen held a traditional Kagami Biraki groundbreaking ceremony with Tokyo Gas.

AUGUST 2019

The project was declared as an “Energy Project of National Significance” (EPNS) in accordance with Executive Order No. 30.

OCTOBER 2019

The DOE approved the extension of the project’s Notice to Proceed (NTP), allowing the continuation of the work and activities required to complete the NTP conditions.

MARCH 2020

First Gen submitted its application for a Permit to Construct, Expand, Rehabilitate, and Modify (PCERM) to the DOE.

ENHANCED PROJECT CONCEPT: THE MULTI-PURPOSE JETTY

Once the modification of the existing jetty is completed, the modified multi-purpose jetty will have the capacity to receive liquid fuel carriers but will have the additional capability of accommodating FSRU on an interim basis, as well as LNG carriers, that will accelerate FGEN LNG’s ability to introduce LNG to the Philippines to as early as 3rd quarter of 2022.

This innovation can readily serve the natural gas requirements of existing and future gas-fired power plants of third parties and FGEN LNG affiliates, and bring the country closer to its goals of energy security, expanded energy access, and low- carbon future. The LNG terminal can serve as a hub that will underpin large and small-scale LNG opportunities throughout the Philippine archipelago.

ADDITIONAL CAPACITY THROUGH THE SANTA MARIA POWER PLANT

▷ First Gen continues to work on the development of the approximately 1,200-MW Santa Maria Combined Cycle Gas Turbine (CCGT) Power Plant Project in conjunction with the ongoing efforts to develop the LNG Terminal.
▷ The project is expected to provide more flexible and efficient capacity for the country, especially suited for the needs of a grid that will be increasingly dependent on intermittent renewable energy sources.

There is also development on the infrastructure needed to advance the LNG terminal.

Strategy for Natural Gas

To supplement renewable energy’s variability and intermittency, First Gen sees natural gas as a clean, affordable, and reliable energy source that can address the Energy Trilemma, namely:

ENERGY SECURITY

Meet current and future energy demand reliably and be able to quickly provide power in response to volatility in the grid.

ENERGY EQUITY

Provide universal access to reliable, affordable, and abundant electricity.

recycle

ENERGY SUSTAINABILITY

Mitigate and avoid potential environmental harm and climate change impacts.

The Philippines still heavily relies on coal energy. As an advocate of clean and renewable energy, the Company is responsible for communicating why natural gas is a better investment than coal.

Natural Gas is...

CLEAN

Natural Gas is the cleanest burning fossil fuel. Compared to coal, it emits it emits 60 percent less CO2, 100 percent less SOx, 80 percent less NOx, and does not produce ash, sludge, and particulate matter that are harmful to human health and the environment.

AFFORDABLE

Natural gas has provided Meralco with lower generation costs than coal for 7 out of the past 11 years (from 2009-2011 and 2016-2019), and its plants are cheaper to build and operate than coal plants.*

RELIABLE

Natural gas plants have higher availability than coal plants in the Philippines, based on data from 2016 to 2019. Natural gas plants can also start and stop up to 50 times faster than coal plants, making them highly flexible without compromising efficiency and reliability.

A BRIDGE FUEL TOWARD MORE RENEWABLES

Natural gas plants can support intermittent RE sources because they are highly flexible. Natural gas plants can turn on and off quickly, allowing them to adapt to the changing demands of the grid or respond to sudden loss in capacity due to intermittence.

*US Energy Information Agency (EIA) Capital Cost and Performance Characteristic Estimates for Utility Scale Electric Power Generating Technologies, 2020 or 2016.