Lopez Holdings Corporation investments in power and energy manages business challenges

Better power supply at affordable rates demanded upon entities playing in the energy segment while withstanding a major factor beyond control — the weather.

The Lopez Holdings Corporation and its Subsidiaries Definitive Information Statement, Annual Report 17A, and Annual Corporate Governance Report shared great information about the investments in sustainable energy development, infrastructure, property development and green manufacturing where the company has a stake in.

Some of the report highlights, that caught my attention, includes:

FGEN manages power supply and stability needs of the Luzon grid.

FPH affiliate First Gen Corporation (FGEN) posted a 38% year-on-year decrease in net income attributable to Parent to US$118.1 million from US$189.8 million, as restated. Consolidated revenues also decreased by 8% to US$ 1.905 billion from US$2.060 billion. The reduction in net income mainly resulted from the lower income booked by First Gen Hydro Power Corporation due to reduced sales from ancillary services, and FGP Corporation as a result of the fire at the main transformer of San Lorenzo Power Plant’s Unit 60.

The fire cut San Lorenzo’s production from 500 MW to 250 MW. In November 2013, the transformer was replaced and on December 26, 2013, the plant was restored to generate power at its rated capacity. First Gen, through FGP Corp., expedited the manufacture and delivery of the 150-ton replacement transformer to ensure sufficient power supply and the stability of the Luzon grid.

In December 2013, First Gen, through First NatGas Power Corp. signed an equipment supply contract with Siemens AG and a construction services contract with Siemens, Inc. for the engineering, design, procurement, construction and completion of the 414 MW San Gabriel Combined Cycle Natural Gas-Fired Power Plant, the first of three units of a planned 1,350 MW San Gabriel Project. It also signed an operations and maintenance agreement with Siemens Power Operations, Inc. to cover the first 9.5 years of operation of the first San Gabriel unit. This first unit will initially use natural gas but in the future is intended to operate on re-gasified liquefied natural gas. First Gen broke ground on San Gabriel’s first unit in January 2014.

EDC bears brunt of Typhoon Yolanda. Ventures into Wind Power Project.

First Gen affiliate Energy Development Corporation (EDC) registered consolidated net income attributable to equity holders of the parent of P4.740 billion, lower by 47% than P9.002 billion in 2012. Consolidated revenues decreased by 10% year-on-year to P25.656 billion from P28.369 billion. The attributable net income in 2013 represented 18.5% of total revenue, compared to 31.7% in 2012. Recurring net income attributable to equity holders of the parent decreased by 23% to P6.565 billion from P8.522 billion.

EDC booked a P1.261 billion foreign exchange loss due to the depreciation of the peso against the dollar in 2013, compared to a P1.054 billion foreign exchange gain in 2012 when the peso was stronger. EDC recorded a P625 million loss on damaged assets due to Typhoon Yolanda and a P575 million loss on impairment of exploration and evaluation assets in relation to its Cabalian Project in Southern Leyte.

The Department of Energy issued in May 2013 the Certificate of Confirmation of Commerciality in favor of EDC’s wind project in Burgos, Ilocos Norte under EDC Burgos Wind Power Corporation (EBWPC). The DoE certificate, the first to be issued by the DoE for a wind project, confirmed the Declaration of Commerciality for EBWPC to develop, operate, and maintain a feasible and viable 87 MW wind power project. The certification converts the Burgos wind farm’s Wind Energy Service Contract issued in 2009 from the exploration/pre-development to development/commercial stage.

EDC broke ground in April 2013, after selecting Vestas of Denmark, the world’s largest wind turbine manufacturer, as supplier of the 29 V90-3.0 MW wind turbines. The total cost of the Burgos Wind Project will be approximately $300 million covering the costs of the wind farm, substation and transmission line. Once operational, the Burgos Wind Project (BWP) is expected to generate approximately 233 GWh annually and power over a million households. It will augment the Luzon grid’s dependable capacity which needs an additional 4,200 MW in the next ten years due to the projected 4.5% annual increase in electricity demand.

Lopez Holdings Corporation is a holding company which invested in leading Philippine corporations:

• ABS-CBN Corporation (ABS-CBN), the country’s largest multimedia conglomerate and
• First Philippine Holdings Corporation (FPH), which has investments in sustainable energy development, infrastructure, property development and green manufacturing.

Lopez Holdings, ABS-CBN and FPH are listed in the Philippine Stock Exchange.

Lopez Holdings received a total of:

• P942 in cash dividends from its investees in 2013: P179 million from ABS-CBN and P763 million from FPH.
• Higher in comparison to the P865 million in cash dividends received in 2012: P357 million from ABS-CBN and P508 million from FPH; and
• P1.446 billion in cash dividends received in 2011: P938 million from ABS-CBN and P508 million from FPH.

The company will be having its annual stockholder’s meeting today. It will be interesting to learn what will be the major concerns of its shareholders on the power and energy business investment.