2006 Annual Report - Lopez Holdings Corporation

2
A n n u a l R e p o r t 2 0 0 6
poweR
In 2006, First Philippine Holdings Corporation
(FPHC) posted consolidated revenues of ∏59.57 billion,
an increase of 12% from ∏53.26 billion the previous
year. Consolidated cost and expenses for the period
increased by 13.2% to ∏47.33 billion from ∏41.80 billion.
Net income attributable to equity holders of the Parent
was at ∏8.70 billion, higher by 77% from ∏4.90 billion
the previous year.
power generation
First Gen Corporation registered a 20% increase in
consolidated revenues to US$992 million in 2006 from
US$828 million in 2005. Net income improved by 6% to
US$92 million YoY from US$87 million in 2005.
The Pantabangan-Masiway hydroelectric plant
The increase was primarily driven by the company’s
acquisition of the 112-megawatt Pantabangan-Masiway
hydroelectric facility and the higher dispatch of its gas-
fired power plants. The First Gen gas plants hit a record
81 percent dispatch against 77 percent in 2005 while
Pantabangan-Masiway also posted a high dispatch at
72%. Utilization of the bunker-fueled Bauang plant also
jumped to 8% from the previous year’s 2%.
Lower administrative expenses due to the resolution
of its disputes and lower interest expenses due to debt
payments also contributed favorably to the bottom line.
First Gen resolved both its major disputes in 2006 further
strengthening its balance sheet.
In March 2006, Santa Rita, San Lorenzo and the
Gas Sellers settled the dispute concerning the Gas
Sale and Purchase Agreement. The Gas Sellers
claimed annual deficiency payments amounting to
a total of approximately US$163 million for Santa
Rita and US$68 million for San Lorenzo, a total of
US$231 million, as of December 2005. The resolution
of the dispute resulted in the substantial reduction
of the obligations to US$135 million. The settlement
also resulted in a payment deferral facility starting
October 1, 2005 until December 26, 2009, with
interest due likewise reduced. Total principal and
interest payments made during the year amounted
to US$77 million. Furthermore, the time given to
consume the gas in question has been extended from
2012 to 2014.
Later in the year, the long-standing arbitration with
Siemens that started in 2002 was decided in favor of
Santa Rita. The Tribunal ruled that it was entitled to
the US$94 million previously withheld from Siemens
in connection with delays to the completion of the
plant. In respect of all other claims, counterclaims,
interest and costs of the arbitration, Siemens made
an additional net payment to Santa Rita of US$10.5
million, and on December 12, 2006, the Tribunal
issued its Final Award which finally resolved all
outstanding matters in the arbitration, and formally
concluded the matter.
With the resolution of the Siemens dispute, Santa
Rita used the US$88 million it set aside previously in
its loan proceeds account for the prepayment of debt
on February 28, 2007. From a loan balance of US$324
million as of December 2006, Santa Rita’s debt is
down to US$240 million after the prepayment.
First Gen is now poised for further growth.
First gen goes public
On February 10, 2006, First Gen Corporation listed its shares
in the Philippine Stock Exchange (PSE), grossing P9.1 billion in
an initial public offering (IPO). The IPO proceeds will fund First
Gen’s strategic objective of doubling the company’s net megawatt
capacity in the next few years.
First Gen is the first pure play power generation company
to be listed on the PSE. It offered 24% of its total issued and
outstanding common shares at an offer price of P47.00 each.
About 80% of the total offer was sold to international institutional
investors in Europe, the United States, and Asia-Pacific. UBS
AG and CLSA Limited were the International Underwriters.
The balance of 20% was sold to domestic institutional and
retail investors, and was underwritten by ATR Kim Eng Capital
Partners, Inc. and BDO Capital & Investment Corporation.
To comply with the reportorial requirements of the PSE
and the Securities and Exchange Commission, First Gen has
institutionalized stringent corporate governance practices
required of public companies, as well as adopted rigorous internal
and risk management controls, with an emphasis on the rights and
protection of its minority shareholders.
In line with these initiatives, First Gen elected two independent
directors to its nine-man board: Tony Tan Caktiong and Cezar
Consing. Both individuals are highly-respected in their fields and
bring valuable insights to management. The Audit Committee is
currently headed by one of the independent directors to review
corporate performance. In addition, an Enterprise-wide Risk
Management system has been applied in every phase of the
Company’s activities to further ensure the effectiveness of First
Gen’s governance systems.
First Gen was listed on the Philippine Stock Exchange on February 10, 2006 with chairman
Oscar M. Lopez (third from right) ringing the ceremonial bell to signal the start of trade for the day.
A n n u a l R e p o r t 2 0 0 6
3