Manufactured Capital
The following were the advancements in the conglomerate’s three-pronged business strategy in 2022. These directions have been agreed upon with the Board in a strategic planning workshop while the Key Performance Indicators shall be discussed as a next step.
Power Generation
Overall, the power subsidiaries increased generation by 13.6 percent in 2022 as compared to the previous year, producing a total of 22,489.9GWh. All power projects were able to fulfill their power supply agreements, though with challenges for the natural gas power plants during the first half of the year due to restrictions in fuel supply coming from the depleting Malampaya gas field. The natural gas fuel situation improved in the year’s second half through the banked gas of the Philippine National Oil Company.
The increase in power generated can be attributed to the natural gas and geothermal assets. The Santa Rita power plant had no scheduled major maintenance inspections during the year, allowing for continuous operation. In contrast, San Lorenzo’s increase in power generation was tempered by maintenance activities in the first quarter of 2022. San Gabriel’s sizable increase in generation was due to throttling operations in 2021 in line with fuel restrictions. San Gabriel cannot use condensates as an alternative fuel unlike Santa Rita and San Lorenzo. Hence, performance saw a major increase when fuel supply became favorable in the second half of 2022.
In the geothermal assets, the increase in generation was due to favorable steam supply for Palinpinon, Bacman, Mindanao, and Nasulo.
For hydropower, the Pantabangan-Masiway complex experienced low water elevations due to the National Irrigation Authority’s (NIA) requirement for significant releases of water for irrigation. Hence, despite the favorable water flow and volume brought by prevailing La Nina conditions, the hydro asset was not able to produce as much power. Furthermore, in December 2022, water elevation lowered to about 200.6 meters above sea level (masl), due to unfavorable weather conditions. This hydropower asset requires an elevation of at least 207 masl, otherwise its dependable capacity also starts to decline. The elevation of 200.6 masl was good only for 105MW as dependable capacity. This is one of the lowest water elevations recorded during the start of the calendar year and may potentially affect generation in 2023. Our other hydropower asset, in Agusan, had reduced generation due to lower inflows at the first half of 2022, as well as from unplanned outages due to equipment failure. Repairs were immediately conducted.
For our wind asset, the La Nina conditions drove lower wind speeds and thus lowered power generation as compared to the previous year.
Assets Improvement
Optimization and efficiency projects
The Mindanao 3 project was inaugurated on April 27, 2022. This facility optimizes power generation by making use of existing brine from the Mindanao 1 and 2 geothermal facilities for additional power, before the brine is re-injected back into the reservoir.
Risk Controls
With the issues surrounding the COVID pandemic, a project to remotely operate the Pantabangan-Masiway complex was conceptualized and implemented in 2022. This would enable operations personnel to operate the power plant even with pandemic restrictions or other similarly restricting events.
Asset resiliency
The resiliency of our power projects is ensured through a natural catastrophe program and resiliency compliance plans. In 2022 the natural catastrophe program was focused on:
Continuation of engineering controls such as cooling tower replacements in the Leyte geothermal asset, building retrofitting projects, and the installation and construction of disaster prevention and preparedness equipment.
Investment in studies that will help refine risk assessments and risk reduction measures, such as building integrity assessments.
Implementation of activities for emergency response management, as well as simulation exercises to enhance the readiness capabilities of the facility crisis management teams.
Status of upcoming projects
Interim Offshore LNG Receiving Terminal
Progress is going as planned, with the structural components for the jetty having been constructed and all major equipment being installed on the Loading Platform and Utility Platform. The Facility Control Room and Jetty Monitoring Building onshore are structurally complete. Parts of onshore pipelines and the gas metering have been installed, and cable pulling is progressing through the site.
Santa Maria Power Plant
First Gen began the selection process of various contractors for the development of the Santa Maria Combined Cycle Gas Turbine Project.
Tanawon Geothermal Power Plant (20MW)
In August 2022, the OEM Supply and Project Services Contract was executed. The Balance of Plant (BOP) and Connection Assets (CA) contracts were executed in October and November, respectively. Execution started in December 2022.
Mahanagdong Geothermal Brine Optimization Plant (28MW)
Project approval from the Board of Directors was received in November 2022. The OEM and BOP contracts with the contractors were also approved within the same month. A limited Notice to Proceed for the OEM contract was executed in November.
Run-of-river projects
The pre-development activities of 4 run-of-river projects were continued in 2022. These are the 32-MW Bubunawan, 33-MW Tagoloan, 30-MW Puyo, and the 49-MW San Isidro projects. These hydropower projects in Mindanao are expected to benefit from the renewable energy markets such as Feed-in Tariff and the Green Energy Auction Program.
Palayan Binary Project (28.9MW)
As of the end of 2022, 88 percent of the Balance of Plant construction, 98 percent of Connection Asset construction, and 100 percent of the Fluid Collection and Reinjection System construction were completed.
Aya Project (100-120MW)
The Aya Pumped-Storage Hydro Power Project is targeted for implementation by the second quarter of 2023. The detailed engineering design of the civil, hydromechanical, and electromechanical works is on-going and most of the permits and endorsements have already been secured.
This project will change the Pantabangan-Masiway complex’s cycling power generation to a year-round operation as it will no longer be dependent on the seasonal irrigation requirements of NIA.
Energy Solutions
First Philec sustains the momentum of healthy production. Their capacity has increased greatly, now able to produce 2,500 units of transformers per month. They have a healthy order pipeline that will give them a good headstart for 2023. This growth can be attributed to equipment upgrades and additional manpower on the production floor, along with incentives that encourage teamwork and career development opportunities.
Current and potential expansion of products and solutions
With First Philec’s expansion in capacity and solution offerings, a new production facility is under development. The B4 facility is currently in its design phase.
With the launch of the Super Green transformer in 2021, FPI focused on preparing for the product’s commercialization in 2022. This involved completing legal and regulatory activities and introducing the Super Green transformers to key customers.
First Philec also began developing their export plans to the United States. Products planned for export are the pole-type distribution transformers and voltage regulated distribution transformers.
FPI is planning to make investments related to battery storage and is currently in active discussions with local and international companies, including experts from Japan, for this investment opportunity.
As extreme weather events become more frequent and severe, it could lead to an increased need for transformer replacement or repairs due to accelerated deterioration of transformer components. This could provide FPI with a potential new revenue stream and an opportunity to innovate and develop new solutions to address these challenges.
The potential widespread adoption of electric vehicles (EV) that require fast charging systems can accelerate the aging of transformers, reducing their lifespan. Aside from this, the increasing penetration of Distributed Energy Resources, particularly solar, can lead to higher voltage stresses on the connected equipment, such as transformers. Additionally, the feeding-in of solar energy to the grid can cause overloads to the transformer if not properly monitored and mitigated. These developments pose an opportunity for FPI to improve the technology and performance of its products to be better prepared for these changes in the market.
FPI is prepared to support the needs of its customers and the country in this emerging complex world with its products that are adapted to extreme weather, higher penetration of variable renewable technologies, and the impacts of the electrification of the transport sector.
Real Estate
Residential and Commercial Real Estate
First Philec sustains the momentum of healthy production. Their capacity has increased greatly, now able to produce 2,500 units of transformers per month. They have a healthy order pipeline that will give them a good headstart for 2023. This growth can be attributed to equipment upgrades and additional manpower on the production floor, along with incentives that encourage teamwork and career development opportunities.
In 2022, Rockwell Land completed three projects: 1 Proscenium, 32 Sanson-Solihiya, and the Vantage West. It also unveiled five new developments: Edades West, BenCab, Rockwell Center Bacolod (RCB) commercial lots, Bel-air, and Terreno South Phase 4.
Occupancy in Rockwell Land’s office developments dipped slightly from 96 percent in 2021 to 95 percent in 2022 due to some pre-terminations as well as the additional gross leasable area (GLA) of 1 Proscenium. However, rental rates improved as Rockwell Land was able to secure escalations from renewed tenants.
In the retail segment, occupancy improved to 90 percent compared to 71 percent in 2021 as there were fewer pandemic restrictions in 2022. This allowed existing tenants to continue operations while new tenants were able to open. Rates significantly improved on the back of better sales driven by increasing foot traffic year on year.
For 2023, potential revenge spending and resilient BPO growth provide opportunities for the office and retail segments that Rockwell can cater to.
Developments in building design
Rockwell Land is incorporating the tenets of the FPH mission to decarbonize and regenerate into the design of its properties. To adapt to climate impacts, they are developing their projects to have better building envelopes to address concerns of heat; will be following LEED design parameters; use Energy Recovery Ventilation (ERV) for fresh air supply; and other similar considerations. The recently completed 1 Proscenium is a Silver LEED certified building. And Edades West, to be completed in 2028, will incorporate double-glazed windows with low-emissivity treatment that filters excess heat from the sun by up to 2 degrees Celsius, have rainwater harvesting system, and low flow bathroom and kitchen fixtures.
Climate impact studies are used to inform the feasibility studies of projects and are also a consideration when scouting for new locations.
Total area constructed: 112,887.6 sqm
Total area leased: 224,734.0 sqm
Total area sold and reserved: 132,000.0 sqm
Industrial Real Estate
FPIP currently has 184,529sqm available of RBF space for its locators, of which 76.2 percent or 140,520sqm has been leased out in 2022. This is lower than 2021’s lease rate of 84.8 percent or 129,642sqm, despite the additional of leased area of 10,878sqm, due to the addition of 31,633sqm of space from the buyback of vacated locator property.
In the expansion of the park and its services, FPIP completed the following in 2022:
- Upgrade of Centralized Water Treatment Facilities (CWTF) 1 and 2
- Design and construction of the sewer network tap to CWTF 3
- Supply and installation of solar PV panels
- Design and construction of slope protection beside the RBF Q compound
- Design and construction of the Consuelo Park Gazebo
- New FUI Office Building Structure
All these developments let FPIP better cater to the locators and FPIP community, as well as continue compliance to regulations.
Other construction activities that will improve current facilities are still for completion. As of end-2022, construction progress on these were at 92.2 percent.
FPIP will continue to expand its land bank and assess the best use of available land in 2023, including reconfiguration of areas within the park to further increase recurring revenue through a combination of industrial and commercial land and property lease.
Expansion plans
With FPIP’s goal to develop a township, it is expanding its menu of products and services it can offer to locators and the FPIP community, including waste management services, warehouse and logistics services, and canteen operations to provide food services to locators for their employees.
The township design previously developed is currently undergoing further refinement to include better integration with the industrial park, embracing the San Juan River, improving accessibility to local and regional communities, expansion of open spaces and public parks, and improving the regenerative and inclusivity concept.
FPIP will continue to expand its land bank and assess the best use of available land in 2023, including reconfiguration of areas within the park to further increase recurring revenue through a combination of industrial and commercial land and property lease.
Construction and Energy Services
First Balfour continues to service four key markets, where there are opportunities in relation to the mission on decarbonization and regeneration:
Power and Energy. First Balfour continues to provide engineering and construction services to renewable energy companies and other utility providers. In 2022, they worked on a number of geothermal projects for EDC and PGPC, as well as a power transmission project with National Grid Corporation of the Philippines (NGCP).
Water infrastructure. In the water space, First Balfour hopes to bring relevant technologies used and experiences gained in major urban centers to other water districts around the country. The end goal is to help them uplift the level of service they provide their existing customers and more importantly, reach communities who do not yet have access to clean water.
Transport infrastructure. The expansion of the country’s transportation infrastructure requires an investment of PHP5 trillion for the next decade. First Balfour will participate in the tenders for these transport projects.
Specialized buildings. In anticipation of further e-commerce demand, rising internet use, and the recent improvements in Information and Communication Technologies (ICT) capabilities, the Philippines is attracting expansive data center interests in the next three to five years. We also see hospitals and healthcare infrastructure to have continuous growth in the coming years as a response to the challenges brought about by the COVID-19
pandemic.The projects First Balfour pursues contribute to a climate resilient and adaptive environment, so they keep enhancing their capabilities to deliver these long-term goals.
Apart from the construction projects, the following are the updates on First Balfour’s subsidiaries:
T1 Rentals
- Equipment fleet grew to 873 units by end-2022
- Opened a 3,400sqm equipment yard in Clark, Pampanga
T1 Transport
- Ventured into tugboat vessel operations business
Torreverde Corp
- Aggregates facility in Batangas partially began sourcing renewable energy for its operations
ThermaPrime
- 2 live drilling contracts
- Goal to bring and operate rigs in overseas engagements
Summary
Power generation segment: improvements in efficiency and optimization of power assets, inauguration of the Mindanao 3 geothermal unit, and favorable fuel supply during the year
Energy solutions segment: steady increase in the transformer production capacity, now at 2,000 to 2,500 units per month
Commercial and Residential Real Estate: completion of three projects and unveiling of five new projects
Industrial Real Estate: completion of various construction activities including upgrades to the Centralized Water Treatment Facilities, installation of solar panels, new office building, and others
Construction and Energy Services: completion of major projects such as the NBAQ4 and CCLEX, with on-going projects and a healthy pipeline of upcoming projects for energy infrastructure, water infrastructure, transport infrastructure, and specialized buildings. First Balfour’s subsidiaries are also expanding their equipment fleet and capabilities
All business segments have various scheduled developments and expansions up ahead.
Non-Financial Outcomes
Manufactured capital was significantly built up in 2022, and will continue to be built up as each business segment expands their businesses and offerings to their respective customers. All the while, business expansion will be mindful of the mission for decarbonization and regeneration.
Financial Outcomes
Our business segments can be said to be very heavy on manufactured capital, as the industries of our businesses are rooted in the development of utilities, infrastructure, and allied services. Hence, the development, expansion, and efficient operations of our manufactured capital is a strong driver of our revenue.
