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First Gen rescinds Avion gas plant deal

Prime Meridian Powergen Corp., a wholly-owned subsidiary of First Gen Corp., on Tuesday terminated the turnkey contract with Istroenergo Group a.s., or IEG, and its Philippine branch Energy Project Completion Ltd. to build the 97-megawatt Avion open-cycle natural gas-fired power plant in Batangas.

“The contracts were terminated by PMPC due to IEG/EPC’s failure to comply with their obligations under the contracts, including, but not limited to, delay in completing the works,” First Gen said in a disclosure to the Philippine Stock Exchange.

IEG is an engineering contractor based in Slovakia that was engaged by Prime Meridian to construct and commission the Avion plant. The project features General Electric LM6000 PC Sprint aeroderivative gas turbines that have the capability to run on natural gas or liquid fuel.

First Gen said Prime Meridian drew against the various performance securities issued by IEG and EPC amounting to $12.2 million and P146.8 million to complete the outstanding works required to commission the plant.

“During the coming weeks, the Avion plant will undergo further optimization and testing before it will be ready to commence commercial operation,” First Gen said.

Following the termination, First Gen said Prime Meridian was now able to focus on completing the commissioning of Avion plant “and will work directly with suitably qualified contractors as needed.”

The Avion project is being built at a cost of around $100 million to $150 million. It was earlier scheduled to be completed at the end of 2015.

First Gen is also building the 414-MW San Gabriel natural gas project, also in Batangas. The San Gabriel project is estimated to cost around $550 million to $600 million to build.

First Gen president Francis Giles Puno earlier said the output of the power projects would “initially” be sold at the Wholesale Electricity Spot Market,  the country’s electricity trading floor.

First Gen owns the existing  1,000-MW Sta. Rita and 500-MW San Lorenzo power plant in Batangas, which use natural gas from the Malampaya field in northwest Palawan.

Puno said First Gen was open to the possibility of partnership with local or foreign  entities for the development of a liquefied natural gas receiving, storage and regasification terminal in order to address the expected depletion of Malampaya field starting as early as 2022.

A land-based LNG regasification terminal is estimated to cost around $1 billion.

Topics: Prime Meridian Powergen Corp. , , First Gen Corp. , Istroenergo Group a.s. , IEG , Avion gas plant deal

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