MOVING FORWARD IN DEVELOPING LNG INFRASTRUCTURE …LNG Supply nt LNG PROCUREMENT PROCESS FOR “FIRST “ LNG SUPPLY TRANCHE Simultaneous with •Off-take Agreement for the New Gas

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MOVING FORWARD IN DEVELOPING LNG INFRASTRUCTURE FOR POWER GENERATION

3RD LNG Supply, Transport and Storage Philippines

SM AURA, BCG METRO MANILA 13-14 October 2016

Jose B. T. Aldon Senior Adviser Natural Gas Business

This presentation is prepared by First Gen Corporation (First Gen) for the 2016 3rd LNG Supply, Transport and Storage Philippines Conference organized by The All Events Group. It is for general information purposes only and not intended to serve as a form of advice, offer, invitation, or solicitation of any kind and shall not give rise to any legally binding obligation on First Gen nor upon any of its subsidiaries or affiliates.

First Gen has composed this presentation with utmost care. However, no expressed or implied representation or warranty is given as to the accuracy and completeness of the information contained herein. In no event shall First Gen nor any of its shareholders, directors, officers, employees, or advisors accept any responsibility or liability for any loss or damage, whether or not arising from any error or omission in compiling such information or as a result of any party’s reliance or use of such information. The information and opinions in this presentation are subject to change without notice.

This presentation may contain certain “forward looking statements.” These forward looking statements can generally be identified by use of statements that include words or phrases such as First Gen or its management “believes”, “expects”, “anticipates”, “intends”, “plans”, “foresees”, or other words or phrases of similar import. Similarly, statements that describe First Gen’s objectives, plans or goals are also forward-looking statements. All such forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those contemplated by the relevant forward-looking statement. Such forward looking statements are made based on management’s current expectations or beliefs as well as assumptions made by, and information currently available to, management.

The information contained in this presentation is solely for the information of the participants of the 2016 LNG Supply, Transport and Storage Philippines Conference and must not be reproduced, redistributed, passed on to any other person, or published, in whole or in part, for any other purpose without the prior written consent of First Gen.

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DISCLAIMER

• FIRST GEN CORPORATION – CONTRIBUTING TO ECONOMIC GROWTH THROUGH NEW INVESTMENTS IN THE NATURAL GAS AND LNG INDUSTRY

• THE PHILIPPINES’ CURRENT ENERGY UTILIZATION AND FORECAST GROWTH

• OPPORTUNITIES AND CHALLENGES OF FIRST LNG IN THE PHILIPPINES

OUTLINE

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• PORTFOLIO OF ASSESTS

• BACKGROUND IN NATURAL GAS

• PIPELINE OF NEW GAS PROJECTS



OUTLINE

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Natural Gas 58 %

Geothermal 32 %

Hydro 5%

Wind 5%

of the country’s gross generation (1)

25%

22 % of Luzon (2)

34 % of Visayas-Mindanao(3)

First Gen Total Installed Capacity and Generation Mix First Gen’s Portfolio of Assets

FIRST GEN IS A LEADING POWER PRODUCER IN THE PHILIPPINES WITH A DISTINCT SET OF ASSETS THAT PRIMARILY UTILIZE INDIGENOUS, CLEAN AND/OR RENEWABLE FUELS

2,647 MW Net Attributable Capacity

132 MW

Pantabangan-Masiway 70% economic ownership

(both direct and indirect)

1.6 MW Agusan 100% economic ownership

1,000 MW Santa Rita

500 MW San Lorenzo 100% economic ownership

1,159 MW Energy

Development Corp. 50% economic

ownership

+414 MW San Gabriel

--& 100MW Avion -Completed

100% economic ownership

150 MW Burgos (EDC)

50% economic

ownership

Visayas

Mindanao

Luzon

Notes: (1) Based on DOE Power Statistics 2013

(2) Based on Santa Rita, San Lorenzo, Pantabangan-Masiway and BacMan plants as a percentage of Luzon grid capacity

(3) Based on Palinpinon, Tongonan, Mindanao 1&2, Unified Leyte and Agusan Hydro plants as a percentage of Visayas and Mindanao grid capacity 5

3459 MW

• The Malampaya Gas-to-Power project is the single biggest industrial investment in the Philippines totaling US$4.5B

• The Malampaya gas field has approximately 2.7 tcf of gas and 85 million barrels of condensate located some 3 kms. below sea level

• Operation of the field is under a Service Contract with the consortium of Shell, Chevron and PNOC-EC

• Gas is fed through a 504 kilometer pipeline fuelling three power plants – the 1,000 MW Santa Rita and 500 MW San Lorenzo, and the government-owned 1,200 MW Ilijan power plant

Santa Rita and San

Lorenzo Power Plants

About Malampaya

Ilijan Power Plant

FIRST GEN HAS PLAYED A KEY ROLE IN THE PHILIPPINE NATURAL GAS INDUSTRY SINCE THE MALAMPAYA GAS-TO-POWER PROJECT

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45% 45% 10%

FIRST GEN IS WELL-POSITIONED TO EXPAND THE PHILIPPINE NATURAL GAS INDUSTRY BY BUILDING NEW GAS-FIRED PLANTS AND AN LNG IMPORT TERMINAL

2022 2015

NEAR TERM: Using Malampaya

LONG TERM: Using LNG

2019

100 MW Avion

• 1,000 MW Santa Rita • 500 MW San Lorenzo

2016

• 414 MW San Gabriel U70

• 100 MW Avion

LNG Import** Terminal Phase 1

LNG Import Terminal Phase 2

414 MW San Gabriel

Unit 70

• Non-First Gen Plants • Industrial Users • Transportation

First Gen Plants

Third Party Users

2020

450 MW Santa Maria

Unit 90

450 MW Santa Maria

Unit 80

7 **NOTE: Terminal Phase 1 might move to 2022 COD,


OUTLINE

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$-

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

-

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

Electricity Intensity1 and GDP2

mWh/capita GDP/capita

RELATIVE TO ITS LARGE POPULATION, THE PHILIPPINES IS A LOW-ENERGY USING COUNTRY

In the 10-member ASEAN region, the Philippines ranked 8th in terms of electricity consumption per capita.

Only Cambodia and Myanmar had lower electricity usage.

mW

h

$ 0

00

s (fo

r GD

P d

ata)

THERE IS SIGNIFICANT UPSIDE IN THE PHILIPPINE ECONOMY PROVIDED THAT NEW POWER CAPACITIES ARE INSTALLED IN THE COUNTRY

Sources: US EIA, International Monetary Fund, ASEAN website

1 Per US EIA data, 2011 2 At purchasing power parity in international dollars

(rounded IMF 2012)

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COAL CURRENTLY ACCOUNTS FOR BULK OF THE PHILIPPINES’ POWER GENERATION MIX at 43% WHILE NATURAL GAS IS AT 25%

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PHILIPPINES Population: 100M

Installed Capacity: 19 GW1

Available Capacity: 17 GW2

Nat Gas 53% Coal

26%

Oil 6%

Hydro 12%

Biofuel 3%

Nat Gas 71%

Coal 21%

Oil 1%

Hydro 5% Nat

Gas 25%

Hydro 8%

Nuclear 25%

Coal 30%

Oil 9%

Others 3%

JAPAN Population: 128M

Installed Capacity: 287 GW

Sources: US Energy Information Administration (EIA), Japan Ministry of Economy Trade and Industry, Singapore Energy Market Authority, Taipower.com, Phil. NGCP, Thailand Ministry of Energy, PFC Energy

MALAYSIA Population: 30M

Installed Capacity – 29 GW

THAILAND Population: 68M


SINGAPORE Population: 5.5M


Coal 48%

Nat Gas 22%

Hydro 11%

Geo 2% Others

5%

Oil 12%

INDONESIA Population: 253M

Installed Capacity – 44 GW

1 US EIA 2 Source: DOE 2016

SOUTH KOREA Population: 51M


Nat Gas 37%

Coal 27%

Oil 8%

Hydro 6%

Nuclear 13%

Renewables 9%

TAIWAN Population: 24M


Coal 43%

Oil 3%

Nat Gas 25%

Geo 18%

Hydro 10%

Renewables 1%

Nat Gas 91%

Oil 5%

Others 4%

Source: Philippine Department of Energy’s Philippine Energy Plan

THE COUNTRY IS ALREADY IN A TIGHT POWER SITUATION. THE LUZON GRID NEEDS A TOTAL OF 10,500 MW OF NEW CAPACITY THROUGH 2030

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NEW COAL-FIRED CAPACITIES ARE BEING PLANNED TO ADDRESS THE SUPPLY DEFICIT, BUT EXECUTION OF MOST OF THESE PROJECTS ARE GETTING DELAYED DUE TO ENVIRONMENTAL AND COMMUNITY ISSUES

FORECAST SUPPLY-DEMAND CURVE, LUZON GRID (2012-2030)

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OUTLINE

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0 1 2 3 4 5 6

LNG USERS

ESTIMATED AND CUMULATIVE LNG DEMAND (million tons per annum)

DUE TO LIMITATIONS ON INDIGENOUS SOURCES, THE COUNTRY’S LONG-TERM GAS REQUIREMENTS WILL NEED TO BE SERVED WITH LNG IMPORTATION

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2019

2022

414 MW San Gabriel U70 450 MW San Gabriel U80 100 MW Avion

2022** 1,000 MW Santa Rita 500 MW San Lorenzo

1,200 MW Ilijan (government-owned under a BOT scheme)

Industrial users/ transportation

1.0

3.6

5.0

2020 450MW San Gabriel U90 1.4

**NOTE: Term Phase 1 might move to 2022 COD, thus the volume requirement

might be 3.6 MTPA at start of “first “ LNG delivery in that year.

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INDEXATION AND WELL HEAD COSTING WILL BE VERY CRITICAL IN DETERMINING THE COST-COMPETITIVENESS OF LNG TO THE PHILIPPINES

The Global Gas Pricing Groups

Prices are set in relation to real gas supply and demand

Primarily oil-linked Consumer price is government

regulated

Oil-linked

US, UK and Canada

Continental Europe, South

East Asia Japan, Korea and

Taiwan

Middle East, Russia, China, India, SE Asia

Source: “Fundamentals of Natural Gas: An International Perspective” (Vivek Chandra)

LNG Roadshows for LNG/Gas Suppliers

Receipt and Evaluation of Term Sheets

Shortlisting of LNG

Suppliers

Negotiation of key supply

terms

Heads of Agreement

(HOA)

Definitive LNG

Supply Agreeme

nt

LNG PROCUREMENT PROCESS FOR “FIRST “ LNG SUPPLY TRANCHE

Simultaneous with

• Off-take Agreement for the

New Gas Plants

• FID on the LNG terminal

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THE KEY DRIVER OF THE LNG PROJECT IS SECURING COST COMPETITIVE AND RELIABLE FUEL SUPPLY FOR FIRST GEN’S NEW GAS PLANTS

Key Selection Criteria for “First” LNG Supply • Price competitiveness and flexibility

• Volume flexibility

• Track record in long-term LNG supply agreements

• Reliability of portfolio/ volume certainty - geopolitical risk of export points

• Credit requirements for LNG supply

• Co-investment appetite and O&M experience in an LNG import terminal

Floating Storage & Regasification Unit (FSRU) or Floating Storage Unit

(FSU)

Onshore LNG Import Terminal

Pros Cons

• Lower capital investment for interface facilities – subsea pipelines, jetty, etc.

• Quicker development period of 24 to 30 months

• High O&M costs - LNG ships and FSRU are currently under long-term lease arrangements

• Limited storage capacity

• Potential availability constraints during turbulent weather / sea conditions

Pros Cons

• High availability even during turbulent weather/ sea conditions

• Lower O&M costs

• Potential for multiple tanks/ higher storage capacity

• Higher capital investment

• Longer development period of 4 to 5 years

BUILDING AN OPTIMAL BUT “CALIBRATED” LNG RECEIVING, STORAGE AND REGASIFICATION TERMINAL IS CRITICAL FOR THE PHILIPPINE LNG MARKET

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KEY SUCCESS FACTORS CHALLENGES

Proactive and Supportive Regulatory Environment

• Fuel mix policy to incentivise cleaner, more environment friendly fuels • More proactive government role in promoting natural gas utilization (similar

to Malampaya development in the 1990s) • Carbon credits, tax incentives for cleaner fuel (e.g. carbon taxes are imposed

for coal in other countries) • Policies to promote security of power supply

Cost-Competitive LNG Supply

• Asian contracts are currently oil-indexed and expensive compared to the indigenous Malampaya gas

• LNG will compete in the country’s fuel generation mix under a price-sensitive consumer environment

• The Philippines is a greenfield country in the global LNG market. Credit worthiness and track record of the Philippine market/buyers will be an issue

Successful Development of an LNG Import Terminal and Other Gas Infrastructure

• Huge capex requirement for an onshore terminal • Operational issues in an FSRU- Philippines is typhoon-prone • Terminal inefficiency during initial years of LNG volume ramp-up

Successful Project Financing/ Partnering

• Counterparty strength and credit risks • Underpinning “bankable” contracts

• Terminal User Agreement (TUA) for the LNG terminal • Power Purchase Agreement (PPA) for the anchor power plants

THE ENTRY OF LNG WILL PROVIDE GREATER SECURITY OF SUPPLY AND CLEANER, MORE EFFICIENT FUEL TO THE COUNTRY. HOWEVER, A NUMBER OF KEY CHALLENGES NEED TO BE ADDRESSED

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Regulations – international conventions, national laws, local rules, etc. Technical Aspects – size, volume, location, berthing, typhoon design

factors, tsunamis, earthquake loading, etc. Financial Aspects – maturity of the project, demand and supply

analysis, investment cost and benefit ratio analysis, equity and debt coverage, etc.

Security Issues – terrorism, conflicts, theft, sabotage, vandalism, etc. Risk and Safety – fire scenarios, cryogenic issues, dispersion, safety

zone, evacuation procedures, etc. Permitting Process – harmonization and understanding of local and

international rules. Who is (are) in charge? What’s are the steps? Stakeholders’ Engagement inclusive of Financiers – dialogue with

relevant authorities both from the marine and land sides

CHALLENGES IN LNG INFRASTRUCTURE DEVELOPMENT

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There are big opportunities in the total LNG Value Chain, from Upstream to the Downstream markets in the Philippines.

The challenge would be how to integrate and connect properly all the various sections of the value chain, with due respect to schedule and (investment) costs specially as it competes with other existing fuels such as “king” coal and renewables with subsidy (FIT).

And give the proper risk-adjusted return to each Investor/ Participant in each Section of the Value Chain.

And most importantly, the Host Government and the Regulatory Agencies need to give the proper coverage and policies (i.e., fuel mix, fiscal incentives, etc.) to incentivise the participation in the massive (US$20-25 billion) investment in the total LNG Value Chain.

CONCLUDING STATEMENTS

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San Gabriel, Avion, and LNG terminal images are indicative and not to scale

FIRST GEN BELIEVES IN THE PHILIPPINE GROWTH STORY. WE WILL CONTINUE TO PURSUE OUR GAS-FIRED AND LNG PROJECTS TO HELP SPUR THE COUNTRY’S ECONOMIC GROWTH

SITE MAP OF FIRST GEN’S BATANGAS PROPERTY

NOTE: SG U70 and AVION units are now (2016) physically complete and operational

THANK YOU Visit us at www.firstgen.com.ph

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MOVING FORWARD IN DEVELOPING LNG INFRASTRUCTURE …LNG Supply nt LNG PROCUREMENT PROCESS FOR “FIRST “ LNG SUPPLY TRANCHE Simultaneous with •Off-take Agreement for the New Gas

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