First Gen rejects Lopez majority’s claims on hydro deal

MANILA, Philippines – First Gen Corp. rejected fresh allegations from the Lopez majority over its investment in Prime Infrastructure Capital Inc.’s hydropower business, calling the claims erroneous, malicious, and based on a misunderstanding of M&A transactions.

In a clarification submitted to the local bourse, the Lopez-led energy firm defended its investment in Prime Hydropower Energy Inc. (PHEI), developer of the Wawa and Pakil hydropower projects.

READ: P50-B ‘premium’ in Lopez-Razon hydropower deal questioned

The response followed allegations that Federico “Piki” Lopez agreed to pay Prime Infra a P50-billion premium and P25 billion in construction equity under First Gen’s original P75-billion hydropower deal.

First Gen said the group cited figures from the original 40-percent transaction, which the parties later revised. As disclosed in March, its subsidiary ultimately acquired a 33-percent stake in PHEI for P61.875 billion.

The company said the deal allocates P12.5 billion to acquire existing shares and P49.4 billion to subscribe to new PHEI shares, while P20.6 billion will fund project development over time.

First Gen stressed that the premium embedded in the transaction was not “free” or “superfluous” money but compensation for investments and development work already undertaken by Prime Infra over several years.

“The premium that First Gen effectively pays Prime Infra as a result of the acquisition is not free, superfluous money, but a payment in consideration of Prime Infra’s own investments and costs poured in over many years that brought the projects to its de-risked state at the time of First Gen’s acquisition,” the company said.

The company said Prime Infra had already secured financing, approvals, offtake agreements, and begun construction before First Gen joined the project.

“Hence, claiming that First Gen chair and CEO Federico R. Lopez funded the whole project is erroneous, malicious, and shows an utter lack of understanding of basic M&A transactions,” it added.

First Gen said it strategically and prudently reduced its stake to 33 percent to preserve liquidity for other projects in the pipeline.

The company said these financial considerations outweighed any additional rights associated with holding a 40-percent stake. /pai INQ