First Gen says Lopez majority cites old ‘premium’ data

MANILA, Philippines – First Gen Corp. has defended its multibillion-peso investment in Prime Infrastructure Capital Inc.’s hydropower business, rejecting allegations from the Lopez family majority that the transaction unfairly favored Prime Infra and exposed the listed energy company to excessive risks.

In a clarification submitted to the local bourse on Wednesday, First Gen said claims that chair and CEO Federico “Piki” Lopez effectively funded the entire hydropower project through a hefty transaction premium were inaccurate and misleading.

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

The statement was issued after the Lopez majority reignited its feud with Piki Lopez by alleging that First Gen had agreed to pay Prime Infra P50 billion as transaction premium and another P25 billion as construction equity under an original P75-billion deal for a 40-percent stake in Prime’s hydropower platform.

The majority bloc led by Eugenio “Gabby” Lopez III had argued that the arrangement left First Gen carrying most of the project’s funding requirements despite holding only a minority stake.

But First Gen said the figures cited by the Lopez majority referred to a transaction structure that was later revised.

The company noted that, as previously disclosed in March, its subsidiary FGEN Aqua Power Holdings Inc. ultimately acquired a 33-percent equity interest in Prime Hydropower Energy Inc. (PHEI), the developer of the Wawa and Pakil pumped-storage hydropower projects, for P61.875 billion.

First Gen said the acquisition cost consisted of P12.5 billion for existing shares purchased from Prime Infrastructure and P49.375 billion for newly subscribed shares in PHEI.

The payment structure also includes amounts that will be released over time as project funding requirements arise.

Addressing the issue of the alleged premium, First Gen said such payments are standard in mergers and acquisitions and form part of the acquisition cost.

“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.

READ: Lopez majority flags third ‘poison pill’ tied to Piki removal

By the time First Gen invested, the projects had already moved beyond the riskiest stages of development, with construction risk largely remaining, it said.

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