Lopez majority questions P42-B premium in Prime Infra deal

MANILA, Philippines – The Lopez family majority has challenged Federico “Piki” Lopez and First Gen Corp.’s board to justify the terms of the company’s hydropower partnership with Prime Infrastructure Capital Inc., claiming the deal leaves First Gen bearing nearly all of the investment and risks.

In a statement released Friday, the family said First Gen agreed to pay a premium of about P42 billion for a 33-percent stake in Prime Infra’s hydropower business, down from the original P50-billion premium tied to a previously proposed 40-percent stake.

READ: Directors back First Gen hydro deal

The family alleged that, even after the reduction in ownership, Prime would need to contribute only about P625 million net to the roughly P62-billion project while retaining a 67-percent interest.

“Prime needs to put up only a net amount of about P625 million for the P62-billion project, or 1 percent in return for 67 percent of profits,” the family said.

According to the statement, the transaction effectively reimbursed Prime Infra for its development expenses while leaving First Gen responsible for most of the project funding.

The Lopez majority also challenged the board’s approval process, saying directors discussed the transaction for only an hour in executive session and listed it under “other matters” on the agenda.

The family also flagged “poison pills” and a standby letter of credit that could expose First Gen to default risks if Piki loses his position.

The statement also cited possible risks from project cost increases and transmission charges, arguing that First Gen lacked sufficient protection because there was no negotiated price adjustment mechanism in the agreement.

First Gen has previously defended the Prime Infra transaction and its independent directors have publicly expressed support for the deal. /pai INQ