FIRST Gen Corp. has rejected allegations from members of the Lopez family regarding its multibillion-peso investment in Prime Infrastructure Capital Inc.’s hydropower projects, asserting that the deal followed standard merger-and-acquisition practices and was structured to support broader capital allocation plans.
In a clarification submitted to the stock exchange on Wednesday, the Lopez-led power firm disputed claims that Chairman and CEO Federico “Piki” Lopez agreed to pay a P50-billion transaction premium and P25 billion in construction equity as part of the company’s investment in Prime.
The company emphasized that its subsidiary, FGEN Aqua Power Holdings Inc., ultimately acquired only a 33-percent stake in Prime Hydropower Energy Inc. (PHEI) for P61.875 billion, lower than the originally announced 40-percent investment.
First Gen said the consideration consisted of P12.5 billion for existing shares purchased from Prime and P49.375 billion for newly subscribed shares in PHEI.
“The premium paid is a standard consideration in M&A (merger and acquisition) transactions, and one that is incorporated in the acquisition cost,” First Gen said.
The company explained that the premium reflected Prime’s investments over several years in developing the Wawa and Pakil pumped-storage hydropower projects, including securing development rights, financing, offtake agreements and construction activities before First Gen entered the venture.
“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,” it said.
First Gen also pushed back against claims that reducing its stake from 40 percent to 33 percent resulted in the loss of strategic veto rights and ceded control of the projects to Prime Infrastructure.
The company maintained that the decision was made after evaluating its future investment pipeline and liquidity requirements.
“Since First Gen has a significant number of high-potential assets in the pipeline, management thought it best to scale back the hydro investment to make sure that First Gen would have the liquidity to fund all its projects,” it said.
The company added that there was nothing preventing it from discussing a future increase in its stake should management determine that such a move would be in the best interests of the company and its shareholders.
First Gen likewise rejected assertions that Prime Infrastructure would need to contribute only P625 million more to complete the projects while receiving the majority of future profits.
“We reiterate that Prime Infra has already incurred significant costs and expenses in the development and construction of the projects for more than five years, resulting in First Gen acquiring a de-risked project,” the company said.
The clarification came after members of the Lopez family publicly questioned the economics of the transaction and called for greater disclosure regarding the investment.
On Wednesday, First Gen shares slipped P0.56, or 3.48 percent, to close at P15.52 each amid a marginal drop of 0.07 percent for the Philippine Stock Exchange index.
