Lopez majority raises pressure on First Gen board

MANILA, Philippines – The Lopez majority has intensified its criticism of First Gen Corp.‘s hydropower deal with Prime Infrastructure Capital Inc., questioning why the energy company agreed to shoulder nearly all of the project’s funding while ending up with only a minority stake.

In a statement issued on Friday, the group called on First Gen CEO Federico “Piki” Lopez and the company’s board to explain and justify the transaction. They said this left First Gen paying for virtually 100 percent of Prime Infrastructure’s hydropower projects in exchange for a 33-percent stake.

READ: First Gen stands by Prime Infra deal amid Lopez feud

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The majority said Prime Infra had effectively been reimbursed for all its development expenses through what it described as a substantial premium paid by First Gen.

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They said First Gen originally agreed to pay a P50-billion premium for a 40-percent stake in Prime Infra’s hydropower business. The premium was later reduced to about P42 billion after First Gen’s stake was cut to 33 percent.

Even at the lower ownership level, the family claimed Prime Infra would only need to contribute a net amount of about P625 million to a P62-billion project while retaining a 67-percent interest.

“Prime Infra 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, with all risks borne by First Gen,” the statement said.

The Lopez majority also raised concerns about how the transaction was approved, claiming the deal was discussed for only one hour during an executive session and was listed under “other matters” in the board agenda. It alleged that directors were not provided advance information for review.

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The group likewise questioned public support for the deal from First Gen’s independent directors, naming Manuel Ayala, Alicia Rita Morales and Edgar Chua.

It further cited what it described as “poison pills” that could cost First Gen at least P24 billion if Piki were removed from his position.

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

The majority also alleged that a standby letter of credit could place First Gen and its sister companies in cross default should Piki be removed from work.

The group argued that the transaction exposed the company and its shareholders to significant risks, including potential project cost increases and transmission charges.

It added that First Gen lacked sufficient safeguards because it had already paid a substantial premium and had no negotiated price adjustment mechanism with Prime Infra.

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“How can a corporation, a listed one at that, be made to pay billions of pesos and be potentially in default for the job of one man and at the expense of hundreds of thousands of investors?” they said. INQ