MANILA, Philippines – Power generation firm First Gen Corporation confirmed on Tuesday, April 14, the existence of a so-called “poison pill” in its natural gas deal with billionaire Ricky Razon that protects its CEO, Federico “Piki” Lopez, from being ousted and allows Razon to buy out First Gen at a discount.

The “poison pill” was first revealed in a press statement issued by Piki’s cousins, including former ABS-CBN CEO Eugenio “Gabby” Lopez III, on Monday, April 13.

“This is self-dealing at the expense of all First Gen shareholders and for the exclusive benefit of Piki and his cohorts,” the group, which calls itself the Lopez majority, said.

In its disclosure, First Gen, still led for now by Piki, confirmed that the “definitive agreements [with Razon’s Prime Infrastructure Capital Inc.] include Change Management Control provisions.”

The company said these provisions will be triggered if a change in management control in First Gen occurs “during the construction period of the Wawa and Pakil Projects and until the first anniversary of their commercial operations date.”

The Wawa and Pakil projects are pumped storage hydropower developments of Razon’s Prime Infra and First Gen, currently under construction in the Calabarzon.

If Piki and his designates are removed from First Gen, then Razon’s Prime Infra “shall have the right to cause First Gen to sell its Prime Hydropower Energy Inc. (PHEI) shares to Prime Infra at a discount,” First Gen confirmed.

“The discount is 25% of the purchase price of the hydro projects, amounting to approximately P15.5 billion. Additionally, if Prime Infra exercises this right, it may also cause First Gen to sell its remaining shares in the gas plants to Prime Infra at the same 25% discount, amounting to approximately P18 billion,” First Gen added.

The company said these “contractual arrangements were requested by Prime Infra and reflect the level of trust and confidence that Prime Infra has” in Piki Lopez and his management team.

The Lopez majority group said the arrangement — “ordinarily used to block a hostile takeover” — was “kept from the majority and from shareholders at large, as it has never been disclosed to the stock exchange.”

“What we know is that if Piki and the present First Gen management are removed, Prime Infra will have the option to buy out First Gen’s 33% equity in Prime’s hydropower business at a 25% discount, or more than P16 billion off the P62-billion investment,” the Lopez majority said.

First Gen initially acquired 40% of Prime’s hydropower business for P75 billion, but shortly after reduced its stake to 33%, valued at a little over P62 billion, the group said.

Vantage Point’s observations

Rappler business analyst Val Villanueva described the clause as a “defining fault line” in the Lopez family dispute. “It raises pointed questions about whether a major listed company’s governance framework has been structurally constrained by its own deal architecture.”

Here’s Villanueva’s take on the issue:

“At issue is not simply the existence of a change-of-control clause, but its economic force. The provision ties leadership continuity directly to asset value: a qualifying change in management would allow Prime Infrastructure to acquire First Gen’s stake in the hydropower venture at a 25% discount — equivalent to roughly P15.5 billion. Additional provisions may extend similar terms to other assets under certain conditions.

“This does not establish collusion, nor does it, on its face, violate any rule. But it introduces a more vital question: whether the structure of the transaction has the practical effect — intended or otherwise — of making it materially more difficult to remove First Gen’s current leadership.

“Viewed singularly, such clauses are standard. Infrastructure investors routinely demand protections linked to management stability, particularly in capital-intensive, long-duration projects where execution risk is paramount. Framed this way, the provision is a rational hedge.

“It is not, however, a neutral context. The clause emerges at a moment when a faction of the Lopez family has already moved to remove Federico “Piki” Lopez as head of Lopez, Inc., citing loss of trust and confidence — a decision now held in abeyance by court order. Against that backdrop, a provision that imposes a multi-billion peso consequence on leadership change ceases to be a technical safeguard. It becomes a structural constraint.

“By attaching a quantifiable financial cost to governance action, the clause alters the decision calculus of the board. The question is no longer whether management should be replaced, but whether the immediate value impairment justifies the move. That distinction is critical. It shifts governance from principle to trade-off.

“In effect, the provision embeds what could be described as a cost of accountability within the capital structure. Formal authority remains intact, but its exercise is conditioned by economic consequence. That is not a prohibition — but it is a deterrent.

“For minority shareholders, this is where the risk crystallizes. The provision reallocates exposure in ways that are not immediately visible in earnings. The counterparty is protected. Management continuity is reinforced. But the residual cost — should governance action be taken — is borne by shareholders who neither negotiated the terms nor control the outcome.”

Rappler exclusives

Here are in-depth exclusive articles written by Lala Rimando, former Rappler business editor, on the Lopez cousins’ feud: