On Saturday, May 2, the state pension fund Social Security System (SSS) announced it remained confident in the Lopez power generation firm First Gen Corporation (First Gen) despite the bitter family feud engulfing the company’s leadership. The state pension fund, which manages retirement savings for 37 million private-sector workers, said “governance is robust, disclosures to the Philippine Stock Exchange are timely and precise, and management is sound,” citing insights from its commissioner who sits on the board of First Philippine Holdings, First Gen’s parent company.

A review of regulatory filings tells a different story.

First Gen did not disclose P23.5 billion in penalty clauses tied to CEO Federico ‘Piki’ Lopez‘s continued employment until 60 days after signing the contracts that contained them — and only after the Lopez family’s majority shareholders went public with accusations that the company had hidden a poison pill. When the company finally filed amended disclosures to correct the record, it took another two weeks — 76 days after the first contract was signed.

Neither amendment explained why the information had been missing. The documents simply inserted the Change of Management Control (COMC) language into the official record — and were filed on the same day as the information statement for the May 28 Annual Stockholders’ Meeting.

During those 76 days, First Gen shares traded on the Philippine Stock Exchange (PSE). Investors bought and sold positions without knowing that removing Piki Lopez, or any of his written designees, from six specific positions across First Gen and its parent entities.

What was signed on February 13 — and what wasn’t disclosed

On February 13, First Gen distributed a press release to business journalists. It was well-written and confident: a P75-billion investment in two pumped-storage hydropower projects in Rizal and Laguna, part of a strategic partnership with Prime Infrastructure Capital, the infrastructure conglomerate of tycoon Enrique Razon Jr. Two CEOs were quoted. The clean energy future was invoked. The projects — 600 megawatts in Wawa, 1,400 megawatts in Ahunan — were framed as among the most technically significant energy infrastructure initiatives in the country.

The same day, First Gen filed the mandatory Securities and Exchange Commission (SEC) Form 17-C with the Philippine Stock Exchange. The filing covered four items: the deal, the annual stockholders’ meeting date, an employee stock purchase plan, and a vice-presidential appointment. It described the transaction in one paragraph.

What it did not mention, anywhere, in any form: that the deal contained a Change of Management Control provision — a COMC clause — that would allow Prime Infra to force First Gen to sell back its stake at a steep discount if Piki Lopez, or his written designees, were removed from six specific positions across First Gen and its parent companies.

The clause was already in the contract. It was not a detail still being negotiated. It was in the document First Gen signed on February 13, and it was absent from the February 13 disclosure.

The contract underneath the headline

To understand what was omitted — and why the sequence matters — it helps to know how large commercial deals are structured. There are always two versions in any major agreement, and they are not the same document.

The first is a Heads of Terms: a handshake in writing. Think of it like a job offer letter. A company offers you a position — title, salary, start date. You accept. You resign from your current employer. You are committed: walking away now has real consequences. But the full employment contract hasn’t been signed yet. The clauses about what happens if you are let go before a certain date, what you owe if you leave early, what it costs the company to fire you — those are still being finalized by the lawyers.

The second document is the Definitive Agreement — the employment contract you sign on your first day, or before it. Now every clause has a number. Including, crucially, the termination terms: what it costs each party to end the relationship before its natural conclusion.

On February 13, First Gen and Prime Infra agreed on the job offer. The Heads of Terms already contained the COMC clause — the termination term, so to speak — but it expressed the penalty as a formula: “a discount of 75% of the difference between the final closing purchase price and subscription price as may be determined in the definitive agreements.” Read that carefully. It requires knowing final closing numbers that didn’t yet exist. The penalty was real and binding in spirit. Its cost in pesos was impossible to calculate.

On March 6, the employment contract was signed. The Definitive Agreements were executed — full contract, lawyers present, numbers locked. Several things changed: the stake dropped from 40% to 33%, the total commitment fell from P75 billion to P61.875 billion. And the termination formula, which had been expressed as 75% of an incalculable difference, became a clean number: 25% penalty discount.

Why did the discount change from 75% to 25% between February and March? Neither the original filings nor the amendments explain it. First Gen’s position is that Prime Infra requested the COMC provisions. Whether Prime Infra also requested the change in formula — and whether the two versions produce the same or different peso figures — has not been publicly addressed.

What is clear: by March 6, the penalty had been reduced and quantified — making it both more favorable to First Gen shareholders and easier to understand. Yet the March 9 disclosure still omitted it.

What the March numbers show: approximately P15.5 billion if the clause was triggered on the hydro stake. Approximately P8 billion on the gas plants First Gen had previously sold to Prime Infra. Combined: approximately P23.5 billion — equal to 25% penalty discount.

And by that point, the family had already voted to change management.

Between the handshake and the contract

On February 27 — fourteen days after the Heads of Terms, seven days before the Definitive Agreements — the board of Lopez Inc., the private family holding company above First Gen, voted 5-2 to remove Piki as president.

Piki went to court. On March 11, a court issued a temporary restraining order blocking his removal. He remained in his seat.

But between February 27 and March 11, the lawyers finished the contract. On March 6, the Definitive Agreements were signed — eight days after the ouster vote, five days before the TRO. First Gen filed the mandatory disclosure of the March 6 deal on March 9.

That filing described the new structure: the reduced stake, the revised price, the payment schedule involving cash and Standby Letters of Credit stretching to 2029.

It did not mention the COMC clause. It did not mention the P23.5 billion, not even the six conditions.

What finally forced disclosure

For eight weeks after the March 9 filing, the COMC provisions remained out of sight.

What broke the silence was not a regulator, not an independent director, not First Gen itself. It was a press release from the family.

On April 13, twelve cousins holding 71% of Lopez Inc. issued a statement accusing Piki of embedding “not one, but two poison pills” in the Prime Infra deals. For the first time, a penalty clause worth billions entered the public record — not through a company disclosure, but through a family accusation.

Days later, the PSE formally queried First Gen for clarification. The same day, April 14, First Gen filed its first-ever disclosure of the full COMC terms. That’s 60 days after the Heads of Terms was signed, and 37 days after the Definitive Agreements were signed.

Then on April 17 came a third disclosure: BDO Unibank, the Philippines’ largest bank, had issued P24.75 billion in Standby Letters of Credit to support the hydro deal — and those credit facilities contained their own separate leadership-continuity covenants. If Piki or his designees ceased to hold their positions, BDO could declare an event of default not just on the hydro transaction but across multiple credit facilities in the First Philippine Holdings (FPH) group.

Standby letters of credit (SBLCs) are typically issued at the holding company level and secured against the group’s broader balance sheet. An event of default on the SBLCs could trigger cross-default clauses in other FPH financing arrangements, potentially destabilizing the entire Lopez energy empire’s credit structure.

Three separate instruments, two counterparties, one common element. Piki’s continued presence had been commercially priced — by Prime Infra, by BDO — into the architecture of the deal. Whether that reflects unusual entrenchment or standard practice in large infrastructure finance is a question the SEC is now in a position to examine.

The amendment that appeared without explanation

On April 30, First Gen filed two amended SEC reports — one backdated to February 13, the other to March 9. The amended February filing added five paragraphs describing the COMC provisions that had been entirely absent from the original. The amended March filing added the quantified penalty figures and the six triggering conditions.

Neither amendment explained why the information had been omitted. They simply inserted the missing language into the official record, signed by First Gen’s corporate secretary, and filed alongside the information statement for the May 28 stockholders’ meeting.

‘AMENDED’ is not a correction of a typo. It is the insertion of material information that was entirely absent from mandatory regulatory filings.

The disclosure timeline

What the rules require — and what this case asks

The Securities Regulation Code requires listed companies to disclose material information within 3 calendar days of a triggering event. The PSE defines material information as anything a reasonable investor would consider important in making an investment decision.

The central question this timeline raises is not complicated: is a P23.5-billion contingent liability — equal to a 25% discount penalty — triggered by the removal of a named executive — the kind of information a reasonable investor would want to know?

First Gen has consistently maintained that Prime Infra, not Piki Lopez, requested the COMC provisions, and that they reflect Prime Infra’s confidence in his leadership rather than any form of self-dealing. The company has said the board — including director Manuel L. Lopez from the majority cousins’ side — unanimously approved both transactions. If Prime Infra genuinely insisted on the clause as a standard commercial term, the question of intent looks different. But the question of timing does not change.

The clause was either material or it wasn’t. If it was material — and a 25% penalty is difficult to classify otherwise — then the February 13 filing, the press release, and the March 9 filing all fell short of what investors were entitled to know, regardless of who requested the clause or why.

What the Lopez case has surfaced is a structural gap in how Philippine disclosure rules handle contingent liabilities embedded in commercial contracts. The rules require disclosure of the deal. They do not yet clearly require that the financial impact of penalty clauses — even very large ones — be quantified at the time of filing, rather than when a family fight makes them impossible to hide.

That gap is now on the SEC’s desk. Whether it closes depends on what the commission decides this case actually was.

If the SEC finds the 76-day disclosure gap acceptable, it signals that Philippine listed companies can embed multi-billion-peso penalty clauses in deals and wait for shareholders to discover them through family press releases weeks or months later. If it finds the gap unacceptable, it sets a precedent: contingent liabilities above a defined threshold must be disclosed within three days, not when a boardroom war makes them impossible to hide. – Rappler.com

Lala Rimando wrote about Philippine business, and managed newsrooms, including Newsbreak, ABS-CBN, Rappler, and Forbes, for over 25 years. She’s now based in La Union, taking care of her mom with dementia, and working on the multimedia biography of the late John Gokongwei.

Here are other special reports on the Lopez cousins’ feud:

• Debt, discipline, and daring: Inside the Lopez Group’s high-risk bets
• The Lopezes, presidents, and the cost of dissent
• Who writes the Lopez story? How lawyers, headlines, and ABS-CBN shape a family war