First Gen defends Prime Infra hydro deal amid dispute with Lopez family

FIRST GEN CORP. defended the structure of its hydropower investment with Prime Infrastructure Capital, Inc., (Prime Infra) rejecting allegations from the Lopez family majority that the company had agreed to a “scandalous” P50-billion premium in the transaction.

In a clarification submitted to the Philippine Stock Exchange on Wednesday, the Lopez-led power producer said the premium attached to the deal reflects investments already made by Prime Infra in developing its hydropower assets.

The clarification came after the Lopez family majority questioned the structure of the original P75-billion agreement involving Prime Infra’s pumped storage hydro portfolio, claiming that First Gen Corp. Chairman Federico “Piki” Lopez had agreed to pay P50 billion as transaction premium and P25 billion as construction equity.

“Note that the premium paid is a standard consideration in M&A (mergers and acquisitions) transactions, and one that is incorporated in the acquisition cost,” First Gen said.

It added that it is “not free, superfluous money” but 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.

First Gen earlier sought to acquire a 40% stake in Prime Infra’s pumped storage hydro projects, including the Wawa and Pakil facilities, for P75 billion. The company later reduced the planned acquisition to 33% for P62 billion.

The company also rejected allegations that the reduced stake meant surrendering strategic minority protections and giving Prime Infra absolute control over the projects.

First Gen said the decision to trim its stake was made after considering funding requirements for other projects in its pipeline.

“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,” the company said.

“These significant financial considerations outflank any rights that are provided to a 40% shareholder,” it added.

The dispute forms part of a broader conflict within the Lopez family that resurfaced after the majority bloc of Lopez, Inc. withdrew a Feb. 27 board resolution removing Mr. Lopez as president and chief executive officer.

The Lopez majority earlier cited loss of trust and confidence tied to the company’s P125-billion hydropower and gas transactions, which they alleged were entered into without their knowledge. — Sheldeen Joy Talavera