Directors back First Gen hydro deal
Independent directors of First Gen Corp. have reaffirmed their support for the company’s investment in two hydropower projects of Prime Infrastructure Capital Inc., saying it would create long-term value for shareholders despite questions raised amid the ongoing Lopez family feud.
In a statement issued on Tuesday, the independent directors said they stood by their earlier decision to approve First Gen’s investment in the 600-megawatt (MW) Wawa pumped-storage hydropower project in Rizal and the 1,400-MW Pakil project in Laguna after conducting what they described as an objective and independent evaluation of the assets.
Independent directors Alicia Rita Morales, Edgar Chua and Manuel Francisco Ayala concluded in their review that “First Gen’s investment in both PSH projects will benefit First Gen and its stockholders.”
They noted that First Gen’s 33-percent stake in the two projects could generate annual earnings of about P16 billion once the facilities are completed.
The projects, with a combined capacity of 2,000 MW, are also expected to help improve the country’s power security by storing excess renewable energy and supplying electricity when needed.
The statement comes as the Prime Infra transactions remain a key issue in the dispute between First Gen CEO Federico “Piki” Lopez and the Lopez family majority.
Earlier this year, the Lopez majority questioned certain provisions in the agreements tied to the hydropower projects, particularly the “change of management control” clause.
The group argued that the provision could expose First Gen to significant financial risks if management changes trigger Prime Infra’s rights under the agreement.
Addressing the issue, the independent directors said the provision was a standard requirement in large energy infrastructure investments and was meant to ensure that the projects would continue to be supported by the technical expertise and operational track record necessary for their successful implementation.
The directors also defended the valuation of the transaction. They said the P61.87-billion value assigned to First Gen’s 33-percent stake represented fair consideration for the years of development work, permits, financing arrangements and other milestones that had already been completed by Prime Infra before First Gen entered the projects.
According to the statement, the projects had already achieved major development milestones, including financial close, development rights, off-take agreements and the start of construction, reducing many of the risks normally associated with large infrastructure ventures.
