P50-B ‘premium’ in Lopez-Razon hydropower deal questioned
The majority bloc of the Lopez family alleged that Federico “Piki” Lopez had agreed to pay Prime Infrastructure Capital Inc. a P50-billion transaction premium in a hydropower venture, calling it a “horrible deal”.
The Lopez majority said on Tuesday it recently discovered from board documents that the original transaction had involved a P50-billion premium on top of P25 billion in construction equity. These formed the P75-billion consideration for First Gen’s acquisition of a 40-percent stake in Prime Infra’s hydropower business.
The transaction has been a flashpoint in the dispute between the Lopez majority and Piki Lopez, who remains First Gen president and CEO despite his earlier ouster as president and CEO of Lopez Inc., the family’s holding company.
The majority group alleged that the premium had not been disclosed to investors when First Gen announced the transaction. Instead, it said P62.5 billion would be used to directly fund the hydropower projects.
The hydro deal was announced months after Prime Infra had acquired a 60-percent stake in First Gen’s gas business for P50 billion.
In return, First Gen agreed to buy a stake in Prime Infra’s hydropower platform, which includes the 600-megawatt (MW) Wawa project in Rizal and the 1,400-MW Pakil project in Laguna.
The Lopez majority argued that the economics became even more unfavorable as First Gen’s stake was reduced from 40 percent to 33 percent, lowering the transaction value from P75 billion to about P61.9 billion. It gave Prime Infra a 67-percent stake while requiring only about P625 million in additional equity.
“In effect, Piki funded the whole project that is yet to be built, has no cash flow for years, and faces multiple completion risks,” the Lopez majority said. “This is a horrible deal for First Gen.”
