In response to a clarification sought by the Philippine Stock Exchange on Wednesday, the company said the payment reflected years of investment by Prime Infrastructure, backed by tycoon Enrique Razon Jr., to develop the projects, secure permits, obtain financing and lock in long-term power supply contracts.
“The premium paid is a standard consideration in [mergers and acquisition] transactions, and one that is incorporated in the acquisition cost,” the company said.
It added that the payment was “not free, superfluous money” but compensation for costs incurred by Prime Infrastructure before First Gen entered the projects.
Major hydro push
The company also said critics were referring to an earlier proposal for a 40 percent stake that was later reduced to 33 percent.
First Gen ultimately agreed to invest P61.875 billion for a 33 percent interest in Prime Hydropower Energy Inc., the company behind the Wawa and Pakil pumped-storage projects.
Of that amount, P12.5 billion was used to buy existing shares from Prime Infrastructure, while P49.375 billion went to newly issued shares that will help fund the projects.
Why the projects were worth more
According to First Gen, the acquisition came only after Prime Infrastructure had achieved financial close, secured development rights and permits, obtained offtake agreements and begun construction.
The company said the projects had already passed their highest-risk development phase and entered a more stable stage, with construction risk largely remaining.
Prime Infrastructure had also spent years advancing the projects before First Gen entered, it added.
Rebuts family claims
“Hence, claiming that First Gen chair and CEO Federico R. Lopez funded the whole project is erroneous, malicious, and shows an utter lack of understanding of basic M&A transactions,” the company said.
The clarification came after the Lopez family majority claimed First Gen effectively financed most of the projects while surrendering control and paying an undisclosed premium to Prime Infrastructure.
—Edited by Miguel R. Camus
