First Philippine to beef up power-generation portfolio

business mirror

MONDAY, 28 MAY 2012 20:49 MIGUEL R. CAMUS AND PAUL ANTHONY A. ISLA / REPORTERS

FIRST Philippine Holdings Corp. is beefing up the power portfolio by an estimated 400 megawatts (MW) to 500 MW in two to three years, officials said in a press briefing on Monday.

Chief finance officer Giles Puno said subsidiaries First Gen Corp. and Energy Development Corp. (EDC) are eyeing natural gas projects as well as hydropower and wind facilities at an estimated $3 million per megawatt, suggesting a total investment of $1.5 billion.

Its existing capacity is at 2,763 MW, Puno said. FPHC is controlled by the Lopez Group of Companies which also owns interests in broadcasting, power distribution, infrastructure, property development and manufacturing.

EDC, which operates geothermal plants, is also considering Indonesia as a possible expansion site after signing deals with an Australian company to co-develop geothermal plants in Chile and Peru, First Holdings Chairman and Chief Executive Officer Federico Lopez said.

“Indonesia is one of those areas where the need for geothermal [power] is quite great,” Lopez said, clarifying that the company has yet to close any concrete deal to expand in Southeast Asia’s largest economy.

Even with the consolidation of Rockwell Land Corp., which listed by introduction on the Philippine Stock Exchange this month, power will continue to account for about 90 percent of First Holdings’ earnings.

“We are very happy to be primarily a power generation company. That’s what we have always been,” President Elpidio Ibañez said.

Through the sale of most of its shares in Manila Electric Co., where it now owns just 3.9 percent, First Holdings has been paring down debt to about P9 billion from as much as P22 billion.

Ibañez said the company may refinance another P4.3 billion in 8.72 percent five-year perpetual preferred shares issued in 2008.

“If interest rates are still low next year, then we may be refinancing this,” he said.

Lopez said First Holdings may also participate in the government’s public private partnership program involving power plants, which includes the 246 MW Angat hydroelectric plant in Bulacan.

In addition, First Gen is in continued talks with British Gas for the latter’s 40-percent stake in First Gas Holdings Corp., Puno said. First Gas, which operates the 1,000-MW Sta. Rita natural-gas fired power plant and the 500-MW San Lorenzo natural-gas power plant, is controlled by First Holdings.

First Holdings also operates solar wafer slicing manufacturing plants through First Philec Solar Corp. But with the downturn in demand for solar panels, operations have been scaled back resulting in “a few hundred” job losses so far, Ibañez said.

First Holdings rose 4.3 percent to P70 each on Monday, giving it a market value of P38.3 billion.

Meanwhile, the company also said it invested an additional P1.8 billion in First Gen Corp.’s Series G preferred shares.
In a disclosure to the Philippine Stock Exchange, FPHC said the additional investment corresponds to 20 million of the 33.75 million Series G preferred shares it acquired.

FPHC said the additional investment is its payment of the difference between the issue price it previously paid or P10 per share, and the issue price for the publicly offered shares of P100 per share for 20 million Series G shares.

With this additional investment, FPHC said its 20 million Series G Shares will now be able to enjoy the same rights and benefits as the holders of the 100 million Series G shares recently offered to the public.

For its part, First Gen said it has increased the proceeds raised from the Series G preferred shares to P12 billion.
Puno earlier said the proceeds of the offering will be used for acquisitions and reduction of debts, including a $70-million convertible bond tenor which falls due next year, as well as other obligations.

“We’d like to use it for acquisitions and investments. We are obviously looking at opportunities, but in the case that does not push through then what we’ll do is reduce debts,” Puno said.

The Series G shares was originally offered with an initial size of P7 billion.

Under the terms of the agreement, First Gen granted underwriter BDO Capital the option to subscribe for up to an additional P3 billion. Due to strong demand, the entire oversubscription option was exercised.

The dividend rate of the Series G Shares is 7.7808 percent and as and when declared by the company’s board of directors, is payable every January 25 and July 25. The Series G shares can be redeemed by the company on the first dividend payment date following the 10th anniversary of the issue date, which will fall on July 25, 2022.

The proceeds of the Series G will be used to either partially fund the company’s acquisitions, or to pay for its 2.5-percent convertible bond due on February 11, 2013 and to partially repay its affiliate Red Vulcan Holdings Corp.’s debt.

Through Red Vulcan, First Gen owns Energy Development Corp. which is currently the largest supplier of geothermal in the Philippines and is the second-biggest geothermal energy producer in the world.

The proceeds of the Series G preferred shares will also be used for working capital and business development-related expenses.    source