November 24, 2017, 10:45 pm
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Power firm to sell 10.6% stake to foreign fund

Lopez-led First Gen Corp. has entered into an implementation agreement with Philippines Renewable Energy Holdings Corp. (PREHC) to sell a minimum of 6.6 billion up to a maximum of 8.9 billion common shares of Energy Development Corp. (EDC) worth up to P14 billion.

The bidder, PREHC, is a consortium of investors comprised of funds managed by Macquarie Infrastructure and Real Assets (MIRA) and GIC. 

MIRA manages the first and largest Philippines infrastructure fund which has committed approximately $500 million across six Philippine infrastructure investments since 2012.

GIC is a global investment firm with over $100 billion in assets under management.

Under the agreement, the bidder will acquire, through a tender offer, a minimum of 6.6 billion up to a maximum of 8.9 billion common shares of EDC, representing approximately 23.5 to 31.7 percent of its total outstanding voting shares. 

The number of offers up for bidding is equivalent to 10.6 percent of First Gen’s present 50.6 percent stake in EDC.

Through the tender offer, PREHC is offering a price of P7.25 per share to EDC shareholders, a 22.3 percent premium to EDC’s last 30-day volume weighted average market price of P5.93 per common share. The tender offer will start at 9a.m. on August 10 and end at 12 p.m. on Sept. 18, 2017.

“First Gen welcomes this tender offer from committed long-term renewable energy investors, MIRA and GIC. This is a clear vote of confidence in EDC’s clean energy platform from two of the world’s largest infrastructure investors. This will most definitely be a transformational period in the company’s 40-year history,” Federico Lopez, the firm’s chairman,said in a briefing in Makati.

First Gen, as parent company of EDC,expressed confidence the transaction is positive for shareholders of both firms.

“First Gen benefits by agreeing to participate in the offer by tendering 10.6 percent of total outstanding common shares in EDC, subject to scale-back provisions under applicable regulations. This sale will deliver proceeds of approximately P14 billion ($280 million) to First Gen,” the company said in a statement.

The company also said under the planned transaction, EDC will continue to be controlled by First Gen as it will retain 40 percent economic and 60 percent voting control.

“We want to concretize the partnership, we had been entertaining various investors. It gives us more flexibility moving forward… $280 million will be flowing for First Gen and will be used to start reducing debt and for growth potentials,” said Lopez.

“The tender offer presents an opportunity for EDC shareholders to realize their investment at a premium to the current share price. If successful, we look forward to forming a long-term partnership with First Gen to bring our experience and expertise to EDC,” David Luboff, senior managing director of MIRA, said in behalf of the consortium.

Francis Giles Puno, First Gen president and chief operating officer, said if the tender offer reaches its maximum amount, EDC may have to delist from the stock exchange. Under the current rules, by December this year, firms need to have at least 15 percent float so as not to be delisted.

“Our focus today is the tendering exercise. Maximum is at 8.9 billion shares. If we get the maximum, essentially the float of EDC will continue at 12.5 percent. We don’t know exactly where that will end up. After the transaction, the float of EDC shares will reduce to as little as 12.5 percent from the current 50 percent,” Puno explained.

At present, First Gen has a total installed capacity of 3,471 megawatts (MW), accounting for approximately 21 percent of the country’s gross generation. 

EDC is the country’s largest producer of geothermal energy with total capacity of 1,169 MW, which accounts for 61 percent of the total installed geothermal power in the country.
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