The deal involving the Razon Group’s Prime Infrastructure Capital Inc. (Prime Infra)’s P50-billion acquisition of the gas business of the Lopez company’s First Gen is viewed by analysts as a strategic move by both parties.
Under the deal, Razon’s group acquires a 60 percent controlling stake in First Gen’s gas business.
First Gen has four natural gas-fired power plants with a total capacity of 2,017 megawatts (MW), including the 1,000 MW Santa Rita, the 500 MW San Lorenzo, the 97 MW Avion, and the 420 MW San Gabriel power plants, which are all located in Batangas. On the other hand, Prime Infra has a significant stake in the Malampaya Gas platform, which supplies LNG (liquefied natural gas) to First Gen’s LNG-fired power plants.
Michael Ricafort, RCBC’s chief economist, said in a message on Sunday the seller (First Gen) is monetizing the stake sold, while the buyer (Prime Infra) still sees great value in the future of the asset.
Ricafort said this is also evidence of the industry trend to shift to more renewable energy (RE) sources “by many companies and governments worldwide to reduce carbon footprint/emissions and also to adhere/comply with ESG (environment, social, and governance) standards.”
Peter Garnace, a research analyst at Unicapital Securities Inc., said Prime Infra’s move is “strategic” to expand its footprint in the country’s LNG sector, which is currently considered a transition fuel from fossil fuels before the country can utilize more renewable energy.
“Given Prime Infra’s exposure to the upstream LNG value chain through its operating stake in the Malampaya gas platform—which supplies LNG to First Gen’s LNG-fired power plants—this acquisition is essentially a forward integration,” Garnace said in a separate message on Sunday.
He added that with Prime Infra’s growing exposure in the power generation segment, such a development will also “increase overall competition and lessen market concentration of dominant incumbent players.”
Meanwhile, Garnace said this move is also seen as a step in the right direction, following First Gen’s recent announcement that it would allocate most of its 2025 capital expenditure to expanding its geothermal capacity.
First Gen announced at its annual stockholders’ meeting last week that it has allocated capital expenditures (capex) for the year at $601 million. Of this amount, 90 percent will be utilized by its subsidiary, Energy Development Corporation, for drilling geothermal wells and funding battery storage projects.
Apart from the 2,017 MW capacity from LNG-fired power plants, First Gen has 1,651 MW of installed renewable energy (RE) capacity from 28 solar, wind, hydro, and geothermal power plants, for a total capacity of 3,668 MW.
