First Gen keen on IPO before yearend

Lopez-owned First Generation Holdings Corp. (First Gen) is pushing through with its planned initial public offering (IPO) before the end of the year.

First Gen is the holding company of First Gas Holdings Corp. (FGHC) which owns the 1,000-megawatt (mw) Sta. Rita and the 500-mw San Lorenzo natural gas-fired power plants in Batangas. These gas-run power facilities supply electricity to Manila Electric Co. (Meralco), which is also controlled by the Lopezes.

First Gas, responsible for all the gas power projects of the Lopez group, is a joint venture with British Gas Asia Pacific. It operates the 225-mw Bauang diesel-fired plant in La Union and the 72-mw diesel-fired Panay plant through its wholly-owned subsidiary First Private Power Corp., which was recently sold to the Metrobank-Mirant group.

STAR sources revealed that First Gen is finalizing the IPO plans with its financial advisors, including a plan to conduct an international roadshow. The IPO was originally scheduled early last year.

Company officials have said that the offering will prepare the company in its bid to participate in the privatization of the generation assets of the National Power Corp. (Napocor).

Based on initial plans, First Gen will offer 25 to 30 percent of its equity to at least three foreign financial groups. The remaining 10 percent of the 40-percent stake up for grabs would be sold through the IPO. The total offered stake had been earlier valued at $500 million.

Meanwhile, First Gas has disclosed to the Philippine Stock Exchange that its counterclaim regarding a dispute with Siemens on the construction of its power plant will be considered by the International Chamber of Commerce (ICC) in a hearing scheduled within the month.

First Gas Power Corp. (FGPC) earlier entered into a turnkey EPC contract with Siemens AG, Siemens Power Generation, and Siemens Inc. for the construction of the former’s 1,000-mw combined cycle power plant.

A dispute has arisen with Siemens relating to its construction of FGPC’s power plant. It was claimed that Siemens and its subcontractors incurred delays in project completion, resulting in amounts of approximately $99 million owing from Siemens to FGPC under the contract.

Pursuant to the contract, FGPC withheld approximately $96 million of its milestone payments, inclusive of variation orders, to Siemens.

In December 2002, Siemens submitted a request for arbitration to the Internatinal Court of Commerce (ICC) in London against FGPC arising out of alleged delays to the construction of the project. In the request, Siemens claimed payment for certain milestones achieved in the project, which FGPC has withheld in lieu of liquidated damages amounting to approximately $96 million. Also, Siemens claimed an additional amount of $64 million for prolongation costs and miscellaneous matters.

First Gas said the tribunal considered Siemens’ claims and the liquidated damages issues at a hearing in March/April 2005. Their award on the same is awaited. FGPC’s counterclaims will be considered by the tribunal at a hearing this month.

FGPC originally claimed for alleged defects in the work a sum of up to $215 million with an entitlement to be proven by way of expert evidence. Following submission of independent expert reports, FGPC has now increased its claim by $83 million. The actual entitlement will be determined by the tribunal.