First Gen seeks to refinance $700-M debt

First Gen Corp., a unit of the Lopez Group, is seeking to refinance of $700 million worth of debt and selling a part of the company and some assets to pay down loan obligations.

At the sidelines of the Management Association of the Philippines’ (MAP) international CEO forum yesterday, Elpidio Ibanez, president and chief operating officer of First Philippine Holdings Corp. (FPHC) said the eight banks are reportedly open to the idea and expect to sign an agreement possibly within the month.        

The group’s strategy right now is to have a lot of debt at the parent but over time bring that debt to the operating company so the debt at the parent is reduced.

“Our target is to raise $700 million to further reduce debt,” Ibanez said. In February this year, First Gen issued some $260 million worth of five-year convertible bonds at 2.5-percent interest to pay up its short-term obligations.

At the same time, Ibanez said First Gen remains on the lookout for a strategic partner for its Red Vulcan Holdings Corp., which acquired 60 percent of geothermal power producer unit PNOC Energy Development Corp. (PNOC-EDC).

According to Ibanez, First Gen is negotiating with three potential investors to acquire 40 percent of Red Vulcan. He declined to name the interested parties pending completion of talks.

Aside from this, First Gen is also in talks with at least two foreign groups to invest in the power holding firm possibly through the issuance of new shares. “The issuance of shares may either be done via a private placement. The deal is expected to be completed by the end of the year,” Ibanez said.

Ibañez said there is also a proposal to sell the 100-megawatt Pantabangan power plant which First Gen Hydro Power Corp. acquired in 2006. Ibañez said both foreign and local companies have signified interest to acquire the Pantabangan plant.

“In a financial crunch either you acquire expensive debt or you sell assets,” Ibanez pointed out.

Ibañez said FPHC is expected to post lower earnings this year due to foreign exchange losses. “The sale of our toll road business could somewhat lift profits but would definitely not match our earnings level last year,” he said.

First Gen is the largest vertically integrated power producer in the Philippines. It is also the largest Filipino-owned and controlled independent power generation company in the Philippines with an installed capacity of 2,582 MW, accounting for approximately 17 percent of total installed capacity in the country today.

The company was incorporated in December 1998 to become the primary holding company for the power generation and energy-related businesses of the Lopez Group.

FPHC, parent and controlling shareholder of First Gen, became involved in the power generation industry in 1993 when its first major investment in power generation, Bauang Private Power Corp. (BPPC), was incorporated.