First Gen sells 40% stake in Red Vulcan to Marubeni

Lopez-owned power producer First Gen Corp. has agreed to sell up to 40 percent of its stake in Red Vulcan Holdings Corp., the controlling shareholder of PNOC-Energy Development Corp. (PNOC-EDC), to Japan’s Marubeni Corp.

First Gen said the deal, which is subject to confirmatory due diligence and final board approvals, is expected to be completed within the fourth quarter of the year.

According to First Gen, Marubeni is in the process of finalizing the composition of the consortium that will make the investment in Red Vulcan. 

A portion of the sales proceeds will be used to prepay the balance of First Gen’s staple loan amounting to P13.9 billion, which was availed of for the purchase of EDC shares in November 2007. The loan is maturing in May 2009, First Gen said.

“We are quite excited about the combination of strengths in this partnership. Marubeni is a truly world-class global power player with a successful track record in the international IPP business including geothermal generation. We expect to leverage this partnership and the unique skills of EDC to fully realize EDC’s potential and create significant shareholder value,” said Federico R. Lopez, president and chief executive officer of First Gen. 

First Gen executive vice-president and chief operating officer Richard B. Tantoco, for his part, said Marubeni’s investment into Red Vulcan is a “clear sign of confidence in the intrinsic value of EDC.

“We firmly believe that a partnership with the consortium is formidable and strengthens EDC’s ability to grow, especially overseas. With this alliance, it is a matter of time before we become the largest geothermal company in the world, with a significant presence overseas.”

Marubeni, a Tokyo-based trading company, has 13 business divisions: food, which produces and sells grains, sugar and processed food; textile, including the planning, proposal, sale and logistics of apparel products; material and paper pulp, which sells rubber products, footwear and paper; chemical product, which offers electronic materials and agrochemicals; energy, such as the development of petroleum and gases; metal material, including the manufacture and sale of nonferrous light metals; transportation and industrial machines, including the wholesale and retail of transportation-related and manufacturing equipment; plant, infrastructure and ship, including the deliveryand engineering of industrial plants and infrastructure-related machines; information, which sells computers and others; development and construction, which operates real estate; finance, logistics and others, including the operation of funds; and steel, such as the production of steel products.

First Gen owns 100 percent of Red Vulcan after buying out its minority partner, the Netherlands-based Spalmare Holdings B.V last January.

In November last year, Red Vulcan won the bidding for a 60 percent stake in PNOC-EDC, comprising mostly of government shares, with its offer price of P58.5 billion.

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

First Gen is the largest vertically-integrated power generation company in the Philippines.

With an installed capacity of 2,582 megawatts, the company accounts for

approximately 17 percent of total installed capacity in the country today.