First Gen says gas asset sale to Razon group was ‘correct choice’

FIRST GEN CORP. said its decision to sell a majority stake in its gas-fired power assets to the Razon group was “a correct choice,” citing the importance of securing fuel supply for the facilities.

“We made a difficult, but I think we made the correct choice, which is to sell a 60% of the majority stake to the Razon group,” First Gen President and Chief Operating Officer Francis Giles B. Puno said during an energy summit organized by the Philippine Chamber of Commerce and Industry on Tuesday.

Last year, First Gen sold a 60% stake in its gas assets totaling 2,000 megawatts (MW) in Batangas City to Razon-led Prime Infrastructure Capital, Inc. for P50 billion.

The transaction has since drawn attention amid an ongoing dispute within the Lopez family that led to the removal of Federico “Piki” Lopez as chairman of the group over alleged “loss of trust” and concerns regarding transparency in key transactions.

Major stockholders of the Lopez family’s holding company previously described certain provisions in the multibillion-peso agreements between First Gen and Prime Infra as “poison pills.”

The provisions cited by the faction involved terms tied to Mr. Lopez’s leadership under which Prime Infra may acquire First Gen’s remaining stakes in the gas assets at a 25% discount.

Mr. Puno said the joint venture structure provides greater certainty for the gas plants because the facilities source fuel from the Malampaya gas field, which is operated by Prime Energy Resources Development B.V., a subsidiary of Prime Infra.

Amid efforts to expand renewable energy capacity and reduce exposure to volatility in global oil markets linked to the ongoing Middle East conflict, gas could serve as a transition fuel, according to Prime CoreGen President and Chief Executive Officer Jose Victor Emmanuel “Jocot” A. de Dios.

“Gas technology is such that you can move up and down the load curve when your variable energy sources diminish,” he said.

Prime CoreGen is a subsidiary managing Prime Infra’s acquired gas assets, including the 1,000-MW Santa Rita Power Plant, the 500-MW San Lorenzo Power Plant, the 450-MW San Gabriel Power Plant, the 97-MW Avion Plant, and the proposed 1,200-MW Santa Maria Power Plant.

The offtake agreement for the Santa Rita power plant faces uncertainty as the five-month extension of its gas power supply contract with Manila Electric Co. (Meralco) is set to expire in June.

The Energy Regulatory Commission allowed Meralco to continue sourcing power from the facility until June 25, 2026. The approval marked the second interim extension following the Jan. 31 expiration of the previous temporary extension of the 25-year power supply agreement.

“We’d like that contract extended. I think it’s good for the grid. It’s good for the overall power system,” Mr. De Dios said on the sidelines of the event.

Asked whether the company had submitted an application to the ERC for another extension, he said: “At this time, I don’t think we have it.” — Sheldeen Joy Talavera