The Lopez family majority alleged that First Gen Corp.’s decision to reduce its stake in Prime Hydropower Energy, Inc. (PHEI) from 40 percent to 33 percent is invalid, as it was never presented to the board of directors for approval and lacks a board mandate.

The move was made just three weeks after the 40 percent deal, worth ₱75 billion, was approved on Feb. 13. The group claimed the original deal included a ₱50 billion premium that would reimburse Prime for more than all its expenses to date.

They noted in a statement that, at 33 percent, the revised deal would cost ₱62 billion and carry a ₱42 billion premium. This leaves Prime with a 67 percent equity stake, while First Gen is saddled with a minority stake of 33 percent yet carries all the risks.

“Which deal prevails now? How could the board’s independent members—Manuel Ayala, Alicia Rita Morales, and Edgar Chua—claim everything was ‘unanimously approved’ in a public statement? In the first place, the deal, when it was still at 40 percent, was hidden under ‘other items’ on the agenda and discussed only for an hour,” the group said.

The independent board members defended the deal, arguing it will yield strong dividends once the hydro projects are operational. However, the Lopez majority challenged their decision, questioning why the company surrendered seven points of ownership and minority veto power if it was such a good deal.

First Gen stated earlier that it had to scale back to fund “high-potential assets in the pipeline,” but the Lopez majority countered, asking, “Does that mean directors were not given enough information to properly guide management? Didn’t they know First Gen’s liquidity position?”

They also reminded state-backed First Gen shareholders—the Social Security System and the Government Service Insurance System—that anything “disadvantageous to the government” should not have passed muster.

“The shareholders must know. The regulators should step in to question this brazen move, the disclosures that were months late, the poison pills, and the cross-default that threatens even First Gen’s sister companies that are not involved in the deal,” they pointed out.

The family majority also challenged First Gen’s statement that the reduction was due to “significant financial considerations (that) outflank any rights that are provided to a 40 percent shareholder.”

They claimed that “this is an admission that shareholder rights had been cast aside and their financial interests subordinated to one man’s job security.”

Furthermore, the family majority belied First Gen’s claim that “there is nothing that will prevent First Gen from engaging in discussion with Prime Infra to scale the investment back up.”

They stressed that nothing guarantees Prime will agree to sell back the 7 percent, and dared First Gen Chairman Federico Lopez to produce Prime’s written commitment to discuss selling back the forgone shares, and at what valuation. (James A. Loyola)