First Gen receives $5-billion takeover proposal for EDC

By Sheldeen Joy Talavera, Reporter

LOPEZ-LED First Gen Corp. has received an unsolicited, non-binding offer worth $5 billion (about P308 billion) from Indonesia’s PT Barito Renewables Energy (BREN) to acquire its renewable energy subsidiary Energy Development Corp. (EDC), the company said on Wednesday.

In a disclosure to the stock exchange, First Gen said the proposal was “unsolicited, indicative and non-binding” and remains subject to due diligence, the execution of definitive agreements, and the receipt of regulatory and other necessary approvals.

“To date, there have been no discussions between the parties, no agreements have been signed, and First Gen has not appointed any advisors for this transaction,” the company said.

The proposed acquisition would involve the country’s largest geothermal energy producer, which accounts for about a fifth of the Philippines’ installed renewable energy capacity. EDC has a total installed capacity of 1,480.19 megawatts (MW) across its geothermal, wind, hydro, and solar assets.

EDC also accounted for 87% of First Gen’s revenues last year, contributing P48.6 billion.

BREN is the renewable energy arm of Indonesian conglomerate PT Barito Pacific Tbk. It holds a majority stake in Star Energy Geothermal, Indonesia’s largest geothermal energy producer.

Juan Paolo E. Colet, managing director at China Bank Capital Corp., said the proposal could unlock shareholder value if it materializes.

“Given First Gen’s persistent market valuation discount, such a transaction represents an opportunity to return a meaningful amount of capital to shareholders while simultaneously recycling proceeds into more profitable clean energy investments,” Mr. Colet said in a Viber message.

Based on First Gen’s 45.8% economic stake in EDC, the company could realize about $2.29 billion (about P141 billion) from the transaction, he said.

Shares in First Gen were volatile following the disclosure. The stock climbed as much as 33.37% to an intraday high of P22.30 before ending Wednesday’s session down 1.71% at P19.50 apiece from Tuesday’s close of P19.84.

EDC was established in 1976 under the state-owned Philippine National Oil Co. to develop the country’s geothermal resources. First Gen acquired a 60% voting stake in the company for P58.5 billion through privatization in 2007.

The company recently marked its 50^th anniversary as the world’s largest vertically integrated geothermal producer.

“EDC was borne out of necessity — in the midst of an oil crisis that had affected global economies, but had more severe consequences on smaller energy-import dependent countries like the Philippines,” EDC President and Chief Operating Officer Jerome H. Cainglet said during the company’s anniversary celebration.

Beyond its domestic operations, EDC has expanded into Indonesia through a partnership with PT DSSR Daya Mas Sakti to develop geothermal projects with a potential capacity of about 440 MW.