First Gen hopes to raise $180M via IPO

First Generation Holdings Corp., the investment arm of the Lopez family for its power generation and energy-related interests, expects to raise as much as $180 million (P9.4 billion) from the maiden offering of its shares to the public if the greenshoe option is exercised.

The greenshoe option allows an underwriter of a new issue to sell additional shares to the public if the demand is high.

First Gen senior vice-president and chief financial officer Giles B. Puno said the company, which started the local offering of its shares Tuesday, may sell additional shares to meet strong demand for the shares.

Eduardo Francisco of BDO Capital & Investment Corp. issue underwritten said more than 60 percent of local brokers have already participated in the domestic offer.

"The PSE (Philippine Stock Exchange) orders came yesterday. Payments were made in advance. This is a good sign. There’s been strong demand for the shares," Francisco said.

The initial public offering (IPO), the first for this year, involves a total of 180.9 million shares, 144.73 million of which were sold through an international offer and the balance of 144.73 million to be issued through a local offering.

The IPO shares have been priced at P47 per share after slashing the offer price below the bottom end of the initial targeted range of P51 to P62 to satisfy investors’ request that the shares be offered at a more attractive price.

First Gen said the reduction in offer price was in response to international investors’ request that the shares be offered at a more attractive price to the investing public.

The reduced offer price will result to lower proceeds of P8.5 billion, or around $160 million compared with the earlier target of P11.2 billion, or $200 million.

Proceeds from the offering will be used for improvements in existing facilities, investments in capacity expansion, which may include both potential acquisitions of power generation assets and the development of greenfield projects.

In a disclosure to the PSE, First Gen said 80 percent of the 180.9 million shares was sold in the United States.

CLSA Ltd. and UBS AG are the international underwriters of the IPO.

ATR-Kim Eng Capital Partners Inc. and BDO Capital & Investments Corp. are handling the local offering.

Traders expressed mixed reactions on First Gen’s move to lower its IPO price to P47 a share. Some analysts said there are apprehensions that the financial problems hounding First Gen’s sister companies may discourage investors from buying.

Some traders also expressed concerns over First Gen’s long-term contracts to supply power to Manila Electric Co. (Meralco).

The lower amount won’t hamper First Gen’s investment plans, which include acquisitions of government and privately-owned power plants, and construction of new facilities, Puno said.

"I don’t think it will affect our strategy in First Gen," he said. "If we need to tap the market again then that option is available to us."

First Gen was formed in 1998 to hold the power plants of parent First Philippine Holdings Corp. First Gen’s main source of revenue is a 25-year supply contract with Meralco, the nation’s largest electricity retailer and a unit of First Holdings.

First Gen, which owns four power plants, had a 1.4-percent decline in nine-month profit last year to P3.65 billion even as sales grew 19 percent to P33.7 billion. In 2004, profit fell 6.9 percent to P4.96 billion as sales rose 1.7 percent to P37.04 billion.