First Gen set to complete P13.8-billion refinancing plan

MANILA, Philippines – Lopez-owned power firm First Gen Corp. said yesterday it expects to complete the refinancing of its P13.8 billion loan this month.

First Gen chief finance officer Giles Puno told reporters that they would negotiate with Banco de Oro for an extension of the loan agreement to five years.

“The remaining debt that is due at the end of the month is P13.8 billion. So the P13.8 billion maturity which was originally provided to us as part of the staple financing is being lent by BDO,” he said.

Puno said this is one strategy that would attract investors in Red Vulcan Holdings Corp., a wholly-owned subsidiary which controls geothermal power producer Energy Development Corp. (EDC).

“We hope to get a five-year facility and basically that will buy ourselves time, so that we can enter into the next phase of bringing in the investors,” he said.

“But when the investors come at least they will know that First Gen is not in a situation where it has immediate maturities that it will have to service. It will be in a situation where they’ll initially see leverage at Red Vulcan and that they could optimize that investment at Red Vulcan as well as there will be already long-term debt that’s in place there rather than coming in the form of equity.”

First Gen concluded its $544-million term loan in November last year for the purchase of Red Vulcan’s stake in EDC.

Japanese industrial giant Marubeni Corp. recently entered into an agreement with First Gen to “seriously consider” investing up to 40 percent in Red Vulcan of which proceeds of the sale will be used to partially finance the latter’s loans.

In January 2008, First Gen acquired the 40 percent stake of Netherlands-based Spalmare Holding B.V. which paved the way for the company to own 100 percent of Red Vulcan.

Puno said they are entertaining a number of interested investors for Red Vulcan and hope to complete the sale within the year. He said they intend to retain only a 24 percent stake in Red Vulcan.

“As far as we’re concerned, we should be open to partnerships or joint ventures with other parties and not only with Marubeni. So we’ve been very flexible in looking at opportunities to find other partners which potentially could work. But is also consistent with our approach on how we normalize our finances first, and then be in a position where we can negotiate better terms and pricing with these potential investors. So we’re not only talking with Marubeni, but we’re talking also with others,” he said.

He noted that First Gen was able to trim down its debt level to $362.9 million from $562.4 million in December 2007.

It was also able to pay down the staple financing at Red Vulcan from P29.2 billion to P13.8 billion.

“We are currently in the midst of terming out this remaining amount on the staple financing and should shortly complete that with a medium-term refinancing deal as well,” he said.