First Generation defers sale of Red Vulcan stake

MANILA, Philippines - First Generation Corp., a Lopez-owned energy investment company, has deferred the sale of a 40-percent stake in geothermal firm Red Vulcan Holdings Corp., a ranking company official said.

In an interview with reporters, First Gen EVP and COO Richard Tantoco said the company does not see the urgent need now to sell to a strategic partner as it was already able to raise the much-needed fund to pay up its loan obligations.

“Not right now, its already off the table. Well, effectively what happened is that we have refinanced the debt of Red Vulcan. There is no more pressure to find a partner,” he said.

On November 2007, Red Vulcan won the bid for the government’s stake in PNOC-Energy Development Corp. (EDC) with an offer of P58.5 billion.

EDC is currently the largest geothermal producer in the country with an installed capacity of over 1,100 megawatts. This represents 60 percent of the country’s total geothermal capacity.

“At the time we were looking for partners, the balance sheet of First Gen was very stretched. In fact, the price dropped to P9 per share. After refinancing, the stock jumped to P27 per share,” he said.

Now, he said they would focus on improving the operations of the company.

“In EDC, the value is there but we’d like to focus more on revving up the operations and making it happen. But the shares have gone sideways. But if you look at it over a 10-month period, from P1.80 it has stabilized to P5 in the past two months,” the First Gen official said.

Last year, First Gen said it would offer to investors up to 40 percent of Red Vulcan, with First Gen keeping the controlling 60 percent.

At that time, a number of investors have expressed interest in buying into red Vulcan.

First Gen earlier appointed JP Morgan as its financial advisor for the proposed sale of a portion of its equity stake in Red Vulcan.

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

Through its subsidiary Prime Terracota Holdings Corp., First Gen said it completed the full dilution of Spalmare, its minority partner in Red Vulcan. Spalmare is a joint venture between Icelandic sustainable energy firms Reykjavik Energy Invest hf (REI) and Geysir Green Energy ehf (GGE).

Aside from natural gas facilities, First Gen also runs the 225-MW Bauang medium-speed bunker-fired diesel power plant, the 112-MW Pantabangan-Masiway hydroelectric complex, and the 1.6-MW Agusan mini-hydropower plant.