First Gen eyes P7-B preferred shares issue next year for capex

MANILA, Philippines - First Gen Corp. is studying the possibility of issuing P7 billion worth of new shares early next year to finance its capital expenses, including its planned purchase of British Gas (BG) stake in subsidiary First Gas Corp.

“We’re looking at issuing perpetual preferred shares, we’re hoping anywhere from P5 to P7B in preferred shares. That’s for the acquisitions and investments, if we’re able to acquire the BG stake then that’ll be used to partly fund the BG stake,” Francis Giles Puno, First Gen president, said.

The BG Group is selling its 40-percent stake in the 1,000-megawatt Sta. Rita and 500-MW San Lorenzo gas-fired power plants which it co-owns with the Lopezes.

Unified Holdings Corp., a subsidiary of First Gen, currently owns 60 percent of First Gas Power Corp. which financed, constructed and operates the San Lorenzo combined-cycle natural gas-fired power plant. BG, on the other hand, owns the remaining 40 percent of First Gas.

Puno said portion of the proceeds from the shares issuance will also be used to fund its refinancing requirement for 2011 and other investments.

“We have some refinancing next year, potentially for the convertible bond, that’s in February and then potentially other investments,” he said.

According to Puno, they would need funds for Energy Development Corp. (EDC), another subsidiary of First Gen.

“We also have a call option on EDC shares so we have to fund that also. Hopefully, we’’ll do that by March next year. The call option is about $75 million on top of the $300 million,” he said.

He said this was the call option they entered into with the EDC shares owned by the STI Group of businessman Eusebio Tanco.

Earlier, First Gen announced plans to refinance its $300-million convertible bonds which will fall due early next year or by February 2011.

First Gen posted a consolidated net income of $104.2 million in the first three quarters of 2010, up 43 percent from $73.3 million in the same period in 2009.

The net income attributable to parent jumped nine-fold to $66.5 million in the first quarter of 2010 from $7 million posted in the same period last year.

The increase in earnings was driven by the strong operating performance of the First Gas group, First Gen Hydro Power Corp. and EDC.

First Gen’s consolidated revenues likewise jumped by $208.2 million or 27 percent to $980.1 million in 2010 from last year’s $771.9 million.

The steady and reliable dispatch of First Gas’ Sta. Rita and San Lorenzo natural gas-fired power plants were the main contributors for the increase in revenues from the sale of electricity by $142.9 million or 19 percent to $906 million in 2010 from $763.7 million in 2009.