Prime Infra’s First Gen gas stake to spur competition — analysts

By Sheldeen Joy Talavera, Reporter

RAZON-LED Prime Infrastructure Capital, Inc. (Prime Infra) is acquiring a 60% equity stake in Lopez-led First Gen Corp.’s gas business for P50 billion, a development that analysts said is likely to spur competition among gas players and encourage additional investments in the energy sector.

“With Prime Infra’s growing exposure in the power generation segment, we believe this will increase overall competition and reduce market concentration among dominant incumbent players,” Peter Louise D.C. Garnace, equity research analyst at Unicapital Securities, said in a Viber message to BusinessWorld on Saturday.

Mr. Garnace described the acquisition as “a strategic move” to expand Prime Infra’s presence in the country’s liquefied natural gas (LNG) sector, regarded as a transition from fossil fuels to renewable energy. He added that “close regulatory oversight is necessary to prevent collusion among market players” given the limited number of participants in the LNG industry.

Under a term sheet executed on May 30, Prime Infra will acquire a 60% stake in First Gen’s subsidiaries managing its gas assets, which include four operating power plants — the 1,000-megawatt (MW) Santa Rita, 500-MW San Lorenzo, 450-MW San Gabriel, and 97-MW Avion plants — all supplied by the Malampaya gas field operated by Prime Energy Resources Development B.V., part of the Razon group.

The acquisition also covers the proposed 1,200-MW Santa Maria power plant and an interim offshore LNG terminal.

The transaction remains subject to the execution of definitive agreements and the completion of closing requirements.

First Gen will retain 40% ownership of its gas business and will be “entitled to receive additional earnout amounts, subject to the fulfillment of certain conditions.”

The company said retaining a significant stake will help ensure “proper continuity and stability of its gas operating plants.”

“The partnership between First Gen and Prime Infra will enable the partners to further nurture, enhance and expand their natural gas platforms to serve as a key solution provider to the country’s program to address energy security,” First Gen said.

“In line with this, the partnership will work closely with the government to help secure our country’s energy independence.”

Juan Paolo E. Colet, managing director at China Bank Capital Corp., described the deal as “a positive development for the country as it will spur more investment in our energy sector.”

“This is a game-changer for Prime Infra as it will transform the company into the leading natural gas power producer in the Philippines. The deal is very strategic because Prime Infra already has an investment in Malampaya,” he said.

Mr. Colet added that the transaction allows First Gen “to unlock the value of its gas-related assets and refocus on being a pure renewable energy platform,” providing “tremendous financial muscle to make bold renewable energy investments” and potentially return cash to shareholders.

At its annual stockholders’ meeting on May 29, First Gen President and Chief Operating Officer Francis Giles B. Puno said renewable energy will be the company’s primary focus going forward.

“As we build out more geothermal, hydro, solar, wind — of course, we still feel gas is important because it’s also a good balance to renewable energy buildout — but the focus will be renewable energy,” Mr. Puno said.

First Gen has allocated a capital expenditure budget of $601 million (P33 billion) for 2025, with most of the funds earmarked for Energy Development Corp., its renewable energy subsidiary.

Prime Infra’s acquisition of First Gen’s gas assets will create significant competition with the LNG joint venture among Manila Electric Co. (Meralco), Aboitiz Power Corp. (AboitizPower), and San Miguel Corp. (SMC), which earlier finalized a $3.3-billion deal to build an integrated LNG facility in Batangas.