First Gen to cut debts by $500 M this year

By Myrna M. Velasco – May 14, 2018, 10:00 PM
from Manila Bulletin

Lopez-owned First Gen Corporation will be reducing the level of debts on its balance sheet by a scale of $500 million this year, a key company executive has noted.

First Gen President and Chief Operating Officer Francis Giles B. Puno told reporters that in the firm’s debt management program, “we’re looking at reducing that by $500 million this year – so we’re de-levering rather than re-levering.”

He emphasized that the company does not need to tap fresh round of loans this year because they can still apply cash hoard they fetched from last year’s equity sell-down at subsidiary Energy Development Corporation (EDC); plus remaining cash from previous borrowings.

“We don’t need to borrow because we borrowed last year – so whatever we borrowed last year and the residual of the sell-down, we’re using to pay off our perpetual preferred shares this year and also other debts,” Puno said.

He explained that for the company’s perpetual preferred shares, “we treat them as equity but at the same time, many analysts look at it as debt.”

That has been prompting First Gen then to lump its perpetual preferred shares as debt , “and we’re saying okay, we’re going to reduce that by about US$500 million this year,” the company executive has reiterated.

Perpetual preferred shares would refer to preferred stocks with “no maturity” or without specific buy-back date, but they do have some redemption features. Unless redeemed, listed firms with issued perpetual preferred shares are bound to pay dividends indefinitely.

Puno indicated that the company cornered $240 million proceeds “when we partially sold down EDC common shares.”

Beyond that, the Lopez firm also raised $500 million on a refinancing activity it had undertaken last year, part of which had been set for prepayment of US$309 million debt of First Gas Power Corporation, the Lopez conglomerate’s corporate vehicle for its Santa Rita gas-fired power asset.