First Gen increases stake in geothermal company

Geothermal Energy - Apr 6, 2011 FIRST GEN Corp. has increased its stake in listed geothermal plant operator Energy Development Corp. (EDC) to over 46% after buying some P2 billion worth of shares under a call option brokered back in 2010, a disclosure filed with the local bourse yesterday showed.
The purchase comes as Lopez-led First Gen sourced nearly three-quarters of its entire yearend net income from EDC in 2010, according to earlier reports.

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First Gen said it exercised its privilege over the remaining 390 million shares of EDC provided by the deal by buying these from Philplans First, Inc., Rescom Developers, Inc., PhilhealthCare, Inc. and Systems Technology Institute, Inc. for a transaction cost of P5.51 per share.

Shares in EDC closed at P6.48 in yesterday's trading, up 6% from P6.29 apiece.

The shares in Philplans, Rescom and PhilhealthCare represent more than 3.12% of EDC.

This covered the remainder of the 585 million shares subject to the call option agreements with First Gen already purchasing 195 million previously.

"Exercising the remaining call option will increase our economic ownership in EDC to over 46%," said First Gen President Giles B. Puno in a text message to reporters.

"Although there is still work to be done in terms of improving operating efficiencies, this investment affirms our belief in the strong fundamental value of EDC," Mr. Puno said.

EDC had been one of biggest contributors to First Gen's net income, contributing about $52.5 million to First Gen's 2010 net income of $70.2 million.

The call option deal with Philplans First, Rescom Developers PhilhealthCare and Systems Technology Institute had been executed back in April 2010. In March this year, First Gen exercised its call option on 195 million shares.

The agreement had provided three years for the call option at the exercise price of P5.67 for the first year, P6.19 for the second year and P6.76 for the third year.

"The exercise price of P5.51 represents the year one option price of P5.67, adjusted for the cash dividend of P0.16 declared by the EDC board of directors last March 15," First Gen said in its disclosure.

Before the call option was exercised, First Gen had a stake in EDC of more than 40%.

First Gen's consolidated net income for 2010 increased 27% to $121 million from the $95 million it posted in the year previous. Its attributable net income to its parent company First Philippine Holdings Corp. for 2010 is $70.2 million, up 319% from 2009's $16.7 million.

The company said the increase in revenues posted by its subsidiaries particularly the First Gas group which runs the 1,000-megawatt (MW) Sta. Rita and 500-MW San Lorenzo natural gas-fired power plant.

EDC's net income for 2010 grew by 31% to P4.4 billion from P3.4 billion in 2009.

Shares in First Gen closed at P13.04 apiece, up 1.87% from its previous close. -- E. N. J. David

Source : FIRST GEN Corp.

Published on Global Energy World: Apr 6, 2011