First Gen closes 3.19% lower on its market debut

BY RUBY ANNE M. RUBIO, BusinessWorld Reporter Dark clouds hovered over the initial public offering of Lopez-led independent power producer First Gen Corp., which closed 3.19% weaker at P45.50 than its offer price of P47. While the listing ceremony prior to the ringing of the bell was filled with ambient music by Pundaquit Virtuosi and a production number by the Quezon City Performing Arts, the market debut ended on a somber note. Still, Philippine Stock Exchange President Francis Lim was optimistic that the fundamentals of the country’s 238th listed company would enable it to recover from its opening-day loss. "Contrary to expectations, the share price did not improve. Taking into consideration the mixed rating by Moody’s Investors Service and Standard & Poor’s, [I believe] this played a role in the behavior of the market Friday," he told reporters. First Gen is the holding firm that will focus on the power generation assets of First Holdings. Its portfolio will include holdings in the 225-megawatt Bauang power plant, the 72-megawatt Panay power plant, the 1,000-megawatt Sta. Rita power plant, the 500-megawatt San Lorenzo power plant, and the 65-megawatt Batangas co-generation project. First Gen listed 1.08 billion common shares in the first board wherein 180.91 million common shares were offered to the public on a primary basis at an offer price of P47 per share. Through the primary offer, the company expects to gross P8.5 billion, lower than the earlier expectations of P11.22 billion. The net proceeds from the primary offer will be used for improvements to existing facilities, investments in capacity expansion, which may include potential acquisitions of power generation facilities and the development of greenfield projects. A portion of the net proceeds will also be used by the company for general corporate purposes, including working capital and investments. The underwriters for the international offering are UBS Investment Bank and CLSA, a brokerage, investment banking and equity group under France’s Credit Agricole. ATR Kim-Eng Capital Partners, Inc. and BDO Capital and Investment Corp. are the domestic underwriters. "We welcome one of the Lopez group, which has strongly supported the stock market. First Gen is the first company to be listed this year. What makes it more meaningful for the stock exchange is it is the largest Filipino-owned .This should set a good example for Filipino owned companies to list in the stock exchange," Mr. Lim said. The two major credit ratings firms have conflicting outlooks on the Philippines, with US-based Moody’s still pessimistic -- citing the need for more progress -- while Standard & Poor’s was more upbeat. Martin L. Español, an analyst from stocks portal 2tradeasia.com, said First Gen’s expectations of a flat growth this year turned off investors aside from the fact its revenues are highly dependent on the levels at which Manila Electric Co. dispatches Sta. Rita and San Lorenzo plants. However, he said First Gen is ideally positioned to take advantage of the area’s continued economic expansion as the Lopez-led firm is one of the largest independent power producers in the Luzon grid. Francis Giles B. Puno, First Gen senior vice president and chief finance officer, earlier said net income will not be far off from the $85 million to $86 million levels hit around 2003 and 2004. Rommel Macapagal, chairman of Westlink Global Equities, Inc., said the market debut failed to lift the main index. "Walang kumita sa mga kumuha [None of those who bought the shares gained]," he added. Asked whether woes of sister company ABS-CBN Broadcasting Corp. spilled over to the firm’s market debut, First Gen vice-chairman and chief executive officer Peter D. Garrucho Jr., said "If that is in the mind of a few people, it is a bit of a stretch." "It is a long journey for us in transforming ourselves from a private company to a public company. We also in the process have to listen to investors who would like to buy a part of our company. We have to listen to their counsel and criticism. With that experience, we are a richer organization as we show ourselves to the public, we become stronger," he added. First Gen adjusted and fixed its final offer price at P47 per share, below the offer price range for its market debut at P51 to P62 set in its preliminary prospectus dated Jan. 13. Its gross proceeds goal of P8.5 billion was also lower than the earlier expectations of P11.22 billion. "Any organization that does not encounter any criticism must be a perfect organization. This is just the opening bell. In a few days, the strength of the organization will be understood and realized. We are optimistic." “There are always arguments as to what is the perfect time just as whether there will be a way of forecasting the perfect storm. It is a very good time for us; we prepared for this hard and long. The fact that we are listing now and hopefully the next few days will show we listed, we will show we have... despite the noise in the environment, we will persevere," said Mr. Garrucho. In his opening remarks, PSE Chairman Jose C. Vitug said, "First Gen has generated quite an excitement, even surprise and anxiety. Not a few leading companies out there, we surmise, must have plans of their own and are watching closely how First Gen will perform after listing. “It has proven its technical value in developing and implementing successful greenfield projects like the generation facilities of Sta. Rita and San Lorenzo in Batangas, Bauang in La Union and Agusan Mini Hydro in Agusan del Norte. First Gen also has a strong shareholder base with First Holdings as its major stakeholder. The First Holdings link gives the company an extensive business knowledge and technical expertise to enhance its position as being the leading IPP [independent power producer] in the Philippines. All these and more has attracted so much excitement and not so little expectation," he added. First Gen will be the fifth listed Lopez firm after Meralco, ABS-CBN Broadcasting Corp., Benpres Holdings Corp. and parent, First Philippine Holdings Corp. Reacting to First Gen’s market debut, Energy Secretary Raphael P.M. Lotilla said that private sector participation, by listing at the stock market, would provide the country enough leeway to meet its growing energy requirements. "Energy is everyone’s business. Listing in the stock market like what First Gen did will definitely provide a broader base of ownership in the sector, and as a whole, will provide impetus for good governance in the energy sector," he said. "I laud First Gen Corp. for undertaking its IPO. We hope that this will encourage other energy companies in power, geothermal energy and oil and gas exploration to list in the stock market to be able to help them grow their businesses," he added. He also added that the IPO of First Gen is also a positive sign for the equities market as its success will bolster the capital market. - Ira P. Pedrasa