First Gen to sell gas business to Prime Infra for P50-B

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First Gen [FGEN 19.22, up 16.5%; 1665% avgVol] [link] was halted yesterday after it disclosed that it had signed a term sheet with Enrique Razon’s Prime Infrastructure Capital (PRIME) to sell up to 60% of its stake in its gas power plant business for P50 billion. FGEN said that its retention of a 40% minority stake would “assure proper continuity and stability of its gas operating plants”, and that it would use the proceeds of the sale to finance the build-out of its renewable energy portfolio as part of its push to have over 13,000 MW of capacity under management by 2030.

MB bottom-line: FGEN’s stock price briefly surged up over 30% in the minutes following the halt, but settled out up 16.5% after bouncing around a bit over the remainder of the day. It fills FGEN to the brim with cash (will we see special dividends?), and gives the company a huge amount of capital from which to finance its big push to build out its solar, wind, geothermal, and hydro power portfolio. In my mind, the open question here is this: Does the transaction push PRIME closer to a PSE listing in the medium term? This kind of acquisition could certainly pump up a potential listing after the deal closes and the assets are integrated into PRIME’s financial statements.

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