[Vantage Point] Alternergy’s cherry-picked financials used to defend GSIS deal

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The Department of Finance (DOF) is launching its own investigation into the equity investment of the Government Service Insurance System (GSIS) into Alternergy Holdings Corporation. This follows the Office of the Ombudsman’s order to suspend GSIS president and general manager Jose Arnulfo “Wick” Veloso and six other executives for six months.

Finance Secretary Ralph Recto on Tuesday, July 22, said his agency would assess if Veloso and the others defied “any rule imposed by law or board resolution” concerning some investment decisions, which the Commission on Audit (COA) flagged.

Recall that Ombudsman Samuel Martires directed the preventive suspension of the GSIS officials with regard to the state pension fund’s P1.45-billion foray in Alternergy. Other GSIS officials covered by the order are: executive vice presidents Michael Praxedes and Jason Teng; vice presidents Aaron Samuel Chan and Mary Abigail Cruz-Francisco; officer Jaime Leon Warren; and acting officer Alfredo Pablo.

An Ombudsman investigation earlier found the deal to be in violation of the 2022 GSIS Investment Policy Guidelines. Its probe shows that the purchase skipped stipulated approvals from the GSIS Assets and Liabilities Committee, Risk Oversight Committee, and its Board of Trustees.

It also found that the deal was in violation of the GSIS investment rules because the shares were not listed on the Philippine Stock Exchange (PSE) at the time of the agreement and payment, the resolution said. Alternergy also did not meet the required minimum market capitalization and exceeded the limit on shares available for public trading.

Vantage Point wrote about this issue on July 22, 2025. (READ: Is public money unsafe in GSIS hands?)

Letter to Rappler

Alternergy wrote to Rappler editors to debunk what I wrote on July 22 about its P1.45 billion preferred share transaction with the GSIS. The company characterized the published commentary as “malicious,” “reckless,” and “wholly unsupported by facts,” and demanded a public correction, apology, and dialogue.

While Alternergy’s leadership is within its rights to defend the company’s reputation, the response reflects a troubling unwillingness to engage with the core issues raised — not just by Vantage Point, but also by the Ombudsman, the COA, and the broader investing public.

I respond below, point by point, to clarify why Alternergy’s reaction does not resolve the fundamental concerns regarding its finances, its role in the GSIS transaction, and its communication with the public.

1. On regulatory compliance vs fiduciary accountability

Alternergy said that the GSIS investment “complied with all SEC and PSE requirements” and was backed by top legal advisers. But this misses the point. The ongoing investigation by the Ombudsman is not about whether Alternergy’s preferred shares were legally registrable securities. It’s about whether GSIS breached its own internal governance rules — including risk limits, approval thresholds, and investment eligibility criteria — when it executed the investment.

Compliance with securities listing requirements does not absolve GSIS, a public pension fund, from fiduciary discipline. Nor does it sanitize the investment’s risk profile when viewed from the lens of long-term pension liabilities. Regulatory compliance is the floor, not the ceiling, of good governance.

2. On risk and liquidity misstatements

Alternergy insisted that its perpetual preferred shares are “liquid” because they are listed on the PSE. Listing is not synonymous with liquidity. PSE-listed preferred shares often trade thinly or not at all. Investors — especially large institutional ones like GSIS — must assess whether they can exit their position at scale and without impairing capital. For now, Alternergy has provided no data on actual trading volume or secondary market depth.

Moreover, Alternergy claimed that the return on investment to GSIS is “guaranteed,” citing the 8% coupon and redemption premium. In reality, there would be no legal or contractual guarantee, if the company’s future cash flows or solvency deteriorate. A single coupon payment made in 2024 is not an evidence of long-term sustainability.

It claimed that the pension fund is set to earn an “effective 56% return” over seven years — amounting to a projected P826 million in profit on the P1.45 billion investment in perpetual preferred shares. This optimistic projection is based on an 8% annual coupon, a premium redemption starting in year 5, and the assumption of steady performance by the company.

But these projected returns are forward-looking and highly conditional. They rely entirely on Alternergy’s ability to continue paying annual dividends and redeem the shares as promised — a tall order for a company whose underlying financial health raises multiple red flags.

3. On financial performance: A selective story

Alternergy cited a “241% net income growth” from June 2023 to June 2024, rising from P38 million to P129.6 million (see red highlight in their financial statements below). However, it failed to mention that this refers to profits before minority interest losses, not necessarily attributable to equity shareholders (see yellow highlight below).

More critically, Alternergy omitted the fact that, for the 12 months ended March 2025, it posted a net loss of P-23.6 million (see yellow highlight above).

It also does not contest the point — because it cannot — that its negative free cash flow totaled P1.4 billion in 2023 and 2024 (see yellow highlight in the table below).

For the 12 months that ended in March 2025, it recorded another -P3.4 billion in free cash outflows. These are real figures that are disclosed in their financial statements. What do these tell us? It’s paying dividends and layering debt while burning capital.

4. On leverage and interest coverage

Alternergy disputed the “-5.9x interest coverage ratio” I cited, asserting it instead had a positive ratio of 2.38x as of March 2025. The discrepancy appears to stem from different accounting treatments — likely using EBITDA vs. EBIT — and different fiscal period definitions. EBIT (Earnings Before Interest and Taxes) reflects a company’s profitability from its core operations, excluding the impact of interest and taxes. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) builds upon EBIT by further excluding the impact of depreciation and amortization, which are non-cash expenses.

Regardless, even a 2.38x ratio is borderline for a company with P8.2 billion in debt, especially one which is in the early stages of development, has a limited operating history, and with volatile cash flows. Alternergy said that “1.94x debt-to-equity is normal” for renewables. That may be true in abstract, but what matters more is the company’s ability to service its debt from internal cash flows which, as far as Alternergy is concerned, remains negative.

5. Claim: 1.94x debt-to-equity ratio is ‘normal’ for renewables

Alternergy asserted that its 1.94x debt-to-equity ratio (or 194.6%) is “normal” for renewable energy companies and implied that such leverage is standard for capital-intensive infrastructure projects.

I reviewed the latest debt profiles of 10 comparable renewable energy firms operating in the Philippines, selected based on industry relevance, asset scale, growth phase, and financial maturity. The comparison paints a stark picture:

SPC Power: 0.1%
NexGen Energy: 16.2%
SP New Energy: 39.8%
Lopez Holdings: 58.2%
First Gen: 65.0%
AC Energy Philippines: 95.8% (also the Utilities sector average)
RASLAG: 106.4%
Alsons Consolidated Resources: 112.3%
Repower Energy Development: 129.7%
Aboitiz Power: 142.9%

At 194.6%, Alternergy is over-leveraged compared to its peers, exceeding even the most aggressive capital structures seen in the industry. Notably, its ratio is double the average of the broader utilities sector (95.8%) and far beyond the threshold where most investors begin to question solvency and risk management.

The renewable energy business is indeed capital intensive, often requiring upfront investments in generation and grid infrastructure. However, mature firms manage this through balanced leverage, disciplined capital allocation, and phased project financing. Alternergy’s debt-to-equity ratio is more indicative of financial strain, not strategic planning — especially when paired with:

Negative free cash flow of P3.4 billion for the 12 months ending March 2025
Net losses in the same period, and
A reliance on continued fundraising and external capital to stay solvent.

The company is suggesting that such a level of debt is “within range” — without acknowledging the heightened risk this imposes, particularly on public fund investors like GSIS.

In short, Alternergy is not aligned with sector norms. It is an outlier, and not in a good way. Investors, regulators, and pension fund managers should treat this financial posture with the caution it demands — not the normalization that Alternergy hopes to project.

6. On accusations of ‘transaction splitting‘

Alternergy called the suggestion of transaction splitting “baseless.” It argued that its initial price offering (IPO) in March 2023 and its preferred share issuance in November 2023 were unrelated, separated by time and purpose. But this concern is raised in the COA report itself, not by journalists.

And COA flagged that the P1.5 billion board approval threshold could have been circumvented by splitting a larger investment into two tranches: P85 million in March, followed by P1.45 billion in November.

If the two transactions were unrelated, Alternergy and GSIS can demonstrate this through board resolutions, investment memos, and internal correspondence. But merely claiming separateness without documentary evidence is insufficient in the face of public scrutiny and a formal Ombudsman investigation.

7. On dividend declaration

Alternergy defended its July 2025 declaration of P40 million in dividends as “a reflection of financial strength.” Yet, the company has posted a net loss of -P23.6 million for the 12 months ended March 2025. It continues to burn cash and remains heavily reliant on debt. Declaring dividends in such conditions is not shareholder-friendly — it’s capital misallocation.

Public companies have every right to reward investors, but doing so — while cash flow is negative and debt is growing — raises serious questions about management’s priorities, particularly when public pension money is involved.

8. On due process and presumption of innocence

Alternergy is correct in stating that the Ombudsman’s suspension of GSIS officials is preventive, not punitive. It does not imply guilt. However, Alternergy’s attempt to frame the media’s reporting of those facts as “malicious” is overblown. Journalists reported the contents of the Ombudsman’s suspension order accurately, including direct quotations and legal citations.

Linking Alternergy to the scandal is not guilt by association, it is a fair consequence of being a direct beneficiary of a transaction that is controversial and under investigation. A publicly listed company receiving P1.45 billion in taxpayer-backed funds must expect, accept, and pass rigorous scrutiny.

Accountability is not defamation

Alternergy is clearly upset by the tone and reach of the criticism. But the press is doing its job: asking hard questions, analyzing public data, and reporting red flags in the use of public funds.

What the company characterizes as “reckless and defamatory” does, in fact, fall within the scope of fair commentary and journalistic inquiry, especially when the subject involves state pension funds, corporate governance, and financial transparency.

Alternergy’s call for dialogue is welcome. But its insistence on retractions and corrections — and veiled threats of legal action — do not help address legitimate public concerns about an investment made by a government-owned and -controlled corporation.

It’s a public interest issue — how billions in pension funds are spent, how investments are structured, and whether companies entrusted with public money are financially sound, transparent, and accountable.

Alternergy and the Investment & Capital Corporation of the Philippines (ICCP) may have met the letter of regulatory law, but the principles of fiduciary duty and prudent public fund management appear to have been breached. ICCP served as sole issue coordinator and joint lead underwriter for Alternergy’s IPO in March 2023, including GSIS’s P1.45 billion preferred share purchase.

To reiterate, compliance with securities listing rules does not absolve the GSIS leadership — or Alternergy, as a counterparty — from the duty of care and commitment to act in the best interests of millions of Filipino government workers whose savings and futures hang in the balance.

In the wake of the Ombudsman’s suspension of its top officials, the GSIS now bears the onus of explaining clearly, publicly, and thoroughly how and why this transaction was allowed to proceed. The public deserves nothing less. Doing otherwise will only reinforce public fears that institutions meant to serve the people may, once again, have served the interests of someone else. – Rappler.com