Lopez Family Feud Casts Shadow Over Philippine Power Sector Amid Election Postponements

At 9:05 pm on Friday, July 17, an email arrived at First Philippine Holdings Corporation (FPH) from the Securities and Exchange Commission’s (SEC) “Ad Hoc Committee on Matters Concerning the Lopez Group of Companies.” FPH’s annual stockholders’ meeting (ASM), scheduled for July 27, would have to be rescheduled to a date within 60 days. And a board election, which the committee had already told FPH it could hold on July 27, would still need to happen, just not on that date. Two days earlier, FPH’s listed parent, Lopez Holdings Corporation, had filed its own notice with the exchange. Its annual meeting, already pushed once from June to August, was being postponed again, this time to September 14, so the company could answer a fresh round of questions the SEC had raised about the documents it must give shareholders before a vote. And weeks before either of those filings, on July 2, media group ABS-CBN Corporation told the exchange that its own meeting would move from July 24 to August 19, for a reason that needed no further explanation to be alarming: The media giant had received zero nominations for its board of directors. Three Lopez companies, three postponed meetings. And now, sitting on top of all of it, a US$5 billion offer for the group’s most valuable asset that none of these companies is currently positioned to accept or refuse. Why a family fight reaches the power sector These postponements matter to anyone with money in these companies, and to anyone simply trying to understand why a family argument in a Mandaluyong court reaches the country’s energy sector. The Indonesian company PT Barito Renewables Energy wants to buy Energy Development Corporation, or EDC, the geothermal producer that generates most of First Gen Corporation’s revenue (related story below). Any real version of that deal will need approval from the companies that sit above First Gen in the Lopez ownership chain. Those are First Philippine Holdings and Lopez Holdings Corporation. Neither board has been able to hold an election this year. Must Read An Indonesian billionaire wants EDC: The $5-B offer raising the stakes in the Lopez feud What a missing election actually means Under the Revised Corporation Code, a company’s directors are elected for a one-year term, but the law adds a crucial phrase: they serve for that year “and until their successors are elected and qualified.” That phrase is what lawyers call the holdover rule: If an annual meeting is postponed, or if an election cannot be completed at that meeting, the sitting board does not vacate its seats. It simply keeps governing, unelected for another cycle, until stockholders finally get to vote. Boards still governing without a fresh vote are not inherently a problem. Companies sometimes delay meetings for routine reasons. The trouble starts when a board stays in power for an extended stretch without facing shareholders. A board that makes decisions cycle after cycle without a current vote is running on inertia rather than a live mandate. This is the situation now at FPH and Lopez Holdings, and it is the context in which a $5-billion offer has landed. (READ: [Vantage Point] When independent directors stop being neutral) The family war is the trigger These ASM postponements are happening in the middle of a family war. The fight is among the third generation of Lopezes, the cousins now running a conglomerate that spans media, power, infrastructure, real estate, and more. Their fathers, the second generation, are gone. Read against that backdrop, the postponements look less like routine scheduling and more like another symptom of the internal dispute. Debt, discipline, and daring: Inside the Lopez Group’s high-risk bets The Lopezes, presidents, and the cost of dissent Lopez vs Lopez: The secrecy fight behind the Razon power deals ABS-CBN‘s case makes that point most clearly. Lopez Inc., the private holding company at the center of the war, controls 78.4% of ABS-CBN’s voting shares. When a company’s dominant shareholder cannot or will not put forward a single nomination for its own board, that is not stockholder apathy. It is a controlling family too divided to agree on who should represent it. Lopez Holdings‘ trouble had a clearer paper trail. Two of its three independent directors, Roberto Panlilio and Consuelo Garcia, resigned within days of each other in early May, both citing personal reasons, both declining to be nominated for another term. Independent directors exist specifically to give minority shareholders and the investing public a set of eyes in the boardroom that does not answer to the controlling family. Losing two, in the same week, at the peak of an intra-family fight over board control, is the kind of exit that invites the very question the company never had to answer on the record: what did they see, and why leave now? (READ: When the ASM has no election: What the Lopez family dispute means for every investor) The first postponement, from June to August, was meant to give Lopez Holdings time to find replacements the SEC would accept. The second postponement moves the meeting to September because of a separate SEC review of its disclosure documents. That is two postponements in one year, both tied to the same underlying problem: the company cannot yet put together a board its regulators are satisfied with. FPH‘s story is the most telling of the three, because the rules kept moving. On July 2, the SEC told FPH that it could go ahead with its planned annual meeting on July 27, provided it followed that Mandaluyong court order protecting Federico “Piki” Lopez’s position. FPH began preparing and coordinating with the SEC committee, trying to balance these legal requirements against the deadline. Then, on that Friday night at 9:05 pm, the SEC sent a second letter. This time the committee didn’t change the rules for the election, but it did move the date, ordering FPH to push the meeting back to a new date within the next 60 days. The SEC said this was to give the company “sufficient time to undertake the steps necessary” for the meeting, a phrase FPH’s own official filing leaves unexplained. The effect is striking: for weeks, regulators had been pushing for this board election to happen, yet FPH, for reasons not spelled out in public, needed more time to get it done. First Gen Corporation is the only company in the group that has avoided all these. It held its annual meeting on May 28 as scheduled and elected a new board. It is the only listed Lopez company where the current directors were confirmed by a shareholder vote this year. It is also chaired by Piki Lopez, the cousin the majority is trying to remove. From ‘king’ to ‘steward’: How Piki Lopez answered the Lopez family rift question Now add Barito First Gen is also the company that received the Barito offer. On July 15, First Gen confirmed that Barito had made an unsolicited, indicative, and non-binding bid worth more than $5 billion, roughly P3