PSE Circular for Brokers No. 1853-99

July 27, 1999 PSE CIRCULAR FOR BROKERS NO. 1853-99 July 26, 1999 MS. GRACE DE GUIA Head, Disclosures Group Philippine Stock Exchange Philippine Stock Exchange Centre Exchange Road Ortigas Center, Pasig City Dear Ms. De Guia : Attached is a press statement of the company to clarify various newspaper reports relating to the bidding process for a 40% stake in First Generation Holdings Corporation, a subsidiary of the company. For your information. LLjur Very truly yours, (SGD.) RODOLFO R. WAGA, JR. Asst . Corporate Information Officer First Generation Press Statement Peter D. Garrucho, Managing Director for Energy of First Philippine Holdings issued a statement to clarify various press reports related to the bidding process for a 40% stake in First Generation. First Holdings had incorporated First Generation to consolidate its investments in various power generation companies, principally First Gas Holdings, First Private Power, and Panay Power. The company had invited some multinational power companies to submit proposals for as much as a 40% stake in the firm which managed and partly owned the 1,000 megawatt Sta. Rita natural gas plant which is now nearing completion, a planned 500 megawatt San Lorenzo natural gas plant, the 225 megawatt Bauang diesel plant, and the 72 megawatt Panay Power diesel plant. Bauang and Panay are already in full operations. Sta. Rita is scheduled to undergo commissioning by the fourth quarter of 1999 and will be inaugurated by the mid December. First Generation would also be the corporate vehicle for bidding into a "genco" with the privatization of the National Power Corporation, and for the development other greenfield projects, including a 65 megawatt Cogeneration facility to be constructed in the First Philippine Industrial Park in Tanauan, Batangas. Mr. Garrucho clarified that the company had received proposals for a 40% stake in First Generation. These are currently under evaluation and discussion with the bidders. In addition to the financial offer, there were a number of issues that needed to be threshed out. These included "governance" concerns particularly related to Board decisions and management positions, the possibility of a 50% stake for the bidder instead of 40%, the timing of payments, and the opportunities for increasing First Generation's stake in First Gas Holdings and in First Private Power. Mr. Garrucho pointed out that because of confidentiality agreements, the names of the bidders and their financial offers, cannot be disclosed as yet. Mr. Garrucho stated that a decision on the strategic partner could be concluded only over the next six to eight weeks. While discussions are on-going, Mr. Garrucho added that "our operating companies, Bauang and Panay continue to do very well. Sta. Rita will soon deliver power to Meralco, with the completion of the transmission line and we anticipate that there will be a smooth start-up of the plant as Siemens commissions the engines. We are working towards a financial close for San Lorenzo by the end of the year, now that we have finalized the gas supply agreement with Shell, the power purchase contract with Meralco, and soon the transmission agreement with NPC. We also expect to announce the turnkey supplier for the Cogen project within six weeks. With Sta. Rita in operation soon, we expect even healthier cash flows for First Generation. The identification of a strategic partner should put us in an even better position to take advantage of opportunities in power generation, particularly the privatization of NPC's assets."