Federico “Piki” Lopez takes control of the diminished Lopez Group, what now?

The resignation of Eugenio Lopez III (EL3) from the Lopez Holdings Corporation (LPZ), the Lopezes flagship company,  allowed the younger Lopezes to take the helm of the much diminished Lopez Group.

The Lopezes were once a force to reckon with in Philippine business but a series of missteps have slowly shrank the group to irrelevance.  Presently, LPZ has a market capitalization of only 10.3 Billion Pesos.  LPZ was once a peer to the Gokongweis’ JGS, the Ayala’s AC, the Aboitiz’ AEV, and the Sy’s SM but now it is but a shadow of those groups. JGS has a market capitalization of 451.6 Billion, AC of 445.4 Billion, AEV of 274.19 Billion, and SM of 1.1 Trillion Pesos.

The resignation of EL3 allowed the ascension of Federico “Piki” Lopez into the Lopez flagship.  Piki Lopez is the best hope of the Lopez Group to revive their fortune. The Lopezes’ 54.4% of LPZ is valued at only 5.7 Billion Pesos.  Through LPZ the Lopezes control Rockwell Land (ROCK), ABS-CBN (ABS), and First Gen Corporation (FGEN).

Piki Lopez has a knack of creating shareholder value.  He grew First Gen Corporation (FGEN) to a power generation company valued at 85.9 Billion Pesos from scratch. The Lopezes once controlled MERALCO, the giant electric distributor, but they did not have power generation until FGEN.

At FGEN, Piki Lopez created a clear path strategy towards shareholder value.  Piki Lopez made it clear that the future of power generation is renewable.  That is why FGEN invests heavily in solar, wind, hydro, and geothermal. Piki Lopez theorized that absent a reliable power storage technology, flexible natural gas plants can provide the missing power quickly when there is not enough sunlight and when the wind doesn’t blow hard enough.  It only takes minutes for a natural gas plant to start up, making it flexible enough to adjust to shifting power demands. The clear strategy of using natural gas with renewable energy makes a cleaner and better combination creates shareholder value.

What Piki Lopez has done to FGEN attracted the administration of the likes of Macquarie, GIC (the sovereign wealth fund of the Republic of Singapore), and the American private equity pioneer, KKR. With Macquarie and GIC, FGEN was able to take private Energy Development Corporation, the largest geothermal power plant operator in the country.  KKR acquired around 11.9% of FGEN to invest alongside the Lopezes. 

FGEN at 85.9 Billion Pesos market capitalization makes it the most valuable company in the Lopez Group but the Lopezes have an effective interest in FGEN of only 18.66%.  The Lopezes control FGEN through layers of holding companies.  The Lopez controls an empire through their immediate and direct holdings of 54.4% of Lopez Holdings Corporation (LPZ).

If the Lopezes will have to revive their fortune they have to grow the shareholder value of LPZ.  Piki Lopez could do to LPZ what he has done at FGEN, that is to provide a clear path forward. Piki, what now for LPZ and ABS?

With Piki at the helm, LPZ and ABS are worth following again.

Disclaimer and Disclosure: This is an independent analysis for discussion purposes with the aim of giving stock traders and investors an independent view point. Accuretti Systems Inc. in the course of day to day trading may have own, or is considering buying or disposing, the shares of the companies mentioned in this commentary.

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