October 09, 2014

FPH wins in arbitration case against Nexolon

First Philippines Holdings Corp (FPH) disclosed today that the arbitration panel of the International Chamber of Commerce (ICC) has issued a final award for claims made by FPH subsidiaries First PV Ventures Corp (First PV) and First Philec Nexolon Corp (FPNC) against Nexolon Co Ltd. Nexolon is a publicly-listed Korean company involved in the photovoltaic industry and is the group’s jv partner for its solar wafer manufacturing business.

The case stemmed from a filing made by FPNC and First PV against Nexolon in March 2012 for payment of sums owed by Nexolon, including damages. Based on the final award issued by the ICC, Nexolon was ordered to (1) pay USD24.80m for damages and pre-award interest to FPHN and (2) pay First PV P2.09b as payment for the put option price in consideration of First PV’s shares in FPNC.

Nexolon has until 2 Nov to pay the amount. Otherwise it will be liable for a post-award interest of 8% per annum. Nexolon is reportedly subject to corporate rehabilitation proceedings in Korea, hence First PV and FPNC are considering options to pursue the enforcement of the award.

Our take: Although actual collection may take time, we view this development positively. The favorable settlement removes not only a potential overhang on the stock but raises the chances that FPH may win its second arbitration case. To recall, FPH subsidiaries First Philec Solar Corp (FPSC) and First Philippine Electric Corp (First Philec) filed last Nov 2012 an arbitration case against US firm SunPower Manufacturing Ltd (SPML) with the ICC.

FPSC is a jv with SPML that is engaged in the production of high-efficiency solar cells and panels for solar energy generation. The nature of the dispute for both arbitration cases are essentially the same. – WealthSec