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SMIC acquires Philippine geothermal energy firm
Share-swap deal amounting to US$283 million involves two geothermal steam fields producing 300MW of electricity
The Asset 3 Aug 2022

One of the Philippines’ most diversified conglomerates, SM Investments Corporation (SMIC), has ventured into renewable energy by acquiring full ownership of two major geothermal steam fields in the country.

In a disclosure to the Philippine Stock Exchange on August 2, SMIC says it received approval from the Securities and Exchange Commission to acquire the 81% stake of related parties in Allfirst Equity Holdings (Allfirst) in exchange for shares in SMIC. Allfirst is the holding company for Philippine Geothermal Production Company (PGPC) and the transaction will bring SMIC’s ownership in PGPC to 100%.

The total consideration paid for 81% of Allfirst is 15.76 billion pesos (US$283.45 million). The transaction will involve the issuance of 17.44 million new shares to the sellers, equivalent to 1.4% of shares outstanding in SMIC.

PGPC operates the Tiwi and Mak-Ban steam fields. Tiwi is the first commercial-scale geothermal steam field development in Southeast Asia, followed by Mak-Ban, both in operation since 1979. Together, they generate geothermal steam sufficient to produce approximately 300 megawatts of electricity.

In addition to its two producing steam fields, PGPC also has several other greenfield concession areas for geothermal steam production which it will develop moving forward.

SMIC president and CEO Frederic Dybuncio describes the PGPC acquisition as a strong strategic fit with its portfolio of investments in high-growth sectors in the Philippines. “It further reinforces the SM Group’s commitment to sustainability, good governance and acting as a catalyst for responsible development in the communities we serve,” he says.

In 2021, PGPC delivered US$99.4 million in revenues and US$48.8 million in net income, equivalent to 1.2% of SMIC 2021 revenues and 5.5% accretion to SMIC 2021 net income, respectively.

The transaction valuation is based only on the cash flow of the existing geothermal steam fields and does not impute any value to the other concession areas in the portfolio of PGPC which are currently in the developmental stage. All further upside from the production of these developmental concession areas are all for the benefit of SMIC shareholders.

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