SM Investments Corp., the holding company of the Sy family, said Friday it is set to take full control of Philippine Geothermal Production Company Inc., which operates the Tiwi and Mak-Ban steam fields.
SM Investments said in a disclosure to the stock exchange its board approved the acquisition of the 81-percent stake of related parties in Allfirst Equity Holdings Inc. in exchange for shares in SMIC, subject to a valuation confirmation by an independent appraiser.
Allfirst is the holding company for PGPC, operator of Tiwi, the first commercial-scale geothermal steam field development in Southeast Asia in Albay and Mak-Ban in Laguna and Batangas.
Both fields are in operation since 1979. They generate geothermal steam sufficient to produce about 300 megawatts of electricity. The geothermal power plants are being operated separately by Aboitiz Power Corp.
SM Investments said in addition to the two producing steam fields, PGPC also has several other greenfield concession areas for geothermal steam production which it will develop moving forward.
“As a leading sustainability advocate, SMIC is pleased to invest directly in clean renewable energy-related production, which is a national priority and aligned with our commitments to environmental stewardship and to tackling climate change. Renewable geothermal energy production contributes to carbon reduction efforts and is aligned to UN Sustainability Goals,” said SMIC president and chief executive Frederic DyBuncio.
The transaction will be structured as a share swap based on a P26.6-billion enterprise valuation of PGPC, resulting in the issuance of 17.4 million SMIC shares based on a 60-day volume weighted average price of P903.88 per share.
The transaction will be accretive to SMIC based on 2021 earnings.
SMIC said the valuation is based 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 in developmental stage.
All further upside from the production of these developmental concession areas are for the benefit of SMIC shareholders, it said.
DyBuncio said the transaction would also create value to the minority shareholders and ensure alignment of the interests of all shareholders in the geothermal property.
“PGPC is expected to generate significant carbon offsets reported under the Task Force on Climate-Related Financial Disclosures framework,” he said.
The transaction will bring SMIC’s ownership in PGPC to 100 percent, and will be included in SMIC’s portfolio investments in future reporting.
This portfolio comprises investments in high-growth sectors in the Philippines where SMIC seeks to support market leading companies that benefit from synergies within the ecosystem of the SM Group.
The transaction will be subject to approval by SMIC shareholders at the company’s annual stockholders’ meeting on April 27 and by regulators and is expected to be completed by the third quarter of 2022.
SMIC said the transaction reinforces the SM Group’s commitment to sustainability, good governance, and acting as a catalyst for responsible development in the communities it serves.