SPC terminates ‘purchase deal’ with STEAG

Published May 9, 2022, 3:28 PM

by Myrna M. Velasco

Listed firm SPC Power Corporation, through its affiliate-firm Intrepid Holdings Inc. (IHI), has terminated its sale and purchase agreement (SPA) with German firm STEAG GmbH, aborting the former’s plan to acquire majority shareholdings in the 232-megawatt Mindanao coal-fired power facility sited in Misamis Oriental.

The SPA that was sealed on February 10, 2022 had stipulated that the SPC-owned subsidiary firm can purchase the 51-percent equity of STEAG in the Mindanao coal plant for $52 million.

But it was primarily provided in the deal that the closing of the transaction shall be subject to regulatory approvals, as well as on the need for it to secure a waiver for the transaction.

SPC, nevertheless, disclosed that “securing completely the transaction or waiver of the conditions precedent is highly unlikely, thus, the parties have mutually agreed to terminate the PSA.”

As previously agreed by the parties-in-interest, SPC qualified that “among the terms and conditions of the PSA, is the satisfaction or waiver of the conditions precedent – which is a prerequisite for the completion of the transaction.’

The other shareholders in the Mindanao coal plant are Filipino firms Aboitiz Power Corporation and La Filipina Uygongco Corporation.

It is worth noting that Henares-led SPC and Aboitiz Power had ‘intense rivalry’ and they went through fierce legal tussle when they both joined the government’s auction for the privatization of the Naga thermal plant in Cebu in 2014. The plant eventually landed into the hands of Aboitiz Power after winning the court battle.

SPC has not stated what kind of waiver it has not been able to secure on its targeted acquisition of the majority stake in the Mindanao coal plant.

Under the pact signed with STEAG early this year, SPC Power indicated that it purchased the 40.5-percent stake of the coal-fired power asset; while its affiliate IHI acquired the remaining 10.5-percent.

It was fleshed out then that the terms of payment for the transfer of ownership rights to the buyers SPC and IHI comprise of US$33.889 million for common shares; and US$18.110 million worth of redeemable shares; plus there’s consideration for accrued interest to be placed on a locked box.

SPC explained then that a ‘locked box interest rate’ would refer to an amount “equal to the interest, accrued on a daily basis – and that should have been at a rate of 4.0-percent per annum calculated over the period starting from January 1, 2021 until and including completion, or March 31, 2022, whichever is earlier.”

The SPI-operated Mindanao coal plant was developed through a build-operate-transfer (BOT) arrangement with the government – and it has been state-run National Power Corporation (NPC) that served as the original counterparty to the 25-year power purchase agreement (PPA) of the facility’s generated capacity. That contractual obligation was eventually transferred to Power Sector Assets and Liabilities Management Corporation, the successor-company of NPC.

That coal-fed power asset, in particular, is being targeted by the government as a candidate-plant for eventual phaseout under the energy transition mechanism (ETM) that is underpinned by financing package as anchored on the decarbonization goals of the Paris Agreement.