SM Investments Corporation (SMIC) is acquiring 81 percent of Allfirst Equity Holdings Inc. (Allfirst), to gain full ownership of Philippine Geothermal Production Company, Inc. (PGPC), for P15.73 billion.
In a disclosure to the Philippine Stock Exchange, SMIC said its Board of Directors has approved the acquisition of the 81 percent stake from related parties in Allfirst in exchange for shares in SMIC, subject to valuation confirmation by an independent appraiser.
Allfirst is the holding company for PGPC, which operates the Tiwi and Mak-Ban steam fields. Together they generate geothermal steam sufficient to produce approximately 300 MW of electricity.
Tiwi is the first commercial-scale geothermal steam field development in Southeast Asia, followed by Mak-Ban, both in operation since 1979.
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.
“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 CEO Frederic C. DyBuncio.
He added that, “The terms of this transaction will additionally create value for our 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 (TCFD) framework,” Dybuncio noted.
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 VWAP (volume-weighted average price) of P903.88 per share.
SMIC said the transaction will be accretive to SMIC based on 2021 earnings.
The 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.
The transaction will be subject to approval by SMIC shareholders at the company’s ASM on Apr. 27, 2022 and by regulators and is expected to be completed in the third quarter of 2022.
“This transaction further reinforces the SM Group’s commitment to sustainability, good governance and acting as a catalyst for responsible development in the communities we serve,” SMIC said.