With the re-opening of most economies, a large number of companies have begun exploring capacity expansion both domestically and internationally. A few have done so like TNB in Malaysia by acquiring energy assets overseas while others are cautiously expanding by acquiring controlling stakes in local companies.
One such example is that of SM INVESTMENTS Corp. (SMIC) that has acquired full ownership of Philippine Geothermal Production Co., Inc. (PGPC), the operator of Tiwi and Mak-Ban steam fields, through a US$283 million (P15.76-billion) share-swap deal with Allfirst Equity Holdings, Inc.
“The acquisition of PGPC is sizeable, accretive to our shareholders, and a strong strategic fit with our portfolio of investments in high growth sectors in the Philippines,” said Frederic C. Dybuncio, president and chief executive officer of SMIC in a stock exchange disclosure date 2 August.
The 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 received an approval from the Securities and Exchange Commission on 1 August to acquire the 81% stake of related parties in Allfirst, the holding company for PGPC, in exchange for shares in SMIC. The approval means SMIC now owns 100% of PGCP.
The steam fields in Tiwi, Albay and Mak-Ban (Makiling-Banahaw) in Laguna and Batangas generate combined geothermal steam enough to produce 300 megawatts of electricity. Aside from the two steam fields, PGCP also has several greenfield concession areas for geothermal steam production which it plans to develop in the future.
Tiwi is the first commercial-scale geothermal steam field development in Southeast Asia, followed by Mak-Ban. Both are in operation since 1979.
“In 2021, PGPC delivered $99.4 million in revenues and $48.8 million in net income, equivalent to 1.2% of SMIC 2021 revenues and 5.5% accretion to SMIC 2021 net income respectively,” SMIC said.
Therefore while this may seemingly be a small-scale acquisition, the long-term bottom line impact is likely to be sustainably positive.