SM Investments ventures into renewable energy business

The country’s largest conglomerate, SM Investments Corp., has debuted into the renewable resource business with a P15.77-billion deal to acquire the company that produces geothermal steam out of Tiwi and Mak-Ban fields.

In a disclosure to the Philippine Stock Exchange on Tuesday, SMIC said it would acquire 100 percent control of Philippine Geothermal Production Company Inc. (PGPC), operator of Tiwi and Mak-Ban (Makiling-Banahaw) fields. Together, these fields generate geothermal steam sufficient to produce about 300 megawatts of electricity.

In addition to its two producing steam fields, PGPC has several other greenfield concession areas for geothermal steam production which it intends to develop in the future.

SMIC received the approval of the Securities and Exchange Commission to acquire the 81-percent stake held by related parties in Allfirst Equity Holdings Inc (Allfirst), the holding company for PGPC.

This transaction will give it 100-percent control of PGPC, effectively folding into the flagship listed conglomerate the geothermal assets already owned by family members and affiliate entities.

“The acquisition of PGPC is sizable, accretive to our shareholders, and a strong strategic fit with our 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,” said Frederic Dybuncio, CEO of SMIC.

In 2021, PGPC delivered $99.4 million in revenue and $48.8 million in net income, equivalent to 1.2 percent of SMIC’s 2021 revenues and a 5.5-percent accretion to SMIC’s net income, respectively.

Outside of its core property development, banking and retailing businesses, SMIC has been investing in new sectors that are believed to offer high-growth potential over the years. These included integrated gaming resort (Belle Corp.), mining (Atlas Consolidated Mining & Development Corp.), logistics (2GO Group Inc. and Airspeed), dormitory chain (Philippine Urban Living Solutions), community shopping malls (CityMall Commercial Centers Inc.) and food retailing (Goldilocks).

For its venture into geothermal assets, the Sy family-led conglomerate will use its own shares as currency. It will issue 17.44 million in new shares of SMIC, equivalent to 1.4 percent off outstanding shares, to the selling shareholders of Allfirst.

Tiwi is the first commercial-scale geothermal steam field development in Southeast Asia. Tiwi Located in the province of Albay, around 569 kilometers (kms) south of Metro Manila, it is situated in southeastern Luzon along the Lagonoy Gulf of the Philippine Sea.

The geothermal reservoir of Mak-Ban, on the other hand, is at the southwest flank of Mt. Makiling, with Mt. Banahaw on the east, 72 kms southeast of Metro Manila on the boundary of Laguna (Bay and Calauan) and Batangas (Sto. Tomas) provinces.

Both Tiwi and Mak-Ban geothermal fields have been in operation since 1979.

The power plants are operated by Aboitiz Power Renewable Inc. (APRI), which acquired these generating assets from the government in 2009, while the steam fields alone, including geothermal water and steam production, are operated by PGMC