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SM to acquire Philippine Geothermal Production Company

Sy family-led SM Investments Corp. (SMIC) announced on Friday that it will acquire a geothermal power company as part of its efforts toward sustainable development.

In a disclosure to the Philippine Stock Exchange, SMIC said its board of directors approved the acquisition of the 81% stake in Allfirst Equity Holdings Inc. in exchange for shares in the company, subject to valuation confirmation by an independent appraiser.

Allfirst is the holding company for the Philippine Geothermal Production Company Inc. (PGPC).

SMIC said the transaction will bring its ownership of PGPC to 100% and it will be included in its portfolio of investments.

PGPC operates the Tiwi and Mak-Ban steam fields.

Tiwi is the first commercial-scale geothermal steam field development in Southeast Asia, followed by Mak-Ban. Both steam fields have been operating since 1979.

Tiwi and Mak-Ban steam fields generate geothermal steam sufficient to produce approximately 300 megawatts of electricity, according to SMIC.

In addition to its two producing steam fields, SMIC said PGPC also has several other greenfield concession areas for geothermal steam production that it will develop moving forward.

The company said the transaction will be structured as a share swap based on the 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.

SMIC said that 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, it said.

The company said the transaction will be subject to approval by SMIC shareholders at the company’s annual stockholders meeting on April 27 and by regulators.

The transaction is expected to be completed in the third quarter of 2022.

“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 Frederic DyBuncio, president and CEO of SMIC.

“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." — VBL, GMA News