SPNEC confirms it is looking for investors in Terra Solar to help fund project dev’t

SP New Energy [SPNEC 1.11, up 0.9%] [link], Meralco’s [MER 373.00, down 1.8%] new renewable energy subsidiary, confirms a report that it was seeking investors to help fund the development of the 3.5 GW Terra Solar project, but clarified that it is only seeking investors “at the Terra Solar Philippines Inc. level,” and that it has only “just launched the process and are still in discussions with various possible investors.” Manny Pangilinan, the Chairman of SPNEC and SPNEC’s ultimate parent company said that they need investors “to help us in financing” as MER is starting “to see the complexities that flow from the execution of a project of this scale.” Mr. Pangilinan said that SPNEC is speaking with foreign investors, but did not indicate if that was in addition to potential domestic investors.

MB bottom-line: SPNEC owns 100% of Terra Solar right now, but it’s looking to sell a 40% stake to an investor or group of investors. The Terra Solar project was initially a 50/50 split between SPNEC (then owned and operated by Leandro Leviste) and Prime Infrastructure (owned by Enrique Razon) before tensions between SPNEC and Prime Infra led Mr. Razon to limit the scope of Prime Infra’s involvement with SPNEC and eventually to sell his 50% stake in Terra Solar to SPNEC for ?6 billion. Now, SPNEC is looking to sell primary shares in Terra Solar to raise money at the Terra Solar level to pay for the development costs which appear to have caught MER by surprise, at least with respect to the cost of the 4 GW battery storage component of the facility. The audacity of this project’s size and the press it’s received has likely raised its profile with international investors, which is a great starting point for a sales process as more potential buyers usually means a better potential price. This sale won’t be dilutive to SPNEC shareholders (the sale is at the Terra Solar level), but it will reduce SPNEC’s long-term benefit from the project. 

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