MANILA, Philippines — Taking a step closer to its goal of becoming a fully renewable energy company, ACEN Corp. has fully divested from its remaining coal plant under South Luzon Thermal Energy Corp. (SLTEC) through the world’s first energy transition mechanism or ETM.
“For ACEN, it is the only coal plant. However, ACEN still has some diesel plants to complement the variability of renewables. We set a target of 2025 for ACEN to achieve 100 percent renewables generation,” ACEN president and CEO Eric Francia said in a text message yesterday.
Based on separate disclosures to the Philippine Stock Exchange yesterday, ACEN conducted several transactions leading to the full divestment in SLTEC, and in turn, coal power generation.
These transactions allowed the company to implement the overall ETM for its remaining coal asset.
“ACEN continues to blaze the trail for energy transition in Asia-Pacific. As the company has successfully divested its coal asset, ACEN commits to a just energy transition. We have established mechanisms to ensure that stakeholder interests, especially those of the people and communities of SLTEC, are effectively addressed,” Francia said.
The ETM is a concept developed by the Asian Development Bank (ADB), which aims to leverage low-cost and long-term funding geared toward early coal retirement and the reinvestment of proceeds to enable renewable energy projects.
“We commend the Ayala Group and ACEN for the successful closing of this pioneering ETM transaction. We hope that this sets the tone for others to pursue the just transition of thermal plants to cleaner technologies,” ADB vice president Ahmed Saeed said.
The company said it sold its remaining 832,500 common shares in SLTEC to ETM Philippines Holdings Inc. (EPHI) for P100 apiece.
The sold common shares, equivalent to 2.27 percent of SLTEC’s outstanding shares, were valued at P83.25 million.
“The equity divestment feature of the ETM includes the sale by ACEN of common shares in SLTEC, resulting in the complete divestment of its equity interests in SLTEC,” the company said.
The transaction will also allow ACEN to raise additional funds to bankroll new renewable energy projects.
ACEN also executed separate option agreements with the Government Service Insurance System and EPHI following the issuance of SLTEC shares to GSIS and EPHI, and purchase by EPHI of SLTEC shares from ACEN.
“The option agreements entitle ACEN and the Investors, severally, to exercise call and put options, respectively, based on certain pre-agreed conditions, in order to enable the early retirement of SLTEC’s 246-MW coal plant by 2040, and its transition to a cleaner technology,” the company said.
SLTEC also redeemed the remaining 1.35 million preferred shares held by ACEN at P100 per preferred share, or a total of P135.025 million.
“SLTEC’s redemption of an additional 1,350,250 preferred shares from ACEN will enable the return of capital to ACEN, which it can use to fund new renewable energy investments,” the disclosure read.
SLTEC owns and operates a 2x135-megawatt (MW), or 246-MW net, circulating fluidized bed thermal power plant in Calaca, Batangas.
ACEN said the ETM would ultimately result in the early retirement of the SLTEC coal plant by 2040, or 15 years ahead of the end of its technical life.
The ETM for the SLTEC plant involved P13.7 billion in debt financing provided by the Bank of the Philippine Islands and Rizal Commercial Banking Corp., as well as P3.7 billion in equity investments from the GSIS, the Insular Life Assurance Company, Ltd. (InLife) and EPHI for a total deal value of P17.4 billion.
ACEN also received P7.2 billion from the transaction for reinvestment in the company’s renewable energy projects.
The balance of proceeds was used for refinancing debt and transaction fees.
Of the P3.7-billion equity investments, GSIS invested P2.2 billion in redeemable preferred shares issued by SLTEC.
“Our priority is to find ways to grow and sustain our funds to ensure that we are able to provide our over two million members and pensioners their benefits. We also fully support investments that prioritize optimal environmental, social, and governance factors or outcomes consistent with our corporate social responsibility,” GSIS president and general manager Wick Veloso said.
InLife also anchored the equity placements with a P1-billion investment.
“To deliver a lifetime or good, for us at InLife, also means investing in cleaner air and environmental solutions for future generations. The proceeds of our investment will be used to develop renewable energy and eventually allow decommissioning of the coal plants. We join the call for the development of more renewable energy sources through this pioneering transition mechanism,” InLife executive chairperson Nina Aguas said.
AlphaPrimus Advisors and BPI Capital served as financial advisors to the transaction. CLSA Philippines was the lead arranger for the equity placements, while BPI Capital and RCBC Capital acted in the same capacity for the SLTEC debt financing.
The ETM aims to leverage low cost and long-term funding geared toward early coal retirement and reinvestment of proceeds to enable renewable energy.
This move will also help ACEN fulfill its commitment to achieve net zero greenhouse gas emission by 2050 or earlier.
Together with the Ayala group, ACEN announced its commitment to net-zero greenhouse gas emissions by 2050 in November last year. The goal is supported by key milestones that will bring ACEN generation output to 100 percent renewable energy by 2025.