Raslag to buy a 42-hectare plot in Tarlac for P273-M
Raslag [ASLAG 1.7 1.7%] [link] disclosed that its board has approved the purchase of several adjoining plots of land in Tarlac, totaling 42-hectares, for P273 million (P650/sqm).
The land will host RASLAG-6, the company’s 6th solar power plant that will connect to a nearby transmission line. ASLAG said that the new solar plant will “increase RASLAG CORP.’s income in the near future”.
ASLAG’s negotiated terms appear to be P27.3 million in “earnest money” (non-refundable deposit), a down payment of P61.4 million, and nine equal monthly payments of P20.5 million.
ASLAG will get the money from internally-generated funds, which may be reinforced by bank loans.
MB BOTTOM-LINE
Solar power plants are probably on the lowest rung of complexity when it comes to power plant installations.
It’s not unheard of for utility-scale solar power plants to go from first shovel to operations within a year, which is just not something that you can say about wind farms (turbine shipment and assembly is a huge pain), coal plants, or hydroelectric plants.
The quick development phase means that ASLAG is able to convert its debt/equity into generating assets very quickly, and the nice side effect for shareholders is that the added revenue hits the balance sheet that much quicker.
It’s a little different for REITs, even solar energy-focused REITs like the Citicore Energy REIT [CREIT 2.5], since the REIT law prohibits REITs from buying any asset that doesn’t have a “good track record” of 3 years of income.
Greenfield development, like the type that ASLAG is attempting here, is just not possible inside the REIT structure. Sure, it’s possible for CREIT’s parent company, Citicore Renewable Energy Corp, to buy raw land for development.
That’s exactly what it does. And then, after the land has been generating income, it is eligible for transfer into CREIT. That’s the lag that ASLAG shareholders don’t have to worry about.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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