FREE Stock in Focus: SP New Energy Corp. (SPNEC) – 12 Sept 2024 by AP Securities

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Summary of Broker’s Recommendation

We remain cautious on SPNEC while it awaits funding for Terra Solar. We throw this caution to the wind now that Actis has bought into the project, which would lower execution risk to minimal levels. We estimate that SPNEC should be worth P1.40 per share.

However, thanks to the run-up in recent weeks which took the company’s share price up to P1.31, upside is now limited to our Target Price. Since we assume that the run-up was a result of speculation over an impending Terra Solar deal, it is likely that we will see some sell-on-news action.

With that in mind, we would recommend a BUY on SPNEC if the share price retraces to P1.26 but we remain a HOLD at current price levels.

Analysis and Opinion

Actis buy-in values Terra Solar at $1.5-Billion

British private equity firm Actis, which has $13.5-Billion worth of investments in renewable energy (RE) projects globally, has bought into SPNEC’s mammoth Terra Solar Project in a deal that values the project at $1.5-Billion. Terra Solar will be issuing $600-Billion worth of primary shares to give Actis a 40% stake in the project, while retaining 100% ownership of the land. SPNEC’s stake is now valued at P58.7-Billion.

The listed RE firm’s stake in Terra Solar would now be valued at around P50.0-Billion, using the prevailing USDPHP exchange rate of P55.70. Adding to that the P8.6-Billion appraised value of the land as of 2Q 2024, this pegs SPNEC’s Terra Solar stake at P58.7-Billion.

Construction update

During the same event where the Actis deal was announced, SPNEC Chairman Manny Pangilinan said that Terra Solar is now between 60-67% complete and will likely reach 80-90% completion by the end of the month. MVP further confirmed that the project’s first phase will come online by the first quarter of 2026, although we take this with a grain of salt as commercial operations in the Philippines is often delayed by grid connectivity issues.

The rest of the portfolio

Aside from the Terra Solar project, SPNEC also has full ownership over the 63-MW SP Calatagan and the 150-MW SP Tarlac solar farms. Both projects are operational and generated P1.1-Billion in revenues in 2023. If we value these two projects at the same P23.87/MW valuation given to Terra Solar by Actis, albeit discounted by 50% to account for their lack of battery energy storage systems, the two projects should be worth P2.5-Billion. Adding to that the appraised value of the land these projects sit on, the rest of SPNEC’s portfolio would be valued at around P6.5-Billion.

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