Stock Commentary

Solar Philippines NEC bares plan to develop 10 GW of solar power capacity

Merkado Barkada
Solar Philippines NEC bares plan to develop 10 GW of solar power capacity

In a late-morning disclosure yesterday, Leandro Leviste’s Solar Philippines NEC [SPNEC 2.02 3.06%] disclosed that it is “firming up” plans to develop 10 gigawatts (GW) of solar projects. SPNEC said that it would be able to achieve this through asset-for-share swaps (yes, plural) with its parent company, Solar Philippines, which has been the holdco for all of Mr. Leviste’s solar projects in various stages of development.

The disclosure mentioned that Solar Philippines has spent “the past years” snapping up land assets around Metro Manila “in anticipation of the day when this demand would come.”

SPNEC said that in addition to the asset-for-share swaps, it may need to conduct a stock rights offering to raise additional capital, and it may form joint ventures.

SPNEC admitted that solar projects of this size are only viable for SPNEC if it partners with “the country’s leading power companies”, and that SPNEC plans to complete the formation of these joint ventures with those leading companies before the end of 2022.


For reference, the Philippines only had 7.6 GW of installed generation across all renewable energy types, with 4 GW of that coming from hydro. This 10 GW plan is absolutely massive.

As SPNEC points out, as of 2020, the Philippines only had about 1 GW of grid-connected solar capacity according to the Department of Energy.

Mr. Leviste’s strategy here is interesting, and it will be absolutely fascinating to see if this situation plays forward as he thinks it might.

The basics are this: gobble up premium solar-ready land and build a portfolio of solar-rich land before other power companies even think about it, then bid out projects to the incumbent “leading power companies” to actually develop the land using joint ventures.

The theory here is that what makes a parcel of land of high-value to solar companies will not materially change; land that is flat, clear of obstructions, and close to major centers of demand.

Solar power generation is a very land-intensive exercise, and the “100 square feet per 1 kilowatt” rule of thumb yields a land requirement of nearly 93 square kilometers for this 10 GW plan.

That’s about three times the land area of Makati City.

Now, Solar Philippines wasn’t paying Makati City prices for that flat, empty land, but any company with a potential solar project that is looking for something close to Metro Manila of any size is going to have the option of dealing with Solar Philippines through SPNEC to gain access to the Solar Philippines’ portfolio of premium solar-ready land.

The hitch, for SPNEC holders and potential investors, is the number of variables here that will impact the value of these deals for SPNEC, starting just with the pricing of the land that it might obtain from Solar Philippines through the asset-for-share swaps, but also in the terms of the various agreements that SPNEC would need to forge with companies like AC Energy [ACEN 9.63 0.42%] and Aboitiz Power [AP 32.50 0.46%] to get these projects built.

I absolutely love the audacity of the plan, and the company’s (seeming) willingness to work with anyone and everyone to develop the projects.

It’s a refreshing change from the typical oligarch approach of keeping everything in-house as much as possible.

All that said, for SPNEC shareholders, 99% of the value of this plan will come from the careful and thoughtful execution of it. I’ll be extremely interested to learn more about how SPNEC plans to proceed.


Merkado Barkada is a free daily newsletter on the PSE, investing and business in the Philippines. You can subscribe to the newsletter or follow on Twitter to receive the full daily updates.
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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