Premier Island Power REIT Corporation (PREIT) will be the second real estate investment trust (REIT) company whose primary source of rental income comes from a power generating company. The dividend yield of 9.56% at the reduced offer price of Php 1.50 is worth considering, especially in light of PREIT\u2019s WALE of 9.25.<\/p>\n\n\n\n
Our reservations only come from the growth prospects of this REIT company, as the power plant assets of the tenants will soon become obsolete as the world transitions to green energy. In addition, the DOE, ERC and NGCP are looking to fully integrate the three main islands of the Philippines which should give PROSIELCO and CELCO cheaper and clean sources of energy.<\/p>\n\n\n\n
The offer may be appealing to those who have a 5-7 year horizon and are looking for a high-yield vehicle. This may not be as compelling to those whose investment horizon extends beyond 10 years.<\/p>\n\n\n\n
PREIT has set its IPO price at Php 1.50\/share. PREIT will be offering to sell 1.4 million secondary shares with a greenshoe option of 210 million secondary shares. The company will raise Php 2.10 billion from this IPO which can be upsized to Php 2.14 billion with the full exercise of the over-allotment option.<\/p>\n\n\n\n
All the proceeds will go to the selling shareholders, SIPCOR and CAMPCOR, which they intend to reinvest in 14 identified solar projects with a combined capacity of 1,550 MWDC.<\/p>\n\n\n\n
S.I. Power Corporation is Prime Asset Ventures, Inc.\u2019s (PAVI) power arm. S.I. Power Corporation (SIPCOR) is a direct subsidiary of PAVI and the majority owner of CAMPCOR. SIPCOR and CAMPCOR are the selling shareholders and the sponsors of PREIT.<\/p>\n\n\n\n
After listing, PREIT will own a portfolio of 4 parcels of land, 3 buildings and 1 power plant asset with a total area of 30,666sqm and an aggregate appraised value of P8.67 billion. Stable tenancy for the next 8 \u2013 10 years. SIPCOR\u2019s power plants and supporting facilities are the have an 8 \u2013 10 year lease contract with PREIT with an annual rental escalation of 3%.<\/p>\n\n\n\n
The lease agreement from these facilities will serve as the Base Lease for PREIT which can still be improved by a Variable Lease Rate that is determined at the end of the year and is computed as a percentage of the power plant\u2019s revenues. SIPCOR also holds a 20-year PSA (Power Supply Agreement) with PROSIELCO which still has 13 years remaining in this contract. Meanwhile, CAMPCOR holds a 15-year PSA with CELCO, which will stay in effect until 2034. These PSAs together with the long-term lease on the properties should provide stability of cash flows for the next 9.25 years, which is PREIT\u2019s weighted average lease expiry or WALE.<\/p>\n\n\n\n