Citicore Energy REIT (CREIT), the country\u2019s first renewable energy REIT, disclosed in its Three-Year Investment Strategy Report to the PSE that it is planning to issue up to P4.5-billion worth of Green Bonds in 2023 to fund the acquisition of a 6.5-MW solar rooftop system and 475.3 hectares of land in Tuy, Batangas. <\/p>\n\n\n\n
The Batangas properties are part of the 90- MW Batangas Solar Farm A and the 40-MW Batangas Solar Farm B, which are solar farms being developed by Citicore Renewable Energy Corp. (CREC) and slated for completion this year. These two acquisitions will take the company a few steps closer to growing its capacity from 145-MW to its target of 780-MW by 2025.<\/p>\n\n\n\n
CREIT also laid out other potential acquisitions from its REIT sponsor, CREC, including the 72-MW Arayat-Mexico Solar Farm (Phase 1), the 44-MW Arayat-Mexico Solar Farm (Phase 2), and the 65-MW Zambales Solar Farm. Other projects in the acquisition pipeline are still in the site selection stage of pre-development.<\/p>\n\n\n\n
CREIT’s acquisitions could increase its earnings by 60% by 2024 and since the company is debt-free, we believe it can afford to take on the interest expense. According to the REIT Law, REITs can take on debt up to 35% of the value of its deposited property. This limit is further increased up to 70% if the REIT holds an investment grade rating from a duly accredited or internationally recognized rating agency. <\/p>\n\n\n\n
Given that CREIT holds a PRS AA+ rating from Philippine Rating Services Corporation, the second highest credit rating on the PRS scale, and that its deposited property amounts to P14.47-billion, the current borrowing cap for CREIT is around P10.13-billion. Considering that CREIT\u2019s current debt load is 0, the company certainly has more than enough headroom for its planned P4.5-billion bond offer.<\/p>\n\n\n\n
For comparison, ACEN Corporation (ACEN), which holds the highest PRS rating of AAA, conducted a Green Bond offer in September last year with a fixed annual interest rate of 6.05% for five years. We could expect the CREIT Green Bonds to fetch a higher interest rate than that, given the company\u2019s lower PRS rating and the higher prevailing interest rates. Despite the additional interest rate expense of around 6.5% per annum, the acquisitions would significantly increase CREIT\u2019s attributable capacity from 145-MW to 241-MW by the end of 2023, on the conservative assumption that the Green Bonds would only be enough to acquire the rooftop solar system and land for Batangas Solar Farm A. <\/p>\n\n\n\n
Assuming that these solar assets match the profitability of CREIT\u2019s current portfolio, this should be enough to increase the company\u2019s net income (and consequently, the dividends paid out to shareholders) by around 60% by the end of 2024.<\/p>\n\n\n\n