The Company<\/strong><\/p>\n\n\n\n Repower Energy Development Corp. (REDC) is a renewable energy company specializing in small-scale hydropower, with six (6) operating hydropower power plants with a total installed capacity of 10.15-MW. The company also has two (2) facilities under construction with targeted installed capacity of 6.4-MW, both of which are expected to start commercial production this year. REDC also has three (3) hydropower plants in the development pipeline with targeted installed capacity of 21.0-MW. <\/p>\n\n\n\n REDC is a subsidiary of Pure Energy Holdings Corp. (PEHC), a company controlled by Dexter Tiu and Eric Peter Roxas. REDC also has common directors with the Tiu family\u2019s Coal Asia Holdings (COAL).<\/p>\n\n\n\n The Offer<\/strong><\/p>\n\n\n\n REDC is offering 200-Million primary shares, with an over-allotment option of 30-Million secondary shares, at an offer price of P5.00. The total offer size is P1.15-Billion, and post-IPO market capitalization is P3.25-Billion.<\/p>\n\n\n\n Valuation<\/strong><\/p>\n\n\n\n The IPO price of P5.00 represents 24.1x of the company\u2019s 2022 Price-Earings (P\/E) ratio, and 18.3x of its forecasted 2023 P\/E assuming that the two projects under construction will come online as scheduled.<\/p>\n\n\n\n Opportunities<\/strong><\/p>\n\n\n\n REDC aims to secure feed-in-tariff (FIT) contracts for all of its projects, which we see as a strong potential for stable cash flows in the future. Unlike other offtake contracts such as the Green Energy Auction Program (GEAP), FIT contract also allow for annual rate adjustment based on factors such as inflation and forex rates.<\/p>\n\n\n\n Risks<\/strong><\/p>\n\n\n\n The offer looks relatively cheap against renewable giant ACEN Corp. (ACEN), which trades at a forecasted 2023 P\/E of 21.4x. However, the valuation looks quite expensive against a more comparably sized RE firm like Raslag Corp. (ASLAG), which trades at a F2023 P\/E of 7.8x. Other powergen firms like Aboitiz Power (AP) and FirstGen (FGEN) are also trading at single-digit P\/E ratios.<\/p>\n\n\n\n Further, three of REDC\u2019s operating hydropower facilities, namely Balugbog, Palakpakin, and Calibato, are among the oldest operating hydropower facilities in the country. These were rehabilitated, refurbished and modernized after REDC acquired Philippine Power Development Co. (PPDC) in 2015. We see substantial depreciation risks from these three older power plants. REDC has also stated ambitious expansion plans outside of its hydropower niche, namely into wind energy and pumped seawater power generation. These expansions could require further capital-raising through equity, debt, or both, which we see as a risk for investors buying at IPO.<\/p>\n\n\n\n Recommendation<\/strong><\/p>\n\n\n\n Given the small size of the offer (P1.15-Billion including over-allotment), REDC could be an interesting short-term or first-day play. Also, considering the size of its operations it could be a target acquisition by larger renewable energy (RE) player looking to expand its capacity.<\/p>\n\n\n\n