KKR makes first infra investment in the Philippines with First Gen buy

KKR is making its first infrastructure investment in the Philippines with the acquisition of an 11.9 percent stake in First Gen, “one of the largest” independent power producers in the country, for 9.6 billion pesos ($192.2 million; €171.6 million).

The acquisition is being made through Valorous Asia Holdings, a Singapore-based entity owned by KKR, which was set up for the purpose of this share purchase, a spokeswoman told Infrastructure Investor.

On 1 July, Valorous Asia Holdings will acquire the more than 427 million common shares Philippine-listed First Gen tendered, agreeing to pay 22.50 pesos per share.

“The Philippines has great demographic and growth fundamentals, which are poised to benefit the infrastructure sector, including clean energy sources,” KKR’s head of Asia-Pacific infrastructure David Luboff told Infrastructure Investor.

“The country holds powerful potential with a population of over 100 million, coupled with a young demographic and an attractive PPP framework. These are strong indicators when it comes to supporting infrastructure growth,” he said. “Through our Asia-Pacific infrastructure strategy, we are focusing on India, Korea, Japan, the Philippines and areas within South-East Asia, in addition to opportunities in markets including Australia.”

Asked if KKR has any plans to increase its stake in First Gen, Luboff said KKR is very happy with the results of the voluntary tender offer, and that is what KKR is focused on for now.

First Gen generates power through renewable energy and indigenous fuel sources such as wind, solar, hydro-electric, geothermal power and natural gas. According to a statement, the company has 3.5GW of installed capacity in its portfolio, which accounted for 21 percent of the Philippines’ gross power generation last year.

It is a subsidiary of First Philippine Holdings Corporation, a conglomerate whose total assets stood at $5.2 billion and its net income at $414 million as of 31 December 2019, according to its latest financial statement.

The deal is KKR’s first investment in the Philippines through KKR Asia Pacific Infrastructure Investors, a region-focused fund it launched in June 2019, which has a target of between $1.5 billion and $2 billion. According to a filing with the US Securities and Exchange Commission, the firm had raised $1.4 billion as of 31 December. Luboff did not comment on KKR’s fund or fundraising activities.

Other investments KKR has made through its Asia-Pacific infrastructure strategy include five solar assets acquired from Shapoorji Pallonji Infrastructure Capital in April and a 42 percent stake it acquired alongside Singapore’s sovereign wealth fund GIC in infrastructure investment trust India Grid Trust, which manages a portfolio of 12 power transmission assets.

The other two investments the firm has made in the Philippines – Metro Pacific Hospitals and technology company Voyager Innovations – were made through its private equity platform, Luboff said.