Maharlika raising $1 B to fund energy ventures

Via partnerships with other wealth funds, private equity

In its first fundraising activity, state-run Maharlika Investment Corp. (MIC) is targeting to secure $1 billion (P56 billion) to fund energy projects via partnership with other sovereign wealth funds (SWF) and private equity.

During the German-Philippine Chamber of Commerce and Industry forum late Wednesday night, MIC president and CEO Rafael Consing Jr. said he would seek the MIC board approval to raise $1 billion solely for the energy sector.

This developed as the MIC has placed risk limits, which means that for every sector, it can invest only about 15 percent of the P125 billion seed capital or equivalent to P18.75 billion.

“The question is, how can we spend that P18.75 billion many times over? Because the requirements, for example, in energy are more than P18.75 billion,” Consing said.

The $1 billion target already includes the initial P18.75 billion sectoral limit. This means that the MIC is eyeing at least P37.25 billion via the fundraising.

To do this, Consing said the MIC intends to create a limited partnership (LP) with some SWF. He did not disclose, however, which wealth funds he is in talks with, as this will have to go through a formal process.

“We will be the fund manager of a limited partnership. That’s one way by which an investor can come in, through LPs, or by investing into our sub-funds,” Consing said.

“Or if they want to, if they are operators who want to set up specific investments and we can co-invest with them directly, where they don’t have to go through the fund, and we can invest in the project directly,” he said.

A limited partnership will need a general partner, MIC in this case, which will run the business and have full management control. The limited partners will only have liability up to the amount of their investment.

Consing explained that a limited partnership would allow MIC to generate additional returns and invest more even if it will only contribute its risk limit which is at P18.75 billion.

“Because if you stay within your sectoral limit, that is all you can spend. But if you create a fund, and in which case, our sector limit is going to be our contribution to the fund, then we’re able to increase our spending effectively,” he said.

Apart from SWF, Consing said the MIC would also tap private equity to expand the funding for the energy sector.

However, the MIC chief has yet to give a timeline on the fundraising activity.

“When we’re talking about the end of the year, that’s in relation to our investment. Whether we can tie up the funding in time for that investment is a different story. It goes through a process,” Consing said.

Consing earlier said the MIC intends to make its first investment in the fourth quarter of the year in the renewable energy sector.