Wednesday, September 21, 2011

SMC power unit trims IPO size

Business Mirror
WEDNESDAY, 21 SEPTEMBER 2011 22:09 MIGUEL R. CAMUS / REPORTER


SMC Global Power Holdings Corp., the power unit of San Miguel Corp. (SMC), has decided to reduce the number of shares to be sold in its initial public offering (IPO) this year and, therefore, could raise 23 percent less than its original goal of P35.5 billion.


SMC Global Power now plans to sell 290 million to 385 million common shares from P44 each to P71 each to raise a maximum of P27.34 billion, according to a new prospectus filed with the Securities and Exchange Commission.


The company said in its initial filing last month that it will sell 300 million to 500 million primary and secondary shares at the same price range to generate up to P35.5 billion. That would have made it the country’s biggest IPO, eclipsing the P28.8 billion raised by SM Investments Corp. from its maiden share offering in 2005. Cebu Air Inc. raised P23.3 billion in 2010.


The new prospectus did not outline specific dates but it showed that the IPO and the subsequent listing of the company under the symbol “SMPWR” would be held in 2011.


Analysts said weak market conditions in the Philippines and abroad may have prompted the company to adjust its plans.


“This may also have been in light of concerns of huge dilution. They reduced the size rather than risking a significant cut in the valuation,” April Lee-Tan, research head at stock-brokerage firm CitisecOnline, said in a phone interview on Wednesday.


Volatile conditions notwithstanding, firms still need to raise capital to finance their expansion plans, noted PCCI Securities Brokers Corp. research head James Lago in a separate interview. “Companies still need to go out. They have to proceed with what they are doing regardless of market conditions,” he said.


Proceeds from the IPO would be used by SMC Global Power to build new power plants and to bid for government power assets up for privatization.


SMC Global Power entered the power sector in 2009 and is now considered one of the country’s biggest power producers. Through its portfolio, the company controls a 17.5-percent market share of the national grid’s power supply and a 23.5-percent market share in Luzon alone.


SMC Global Power is the independent power producer administrator for the Ilijan natural gas power plant in Batangas, the San Roque multipurpose hydroelectric plant in Pangasinan and the coal-fired Sual plant in Pangasinan. The facilities have a combined contracted capacity of 2,545 megawatts.


Still, many power companies have fallen “out of favor” this year, Tan said on Wednesday.


“One reason is that weather conditions are unusually cool this year, resulting in a drop in power demand. There are also no shortage [issues], and WESM [Wholesale Electricity Spot Market] prices have gone down and economic growth is weaker,” she said.


SMC Global Power earlier reported that sales in the six months to June almost doubled to P35.2 billion, while net income during the period hit P2.7 billion, up 176 percent.


The company tapped as international lead managers and book runners Goldman Sachs (Singapore) Pte., Standard Chartered Securities (Singapore) Pte. Ltd., UBS AG. and CIMB Securities (Singapore) Pte. Ltd. ATR KimEng Capital Partners Inc. and SB Capital Investment Corp. were hired as domestic underwriters.


SMC shares added 0.82 percent to P123 each on Wednesday.

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