SMC Power raising $500 M via bonds

Manila Bulletin

By Myrna M. Velasco

January 19, 2011, 11:22pm

MANILA, Philippines – The energy arm of San Miguel Corporation (SMC) is scheduling prepayment of obligations due to assets and contractual capacity acquisitions with the Power Sector Assets and Liabilities Management Corporation (PSALM) from the proceeds of the $500 million offshore bond issue it is about to conclude.

Apart from the planned prepayments with PSALM, SMC Global Power Holdings Corporation indicated that it will also utilize part of the proceeds for “financing investments in power-related assets.”

SMC Global Power’s remaining obligations with PSALM are those related to contractual capacities it cornered as Independent Power Producer Administrator (IPPA for the Sual coal-fired; San Roque hydro and Ilijan natural gas power facilities. These have been housed under various subsidiaries, namely: San Miguel Energy Corporation; Strategic Power Development Corporation; and South Premiere Power Corporation.

SMC Global Power has tapped ANZ, HSBC and Standard Chartered Bank as joint bookrunners and joint lead managers on it US dollar-benchmarked 5-year bond offering.

“The proceeds of the bond issue shall be applied towards: financing investments in power-related assets; financing payment subject to negotiations with PSALM, or prepayment to PSALM of the obligations of SMC Global Power’s subsidiaries,” the company has reiterated.

SMC Global Power said it has filed an application for listing of the bond issue in the Singapore Exchange Securities Trading Ltd.

The SMC subsidiary is currently the largest power generator in the country -- in terms of having control on capacity dispatch as well as on generated capacity from its Limay plant acquisition.

If referenced on market caps provision of the Electric Power Industry Reform Act (EPIRA), the SMC firm is already nearing its limit when it comes to capacity ownership and control.

Nevertheless, SMC Global Power remains forthright on its assertions that it wants to invest further in power generation to help the country solve the shortfall in electricity supply, including Luzon grid’s dilemma which may worsen either this year or 2012.

The biggest challenge for the diversifying conglomerate though is breaking the market ceiling barrier, which only an amended legislative measure would be able to lift.

The market cap of 25-percent for national installed capacity and 30-percent within grid are safety nets in the EPIRA to ensure that no single company would be able to gain significant control in the industry.

However, that now serves as a deterrent for ‘moneyed investors’ which could have aided the government in preventing the repeat of an ominous power crisis.