Mostly geothermal, hydro facilities
MANILA, Philippines—Conglomerate San Miguel Corp. plans to cement its new position as a leading player in Philippine power generation by bidding for five more power plants to be privatized by the government.
The five power-generation assets that San Miguel would like to acquire are the 640-megawatt (MW) Unified Leyte geothermal power plants, the 149-MW Naga power facility, the 650-MW Malaya thermal power plant, 140-MW Casecnan hydroelectic power complex and the 728-MW Caliraya-Botocan-Kalayaan hydropower facilities, SMC president Ramon Ang confirmed to the Inquirer.
“SMC will always join government bidding to help the government get the best deal,” Ang said.
The state agency Power Sector Assets and Liabilities Management Corp. has announced plans to auction the independent power producer administrator (IPPA) contracts covering these power generation assets within the year or 2012. The IPPA contract gives the winning bidder the right to manage the contracted capacity of the power plants, including how to source fuel and sell the electricity.
The San Miguel conglomerate, which has been diversifying from its traditional food and beverage businesses since 2006, now has 3,145 MW in installed capacity and has become the biggest power producer in Luzon. Its portfolio accounts for 29.2 percent of the Luzon grid and 21.7 percent of the national grid through its energy unit SMC Global Power.
But with all major groups scrambling to get into the power business, competition for the power-generation assets on the auction block is expected to be tough.
Local stockbrokerage Asiasec Equities Inc., in a company report dated March 10, said SMC was best positioned to capitalize on new generation capacity investments. Based on opportunity from assets to be privatized as well as capacity for expansion in its existing power assets, the local stockbrokerage expects SMC’s energy unit to easily add 1,000 to 2,000 MW of additional capacity, increasing its portfolio by 25-67 percent over the next five years.
These additional 2,000 MW will require at least $800 million in fresh capital in order to support 70:30 debt-to-equity structure, Asiasec said. The research noted that financing this expansion might either come from vendor financing in the case of government privatization or a combination of internally generated cash and bank borrowings in the case of a “greenfield” or an entirely new power plant to be built from scratch.
Asiasec, which rated a “buy” on SMC shares, said the conglomerate’s success story was still to unravel. It added that the issue on SMC’s small public float of less than 8 percent should be effectively addressed by a follow-on offering planned by the conglomerate.
The research noted that the energy assets of San Miguel were diverse and significantly larger in scale than other players. SMC’s power capacity is broken down as follows: 1,000 MW for coal-fired Sual power plant, 1,200 MW for Ilijan, which utilizes natural gas, 345 MW for San Roque hydroelectric plant and 620 MW for diesel-fired Limay. The conglomerate completed its transformation into a power-based group late last year when these power assets were consolidated in its books.
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