SMC power unit readies $500M IPO

Raising funds for aggressive expansion

By: Daxim L. Lucas
Philippine Daily Inquirer

11:36 pm | Sunday, July 10th, 2011

AGGRESSIVE FORAY INTO ENERGY. San Miguel Corp.’s energy unit seeks to raise $500 million through an IPO this year to become a serious player in the country’s power industry.

The energy unit of San Miguel Corp. will brave the equities market this year to raise funds for more aggressive forays into the country’s power industry, in anticipation of higher demand as the government’s infrastructure development program takes hold.

In a mobile phone message to the Inquirer, SMC president Ramon S. Ang said San Miguel Global Power Holdings Corp. was planning to raise “about $500 million” from foreign and local investors through an initial public offering this year.

The planned fund-raising exercise will mark the second such foray this year for the country’s biggest conglomerate by market capitalization after parent firm San Miguel Corp. raised $900 million three months ago—the largest equity sale in the country’s history.

Ang has identified Goldman Sachs, UBS A.G. and Standard Chartered Bank as underwriters for the international component of San Miguel Global Power’s IPO, while ATR KimEng Financial Corp. and SB Capital would handle the domestic component.

Reports of the planned share sale helped propel the share price of San Miguel Corp. to P130 apiece last Friday—its highest level since its “re-IPO” in early May. The share price has so far gained 21 percent from its P107-a-share trough recorded six weeks ago.

San Miguel, a century-old food and beverage firm, more than doubled its market value last year after expanding into oil, mining, power and infrastructure.

Ang said the diversification was meant to triple return on equity, which had averaged only 7 percent in the food and beverage sector in recent years.

In the first quarter of 2011, San Miguel’s energy businesses reported an operating income of P3.4 billion while the group’s net income for the period hit P7.1 billion from P2.9 billion in the same period in 2010 due mainly to its investments in the energy sector.

At present, the San Miguel group is already the biggest player in the power generation sector of the country with a combined generation capacity of 3,300 MW from the Sual coal-fired plant (1,200 MW), Ilijan gas-fired plant (1,000 MW), Limay thermal plant (600 MW) and the San Roque hydropower plant (340 MW).

Ang has also expressed interest in acquiring the Caliraya-Botocan-Kalayaan hydropower peaking plant as well as the Malaya thermal plant from the state-owned Power Sector Assets and Liabilities Management Corp.

It is also looking at other coal-fired power plants to take advantage of coal from the Daguma mines, which San Miguel Energy Corp, another subsidiary, acquired in 2010.

The company is banking on the expected sharp increase in demand for electricity as the Aquino administration’s Public-Private Partnership program begins to take off starting in the first quarter of 2012.