SMC unit plans PHL’s biggest IPO

business mirror

WEDNESDAY, 24 AUGUST 2011 21:21 MIGUEL R. CAMUS / REPORTER

SMC Global Power Holdings Corp., the power unit of conglomerate San Miguel Corp. (SMC), is seeking regulatory approval to sell up to P35.5 billion worth of shares in what could be the country’s biggest initial public offering (IPO).

A prospectus filed with the Securities and Exchange Commission on Wednesday showed that SMC Global Power plans to sell from 300 million to 500 million primary and secondary common shares priced from P44 each to P71 each.

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

“SMC Global is betting that the power industry could attract investors even at a time of uncertainty,” said Astro del Castillo, managing director at First Grade Finance Inc. “Power is one of the industries that the country needs to build up. Still, it will be a very tough road ahead for the IPO if risk appetite doesn’t improve.”

The company did not indicate an offer period. However, parent SMC earlier said the IPO would be held during the second half of 2011.

The planned IPO is the biggest on record in the country, according to data compiled by Bloomberg. SM Investments Corp. raised about P28.8 billion in 2005 and Cebu Air in 2010 raised P23.3 billion from their maiden share offerings.

SMC Global Power tapped as international lead managers and bookrunners Goldman Sachs (Singapore) Pte., Standard Chartered Securities (Singapore) Pte. Ltd. and UBS AG. ATR KimEng Capital Partners Inc. and SB Capital Investment Corp. were hired as domestic underwriters. Standard Chartered acted as financial manager to the deal.

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 (MW).

At present, the company is in the “advanced” stages of planning two start-up clean-coal power projects with a combined capacity of 450 MW alongside plans to bid for selected generation plants, the prospectus showed.

 The company is also planning additional “Greenfield” projects with an aggregate capacity of up to 3,000 MW in five to seven years.

Moreover, SMC Global Power is pursuing the vertical integration of its power interests through complementary businesses. The company has already acquired coal production and exploration rights covering 17,000 hectares of property in Mindanao.

SMC Global Power said sales in the six months to June almost doubled to P35.2 billion. Net income during the period hit P2.7 billion, up 176 percent.

SMC Global Power is on track to be the third company in the San Miguel group to tap the equity market this year to raise funds for the group’s expansion that has been sharply veering away from its traditional foods- and drinks business into high-growth sectors like infrastructure and mining.

In February San Miguel Pure Foods Co. Inc. raised P15 billion selling preferred shares. SMC itself raised $970 million selling shares and convertible debt in April.

Apart from SMC Global Power, supermarket chain Puregold Price Club Inc. and electronics maker Cirtek Holdings Philippines Corp. are also waiting for final approvals to proceed with their IPOs to raise up to P12.42 billion and P600 million, respectively.

The Philippines has seen only one IPO this year with Megawide Construction Corp.’s initial share sale in February.

(With Bloomberg News)