Meralco, First Pac likely to borrow for Singapore venture

MANILA, Philippines - Manila Electric Co. (Meralco), the country’s largest power distributor, and Hong Kong-based investment holding First Pacific Co. Ltd., are eyeing to borrow from lenders to fund their S$600-million ($488 million) acquisition of a Singaporean power firm, a top executive said.

Meralco chairman and First Pacific managing director Manuel V. Pangilinan said the two companies have enough funds though to close the deal by the end of the month but are likely to refinance the acquisition costs.

“Both Meralco and First Pacific have the funds necessary to close. We’re now looking at, as part of the total consideration, borrowing some of the acquisition funding. We don’t know the exact quantum yet, but both First Pacific and Meralco have the funds,” Pangilinan said on the sidelines of Meralco’s Luminaries Awards Monday night.

Last week, Meralco announced that together with First Pacific, it would “take a 70-percent interest in a Singapore power project using a joint venture company formed for this purpose.”

Both companies have formed FPM Power Holdings Ltd. (FPMP) to acquire GMR Energy (Singapore) Pte Ltd. from India’s GMR Infrastructure Ltd. (GMRIL).

The joint venture company will shell out S$600 million plus foreign exchange adjustments to buy out GMRIL’s entire 70-percent share in GMR Energy.

“We have the funds necessary to close it on due date. Most likely, we will refinance with some leverage post-closing (date),” Pangilinan stressed.

GMR Energy is currently in the advanced stage of construction of a 2x400-megawatt (MW) liquefied natural gas (LNG) power plant in Jurong Island, Singapore.

The acquisition is part of Meralco’s move to be a regional power player in Southeast Asia.

Pangilinan said GMR Energy’s facility is expected to start commercial operations in November or December 2013. The power plant’s output will be sold to SP Power Assets Ltd., the retail market, and to merchant supply operations.

“We said by end of the year, commercial operational dates or COD will begin, We expect the first unit to be COD’d by sometime late November, and the second unit late in December,” Pangilinan said.

With the joint venture deal, Pangilinan said the Philippines is expected to benefit from LNG combined cycle power plant technology.

Meralco, which posted a core income of P16.265 billion last year, is also looking at expanding in other countries such as Myanmar, Thailand and Vietnam.

“We’re always on the lookout, but as I said the major focus of our investment is still in the Philippines,” Pangilinan said.