San Miguel power unit taps foreign banks for bond float

MANILA, Philippines - SMC Global Power Holdings Corp., the energy unit of diversified conglomerate San Miguel Corp., has tapped foreign banks for a planned offshore bond float intended to raise capital to beef up its power portfolio.

In a disclosure to the Philippine Stock Exchange yesterday, San Miguel said SMC Global has mandated several foreign banks “to arrange a series of fixed income investor meetings in Singapore and Hong Kong, and investor calls in Europe commencing on Aug. 17.”

These banks include Australia and New Zealand Banking Group Ltd. (ANZ), Bank of America Merrill Lynch, DBS Bank Ltd., Deutsche Bank, Hongkong & Shanghai Banking Corp. Ltd. (HSBC), ING Bank, Mizuho Securities and UBS AG.

“A Reg S US dollar benchmark undated subordinated capital securities offering may follow, subject to market conditions,” the disclosure added.

Company officials were not immediately available for details.

In an e-mailed commentary, Accord Capital Equities Corp. market strategist Justino B. Calycay Jr. said this is a fund raising activity of San Miguel for its power unit.

“The company starts the ball rolling on a possible capital raising activity for SMC Global Power Holdings Corp.,” he said.

“SMC Global Power is a ‘vertically integrated power company with a full spectrum of power business comprising of IPPA (independent power producer administrator) contracts’,” Calaycay said.

Included in its IPPA portfolio are the 2x500 megawatt (MW) Sual coal-fired power plant in the Lingayen Gulf owned by Team Energy, the Kepco-owned 1,200-MW Ilijan Power Plant in Batangas City, and the 345-MW San Roque Power Plant in San Manuel, Pangasinan.

In separate phone interview, Unicapital Securities Inc. research head Lexter Azurin said the capital raising activity is seen as a alternative to the planned initial public offering (IPO) of SMC Global.

“This is one way for SMC Global [to raise funds] than to go for IPO. Due to market uncertainty, the company has decided to tap the debt market since, in terms of interest rates, it’s still quite low as compared to previous years,” he explained.

In May 2014, San Miguel shelved the $750-million IPO of its power generation unit as it secured fresh financing through a bond issuance.

SMC Global going public will be pursued on an opportunistic basis, San Miguel president and COO Ramon Ang said.

The San Miguel power unit has been raising capital to finance its expansion, with a goal of hitting 1,200 MW generating capacity in Mindanao.

“In effect, it’s just their way of capital raising by tapping the debt market in order to beef up their power investments,” Azurin said.