SMC power unit to raise P35.5 billion via IPO

MANILA, Philippines -  SMC Global Power Holdings Corp., the energy arm of food-to-infrastructure conglomerate San Miguel Corp., is targeting to raise up to P35.5 billion from an initial public offering (IPO) of shares to fund its massive expansion initiatives in the country’s power industry.

The San Miguel Group is returning to the local market with SMC Global Power’s IPO, which is likely to become the biggest on record in the Philippines. The parent firm raised around $900 million (P38.23 billion) from a follow-on offering of shares in April.

In its registration statement, SMC Global Power said it is selling 300 million to 500 million common shares through a primary and secondary offering at a price range of P44 to P71 each share.

Standard Chartered Securities (Singapore) Pte. Ltd. is SMC Global Power’s sole financial adviser as well as joint bookrunner and international manager, along with Goldman Sachs Pte. and UBS AG.

On the other hand, ATR KimEng Capital Partners Inc. and SB Capital Investment Corp. will serve as domestic lead underwriters.

SMC Global Power intends to use proceeds from the offering to develop greenfield power projects, acquire existing power generation capacities, and for general corporate purposes.

 The company is the advance stages in the planning of two clean coal greenfield power projects with a combined capacity of 450 megawatts and is considering additional greenfield power projects with an aggregate capacity of up to 3,000 MW over the next five to seven years.

SMC Global Power is likewise also preparing to bid for selected National Power Corp-owned power generation plants scheduled for privatization.

The company is pursuing vertical integration of its power business. By capitalizing on changes in the regulatory structure to expand its sales of power to a broader range of customers, including retail customers. As part of the reorganization of the power related-assets of San Miguel, SMC Global Power acquired a 100 percent interest in San Miguel Electric Corp. which is in the process of obtaining a retail electricity license from the Energy Regulatory Commission.

Once open access and retail competition are implemented in December 2011, the electricity supplier license will allow SMC Global Power to enter into offtake agreements with customers with power requirements of at least one MW.

SMC Global Power is now one of the largest power firms in the country, holding a 17. 5 percent market share of the power supply of the national grid and a 23.5 percent market share of the Luzon grid.

 It has acquired coal exploration, production and development rights over approximately 17,000 hectares of land in Mindanao. If it is able to develop these assets and commence mining operations successfully, SMC Global Power expects these assets will provide a source of coal fuel supply for its planned greenfield power projects.