JG Summit eyes Meralco shares held by SMC

MANILA, Philippines - Conglomerate JG Summit Holdings Inc. of tycoon John Gokongwei has set its sights on the power distribution and power generation business.

JG Summit is interested in securing the minority stake in power utility Manila Electric Co. (Meralco) currently held by diversified conglomerate San Miguel Corp. (SMC).

“We advise that JG Summit is in talks with SMC with respect to its interests in Meralco,” JG Summit said in a regulatory filing. SMC confirmed the talks in a separate disclosure.

The move is seen to expand the business portfolio of JG Summit into power distribution and would beef up its energy generation projects.

In January, JG Summit’s snacks and beverage unit Universal Robina Corp. (URC) secured shareholders’ approval to enter the power generation business for the first time through a $60-million power plant in its sugar mill that is scheduled to start commercial operations in 2014.

Meralco, for its part, is looking to put up numerous power plants with a generation capacity of up to 3,000 megawatts (MW) in the next few years.

In August, Meralco PowerGen Corp. signed a joint venture deal with New Growth B.V., a subsidiary of the EGCO Group of Thailand, to develop a 460-MW coal-fired power plant in Mauban, Quezon. Meralco is also hoping to start operations of a 600-MW coal-fired power plant at the Subic Bay Freeport Zone in Zambales in 2017.

For its part, SMC unloaded a portion of its stake in power distribution giant Meralco in July.

SMC sold 64.33 million shares or 5.7 percent of Meralco’s total outstanding shares to various investors at P270 apiece for a total transaction value of P17.369 billion.

To date, SMC owns 27 percent of Meralco, which is controlled by Hong Kong-based First Pacific Co. Ltd. through its local unit Beacon Electric.

From its core brewery and food business, SMC has expanded into power production, downstream oil sector (Petron Corp.), packaging (San Miguel Yamamura Packaging Corp.), airline (Philippine Airlines) and several infrastructure projects like the Caticlan airport, Skyway, and the NAIA Expressway. So far, around 70 percent of the company’s revenues are already coming from new businesses.

In the first half, foreign exchange losses dragged the diversified conglomerate into the red. Including unrealized forex losses, net loss attributable to the equity holders of the parent company hit P2.4 billion, reversing the P14.12-billion income in the same period last year.

But SMC’s revenues reached P357.5 billion, up nine percent from last year due to strong performances from food subsidiary SMPF and Petron Malaysia, which was consolidated into the the SMC Group in April 2012.

SMC is undergoing a five-year, $34.83-billion investment plan that would make it the largest investor in the Philippines. The conglomerate said it would spend an average of P283.52 billion every year until 2017.