SMC Global Power’s P15 B bond issue gets highest credit rating

MANILA, Philippines – SMC Global Power Holdings Corp., the power generation arm of diversified conglomerate San Miguel Corp., obtained the highest credit grade for its planned offering of P15 billion worth of retail bonds.

In a statement, Philippine Rating Services Corp. said the bond issue was rated PRS Aaa, reflecting SMC Global Power’s strong financial position.

The triple A rating is the highest credit rating on PhilRatings’ long-term issue credit rating scale. Obligations rated PRS Aaa are of the highest quality with minimal credit risk. The obligor’s capacity to meet its financial commitment on the obligation is extremely strong. 

PhilRatings also considered SMC Global Power’s good market standing despite its relatively short operating history and strong parent company support and synergies derived from the San Miguel Group of Companies.

The bonds have a maturity of five, seven and 10 years.

Based on its registration statement filed with the Securities and Exchange Commission, the company has tapped BDO Capital and Investment Corp., BPI Capital, Chinabank Capital, Maybank ATR Kim Eng, PNB Capital, RCBC Capital, SB Capital, Standard Chartered and UCPB as lead underwriters for the issue.

A portion of the proceeds from the offering will be used to refinance short-term loan provided by BDO which were in turn used to redeem $300 million notes due this year.  The remaining amount will cover general corporate purposes.

SMC Global Power is one of the country’s  largest power companies controlling 2,903 megawatts of combined contracted capacity as of the end of 2015. It accounted for 17 percent of the power supply of the national grid and 22 percent of the Luzon grid during the same period.

It is primarily involved in the generation, sale and trading of power, either through offtake agreements directly to customers such as distribution utilities, electric cooperatives, industrial users and contestable customers, or through the wholesale electricity spot market.

In addition, SMC Global Power, through a subsidiary, is the concessionaire for the operation and maintenance of Albay Electric Cooperative Inc., the distributor of electricity in the province of Albay. It likewise holds a retail electricity supplier license through San Miguel Electric Corp.

Last year, the company posted a net income of P1.8 billion on revenues of P77.5 billion.  Total assets stood at P331.2 billion, up 5.6 percent.

“With profitability expected to significantly improve, cash will mostly be internally generated from operations. In addition, cash from the sale of power and electricity has been and is expected to continue to be the main source of liquidity for the company,” PhilRatings said.