SMGP sees double-digit revenue growth this year

MANILA, Philippines —  Revenues of San Miguel Global Power (SMGP) are expected to expand by double digits this year and next  year on the back of added capacity from its Mariveles 600-megawatt (MW) coal plant and 300-megawatt-hour Masinloc battery energy storage system, according to Fitch Group unit CreditSights.

In a  report, CreditSights  said it expects SMGP’s revenues to grow by about 14 percent this year and  27 percent in 2025.

SMGP’s EBITDA, on the other hand, is seen growing by 35 percent and 21 percent in 2024 and 2025, respectively.

CreditSights said SMGP’s Batangas combined cycle plant is likely to be commissioned in early 2025 and provide 1.2 gigawatts (GW) of power under a contract with Meralco.

“We assumed SMGP is successful in the extension of the current emergency power supply agreements (EPSAs) with Meralco beyond May 2024, with full cost passthrough mechanism and in the successful re-contracting of the residual 190-MW of uncontracted power supply also with full cost passthrough mechanism,” CreditSights said.

“As it stands, contract renewal risk still persists, but Meralco will need continued power supply, so a renewal is mostly probable,” it said.

CreditSights welcomed the successful contract tie-ups for SMGP’s new plants, saying that these will provide for greater revenue visibility.

Meralco recently announced that it secured the lowest bids for 1,800-MW supply from three generation companies through the government-mandated competitive selection process.

SMGP subsidiaries Excellent Energy Resources Inc. and Mariveles Power Generation Corp. submitted the lowest offers for the supply of 1,200 MW and 300 MW, respectively.

“If finalized, the fresh 1,200 MW and 300 MW PSAs would tie up 91 percent and 50 percent of the respective installed capacities of the Batangas and Mariveles power plants,” CreditSights said.

“The successful contract tie-ups also help narrow the time gap between project commissioning and revenue generation for the Batangas power plant. The anticipated earnings contribution from the two new PSAs will only kick in from December 2024 onwards,” it said.

CreditSights also noted that the new contract wins from Meralco, in addition to the prevailing EPSAs entered into in mid-2023, marks a normalization of relations between SMGP and the power distributor.

CreditSights said this could prove crucial for SMGP bagging more contracts in the future.

“Looking ahead, we see an improving  fiscal year 2024 credit outlook for SMGP,” it said.

CreditSights said its outlook is aided by expectations of robust EBITDA contribution by new capacity additions, lower year-on-year 2024 average thermal coal prices, and lower capital expenditures due to the completion of the Mariveles plant and Masinloc battery energy storage system.