Credit metrics of San Miguel energy unit seen improving
By Lenie Lectura – August 20, 2024
from Business Mirror
Financial research firm CreditSights said it looks forward to “better credit metrics” for San Miguel Global Power Holdings Corp. (SMGP) through the second half of the year, citing the power firm’s improving financial performance, better debt situation, and access to funds for its operations.
“We continue to welcome the gradual improvement in SMGP’s credit metrics over the past five quarters, and anticipate credit metrics to improve further through 2H24,” it said in a report it released last August 16.
SMGP had a robust first half, with revenues and EBITDA increasing by 17 percent and 44 percent year-over-year, respectively. This was driven by strong power sales volume growth, new capacities and power contracts, and lower fuel input costs.
Even with the ongoing expansion, SMGP is expected to maintain access to bank loans for refinancing due to its improving credit profile and the strong reputation and credit of its parent company, San Miguel Corp. (SMC). Also, the recent redemption of its $783-million 2024 perpetual bond also indicates a willingness and strong ability by management to repay its outstanding obligations.
The upcoming sale of SMGP’s integrated liquefied natural gas (LNG) projects in Batangas, with an estimated enterprise value of $3.3 billion, is expected to drastically improve cash flows and long-term liquidity.
“We remain watchful of SMGP’s $3.3-billion LNG development project and concurrent asset sale transaction and its net cash flow impact,” it said.
The LNG project involves SMGP selling majority stakes in its Ilijan and Batangas Combined Cycle power plants, while acquiring a 33-percent stake in the LNG project for an undisclosed amount.
The deal involves Aboitiz Power Corp. and a subsidiary of Manila Electric Co. investing in the gas-fired power plants of a unit of SMGP—the 1,278-megawatt (MW) Ilijan power plant and a new 1,320 MW facility set to start operations by the end of the year.
The three firms also aim to acquire the import and regasification terminal owned by Linseed Field Corp. to store and process LNG fuel for the two power plants.
The deal is still awaiting the approval of the Philippine Competition Commission.
SMC said its net income in the first half, excluding unrealized foreign exchange effects, went up by 66 percent year-on-year to P33.5 billion.
Consolidated revenues reached P789 billion, up 15 percent from P685.23 billion recorded last year.
This growth was driven by strong performance across most business segments, including Petron Corp, San Miguel Global Power, San Miguel Infrastructure, San Miguel Foods and Ginebra San Miguel Inc., the company said.
