SMC Global Power to raise up to P40 B from bonds
By James A. Loyola – June 1, 2022, 3:35 PM
from Manila Bulletin
SMC Global Power Holdings Corporation is planning to raise up to P40 billion from the issuance of bonds consisting of a P30-billion float with an oversubscription of up to P10 billion.
This is the initial tranche of the company’s new three-year Shelf Registration program amounting to P60 billion.
Philippine Rating Services Corporation (PhilRatings) said it has assigned its highest issue credit rating of PRS Aaa, with a Stable Outlook to SMC Global Power’s proposed bond issuance.
Obligations rated PRS Aaa are of the highest quality with minimal credit risk and the obligor’s capacity to meet its financial commitment on the obligation is extremely strong.
In arriving at the rating, PhilRatings identified key strengths including SMC Global Power’s leading market position, with a solid platform for expansion.
It also considered the power company’s strong parent Company support and its conservative capital structure considering a capital-intensive industry.
SMC Global Power Holdings Corp
Also factored-in is the stability of SMC Global Power’s earnings and substantial cash flows, supported by the long-term offtake contracts of the Company even though margins are declining.
SMC Global Power, a wholly-owned subsidiary of San Miguel Corporation (SMC), is one of the country’s largest power companies, controlling 4,734 megawatts (MW) of combined capacity as of March 31, 2022.
The Company sells power either through offtake agreements directly to customers, including Manila Electric Company (Meralco) and other distribution utilities (DUs), electric cooperatives (ECs) and industrial customers, or through the Wholesale Electricity Spot Market (WESM).
Accounting for approximately 94.1 percent of revenues, as of March 31, 2022, bilateral contracts with offtakers contributed a significant portion of the Company’s consolidated revenues. These contracts provide stable and predictable cash flows for the Company.
PhilRatings notes, however, that SMC Global Power’s margins have been generally declining since 2019. The cost of power sold heavily influenced the Company’s bottom line.
Its share to total revenues has been generally increasing from 67.9 percent in 2019 to 83.2 percent in the first three months of 2022.
This is a result of the competitive landscape of the Philippine power industry, which the government has implemented, including the start of retail competition and open access and mandatory competitive selection process for distribution utilities among others and the global pressure on the commodity prices particularly coal.
