San Miguel sets $35-B investment plan

San Miguel Corp. will focus on growing the businesses currently in its portfolio over the medium term in a move that will involve aggregate investments of about $35 billion, according to the head of the diversified conglomerate.

More importantly, many of the big-ticket projects – especially in the infrastructure sphere – were slated to be completed before the end of President Aquino’s term in 2016, SMC president Ramon Ang said.

“Many of our expansion plans for our projects will be completed by 2014 or 2015,” Ang said, replying to questions e-mailed by the Inquirer. “Before 2016, we will have completed our investments in two new power plants, our [planned] airport project, the Petron [refinery] expansion, our mining investments and the toll roads.”

San Miguel has been on an acquisition spree in recent years when it acquired the country’s biggest petroleum refiner and distributor Petron Corp., flag carrier Philippine Airlines and a slew of toll road concessions, among others—part of 35 deals worth $7 billion over the last decade.

One company that will benefit from an aggressive expansion program is PAL, where San Miguel holds a 49-percent stake along with management control, while the Lucio Tan group holds 51 percent.

“Our total investments planned for PAL will be around $10 billion,” Ang said, explaining that most of this would be in the form of new aircraft.

“This year, we will concentrate on the expansion of [PAL],” he said. “With the arrival of new aircraft, PAL will, for sure, be very competitive against any airline in the world.”

Eighteen aircraft are slated for delivery this year, starting in August. These include eight Airbus A330s, with a capacity of 418 passengers each; two Boeing B777-300ERs for its long-range services, and eight Airbus A321s, each capable of carrying 202 passengers in a two-class configuration.

“So 2013 will be a big year for PAL,” said Ang, who also serves as the airline’s president. “PAL is very promising.”

He added that the positive impact on the airline’s financial statements would be felt once the efficiencies of the more fuel-efficient aircraft have been factored in, although he said he believed that it would remain “cash flow-positive” this year and next.

If the government approves San Miguel’s proposal to build a new international airport, Ang said the total investments into the project would easily contribute another $10 billion to the economy.

He said the conglomerate has identified a “Korean partner” for the project and was just waiting for the government’s green light for the private undertaking. He declined to disclose whether the proposed four-runway international airport would be located to the north or south of Metro Manila—a precaution, he said, to prevent land speculation that would push up acquisition costs for the 2,000 hectares needed for the project.

On the power sector, Ang outlined plans for San Miguel to build an additional 3,000 megawatts of capacity all over the country.

“We will start building [the power plants] this year,” he said. “Right now, we have two sites: one in Bataan for 600 MW and another 600 MW in Davao del Sur. In the next few months, we will identify the remaining other sites that will complete the 3,000 MW.”

Both plants will be powered by clean coal technology, called “circulating fluidized bed boilers.”

The additional 3,000 MW of generation capacity would involve investments worth $6 billion, he said.

This year, San Miguel would also concentrate on building its portfolio of toll way projects, Ang said. In particular, he wanted the Tarlac-Pangasinan-La Union Expressway (TPLEx) to eventually extend to Laoag, Ilocos Norte.

TPLEx is originally slated to end in Rosario, La Union, but its first phase spanning Tarlac and Pangasinan is expected to be completed this year.

Ang also wanted to extend the South Luzon Expressway further south. “Our dream is to [extend] SLEx up to Bicol,” he said. “But initially, we want to extend it up to Lucena.”

Other investments in the pipeline include a total of $3 billion for a gold and copper mining operation, $3 billion to develop the Nonoc nickel mines off Surigao del Norte, and $2.5 billion for the ongoing expansion and upgrade of Petron’s refinery and petrochemical plant in Bataan.