SMC Global Power Holdings Corp., a wholly owned unit of San Miguel Corp. that will take over the management of debt-saddled Albay Electric Cooperative (Aleco), may offer shares to the public next year after identifying a “cornerstone investor,” SMC president and COO Ramon S. Ang said Tuesday.
At the signing of a concession agreement between SMC Global Power and Aleco, Ang said the SMC unit was up for an initial public offering at the Philippine Stock Exchange (PSE) in the “first quarter (of 2014) at the latest.”
“We will definitely go for listing on the PSE. We are considering the timing (and) talking with investors to gauge demand,” Ang said.
Ang said about 10 percent of SMC Global’s shares might be offered to the public and 39 percent might be sold to a “cornerstone investor.” The San Miguel group is in talks with “several foreign and local firms,” he said, adding that the investor would likely be identified “within December.”
Ang said SMC Global was looking at raising at least $1 billion from these deals.
In the meantime, SMC Global will formally take over the management of Aleco by Dec. 26. It aims to restructure the electric cooperative and bring it back to profitability.
The SMC unit will spend P250 million for Aleco’s capital expenditure and P350 million for the separation pay of employees who will be affected by the management takeover.
Albay Gov. Joey Salceda said, “For us this is a P4.7-billion investment. The assumption of debt is a form of investment. It is a statement of faith in the robust fundamentals of Albay and of the countryside.”
Aleco has about P3.6 billion in debts to power suppliers, which SMC Global Power will assume as part of its agreement with the electric cooperative (EC). The SMC unit is also expected to invest more than P1 billion (including the initial capex and separation pay) in reforming Aleco.
Energy Secretary Carlos Jericho L. Petilla said the takeover by the SMC group of Aleco opens up “a new option” for other ailing ECs.
“For investors, this is a new option. They can get a franchise or choose to do a management takeover. These are new templates for other ailing ECs,” Petilla said.
Aleco is the sixth-largest EC in the country but is also among those with the largest debt.
If San Miguel will be able to successfully turn around Aleco, it could feed the SMC group some P800 million a year in revenue just by fixing its billing and collection system and lowering its systems losses, Salceda said.
It would also be another accomplishment for SMC Global Power, which entered the power industry in 2009 through the acquisition of privatized power generation assets.