Infrastructure holding firm Metro Pacific Investments Corp. (MPIC) has raised its interest in electricity distributor Manila Electric Co. and power generation firm Global Business Power Corp. by buying out the shares held by the PLDT group for P21.8 billion.
PLDT Communications and Energy Ventures’ (PCEV) divestment of its remaining 25-percent stake in Beacon Electric Asset Holdings allows the PLDT group to focus on its core businesses while enabling the First Pacific group to simplify and consolidate its power industry investments in MPIC. Beacon Electric owns 35 percent of Meralco and 56 percent of Global Business Power.
Upon completion of the transaction, MPIC will continue to own a direct 10.5-percent interest in Meralco and—through its 100 percent interest in Beacon Electric—would raise its effective ownership interest in Meralco to 45.5 percent from 41.2 percent and in Global Power to 62.4 percent from 47.8 percent.
In order to fund the investment, MPIC placed out 4.5 percent of its direct shares in Meralco for P12.67 billion.
The deal allows MPIC to settle P12 billion of the purchase price in cash and the balance of P9.8 billion over the next four years.
“I am pleased to announce this rationalization and simplification of our power investments. The acquisition of PCEV’s remaining 25 percent in Beacon, at what I consider to be a very attractive entry price, means that for the first time we have no minority partner in our power portfolio holding company,” MPIC chief executive Jose Ma. Lim said in a statement.
“We are now free to accelerate our rate of participation in the Philippine power sector, building on our nationwide presence as we embrace distribution, thermal generation, renewables and energy from waste. The transactions announced today are also immediately accretive to earnings,” Lim added.
Manuel V. Pangilinan, who chairs both MPIC and PLDT Inc., said PCEV’s divestment of its stake in Beacon would help the telecom firm focus on key priorities in its core businesses.
“While the investment is now viewed as no longer strategic, it has nonetheless been a very financially satisfying one. Proceeds from the sale will be used principally to reduce debt and to fund the ongoing network upgrade and expansion,” Pangilinan said.
Meralco is the biggest electricity distributor in the Philippines while Global Power is the leading power supplier in Visayas with 852 megawatts of coal- and diesel-powered generating capacity. Global Power has also recently entered into an agreement with Alsons Consolidated Resources Inc. to acquire 50 percent of the latter’s coal-generation portfolio holding company in Mindanao, subject to fulfillment of certain conditions.
PCEV is a holding company owned 99.9 percent by Smart Communications Inc., which, in turn, is a wholly owned subsidiary of PLDT. It invested in Meralco and Beacon Electric in 2009 a total amount of P24 billion. Over the years, PCEV received P14.7 billion in cash dividends and completed its divestment for total consideration of P51.6 billion or about 2.75 times its invested capital.
MPIC said in its disclosure that as this was a related-party transaction, the PLDT and PCEV directors who were also on MPIC’s board inhibited themselves in the decision process at a special MPIC board meeting held for this purpose. The transaction has also been reviewed by MPIC’s audit committee, in accordance with MPIC’s internal policies, the disclosure said.