SMC power unit to buy back dollar bonds

Conglomerate San Miguel Corp. (SMC) said its power unit would repurchase $400 million (P23.4 billion) in overseas bonds, allaying concerns over its finances after the government rejected a petition to raise power rates.

SMC said in a stock exchange filing on Wednesday that wholly-owned subsidiary SMC Global Power Holdings Corp. approved a tender offer for its senior perpetual capital securities listed with the Singapore Exchange Securities Trading Ltd., or SGX-ST.

“The appropriate announcement of the tender offers shall be made by SMC Global Power in SGX-ST on even date,” SMC said.

Earlier this month, the Energy Regulatory Commission (ERC) denied the joint motion for price adjustment filed by Manila Electric Co. (Meralco) and South Premiere Power Corp., a subsidiary of listed conglomerate SMC.

SMC sought an increase after incurring losses of P15 billion due to its 10-year fixed-price supply contract which it entered into with Meralco three years ago.

It blamed the soaring prices of coal and natural gas as well as restrictions in their supply. It added a temporary rate increase was needed to enable these plants to continue supplying power to Meralco.

Luis Gerardo Limlingan, head of sales at stock brokerage house Regina Capital Development, said the tender offer send a positive signal to investors.

“It demonstrates SMC has the cash to meet not just the payment obligations but pay down its debt,” he said in a text message on Wednesday.

April Lynn Tan, chief equity strategist at stockbrokerage house COL Financial Group Inc., said the move would help address investors concerns even with the unfavorable decision of the ERC.

Billionaire Ramon Ang, the president of SMC, assured investors SMC had adequate resources to cover losses from its fixed power supply deals.

The view was backed by the Fitch Group’s CreditSights, which maintained its strong rating for the conglomerate’s debts.

CreditSights maintained SMC’s “outperform recommendation” due to strong business prospects in 2022 relative to some of its conglomerate peers.

“Its diversified business profile has enabled its revenues/earnings to remain resilient, even amid economic downturns. Its [first half 2022] revenues and earnings surpassed prepandemic levels owing to a broad-based recovery in all businesses; in turn, leverage improved mildly too,” the report showed.

SMC Global Power Holdings Corp. said operating income from January to June this year fell 26 percent to P12.8 billion.