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SMC Global Power to raise P15B from bond offer

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SMC Global Power Holdings Corp. intends to raise P15 billion from the issuance of fixed rate bonds to refinance debt.

In a statement over the weekend, Philippine Rating Services Corp. (PhilRatings) said it assigned SMC Global Power a PRS Aaa rating for its proposed bond offering, which represents the last tranche of its three-year shelf registration of up to P35 billion.

PRS Aaa is the highest credit rating under the local debt watcher’s long-term issue credit rating scale. This indicates that SMC Global Power has an “extremely strong” capacity to meet its financial obligations.

The proposed bonds were also given a stable outlook, which means that the rating is unlikely to change in the next 12 months.

The power generation arm of diversified conglomerate San Miguel Corp. (SMC) has so far issued P20 billion worth of bonds from its shelf registration program, with P15 billion issued in July 2016 and P20 billion last December. Both outstanding issuances retained their PRS Aaa rating.

In coming up with the ratings, PhilRatings took into account SMC Global Power’s market position, support from SMC, stable earnings and cash flows, as well as its capacity to expand.

“SMC Global Power benefits from the extensive network, keen understanding of the Philippine economy and management expertise of SMC. Furthermore, SMC provides management and support services to SMC Global Power, in areas such as human resources, corporate affairs, legal, finance, treasury and other functions,” the debt watcher said.

SMC Global Power currently has a combined capacity of 4,153 megawatts (MW), sourced from a diversified mix of fuel supply including natural gas, coal, and hydropower. Its existing portfolio includes the 218-MW Angat Hydroelectric Power Plant, the 450-MW greenfield power plant in Limay, Bataan, the 300-MW greenfield power plant in Malita, Davao, and the 640-MW Masinloc power plant in Zambales.

It also acts as the Independent Power Producer Administrator (IPPA) for the Sual, Ilijan, and San Roque power plants.

The company’s combined capacity comprises 19% of the power supply in the National Grid, 25% of the Luzon grid, and 9% of the Mindanao grid.

“SMC Global Power is well-positioned to take advantage of the robust electricity demand outlook, in line with the country’s continuing economic growth. SMC Global Power’s existing capacity is still below the power market share limitations set by the Energy Regulatory Commission, giving the company enough room for portfolio expansion,” according to PhilRatings.

The debt watcher also noted it will be monitoring the legal dispute between SMC Global Power’s subsidiary, South Premier Power Corp. and the Power Sector Assets and Liabilities Management Corp. on the Ilijan IPPA agreement. The two parties have differing interpretations on certain provisions on generation payments from the facility.

The case is now pending with the Court of Appeals.

“Amidst the ongoing dispute, SPPC continues to be the IPPA of the Ilijan power plant. PhilRatings shall continue to monitor developments in relation to this case and its subsequent resolution,” it said. — Arra B. Francia