San Miguel boosts power play with US$1.9b coal plant deal

MANILA: San Miguel Corp agreed to buy an AES Corp-controlled Philippine power plant for US$1.9bil, increasing the energy portfolio of the South-East Asian nation’s largest company as the US firm sheds assets.

San Miguel bought 51%of the Masinloc coal-fired plant from AES and the remainder from Thailand’s Electricity Generating Pcl in a deal valued at US$2.4bil including debt, the Philippine company said in a statement yesterday.

The sale includes a new coal-fired unit that’s under construction, as well as a related energy storage project, San Miguel said.

“The deal makes sense as the purchase allows San Miguel to bypass the long process of starting from scratch if it tried to build a new facility,” Rens Cruz, analyst at Regina Capital Development Corp, said in a phone interview yesterday.

“It’s also a good purchase for San Miguel since this is a high capacity operating plant with room for more expansion.”

San Miguel’s purchase cements its dominance as the largest electricity producer in the Philippines, accounting for about a fifth of the country’s capacity, and furthers its expansion into industries outside its traditional food and drinks business. The transaction is subject to conditions, including the approval of the Philippine competition commission, it said.

Shares of San Miguel, the Philippines’ biggest company by sales, closed down 1.3% at the lowest since Nov 6, compared with a 1% gain in the country’s main stock index.

The deal also helps AES reach its goal of selling assets to cut debt and achieve an investment-grade credit rating by 2020, as well as expand its renewable energy business. It agreed last year to dispose of its interest in Brazilian utility AES Sul to CPFL Energia SA for 1.7 billion reais (US$515mil).

Thailand’s Electricity Generating said in a separate filing yesterday that it agreed to sell its 49% stake for US$850mil, with the deal expected to close in the first half of next year. AES didn’t respond to requests for comment.

State-backed China Resources Power Holdings Co was among final bidders for AES’s share of the plant, Bloomberg reported in November. Aboitiz Power Corp and Manila Electric Co had also expressed interest.

AES bought the 630MW plant, which has been operating since 1998, for US$930mil in 2008, according to the company’s website. It off-loaded the 41% stake to Electricity Generating for US$453mil in 2014. The facility is located about 250km northwest of Manila in Zambales province, an area known for mango cultivation. The new Masinloc unit under construction will employ “super-critical boiler technology,” which San Miguel President Ramon Ang said will reduce its carbon dioxide emissions and raise efficiency.

“The additional power assets provides us an opportunity to increase our footprint in clean coal technology and provides reliable and affordable power, particularly in Luzon,” Ang said in a statement, referring to the Philippines’ main island, which accounts for the bulk of its demand.

Coal accounted for about 48% of the Philippines total generation last year, followed by renewables at 24% and natural gas at 21%, according to Department of Energy data. — Bloomberg