"Its is the seller of the cheapest electricity today."
As a power producer and retailer, SMC Global Power Corp. is perhaps unrivalled in the Philippines—in financial and resources wherewithal, generating capacity, scale of operations, diversity of power sources, efficiency and cost structure, pricing and market power, revenue and profit-making capacity, expansion plans, and tremendous potential for growth.
SMC Global Power is today the cheapest seller of electricity. It has long-term contracts to supply power to Albay and Bulacan provinces at less than P3 per kilowatt hour. Compare that pricing to the P12 per kwh that Meralco charges subscribers.
Low-cost power means low-cost manufacturing production and lower cost of doing business. Low-cost production and lower cost of doing business mean more employment, greater industrialization, and more prosperity.
The Philippines has among the world’s most expensive electricity rates. As a result, power cost as much as 20 percent of production cost and also 20 percent of the operating expenses of 22 million households in the country.
By itself with already 4,200 megawatts of power capacity and future expansion plans and acquisitions, not to mention its willingness to price its electricity at very reasonable rates, San Miguel Global Power’s business cannot but produce huge revenue streams and sustain its profitability.
SMC Global Power’s combined installed capacity is about 19 percent of the National Grid, 25 percent of the Luzon Grid and 9 percent of the Mindanao Grid.
The business cannot but expand. The Philippines needs 43,700 megawatts of additional electricity over the next 20 years. It takes at least three years to build and make operational a power plant. The red tape can overpower a power project proponent. This means there could be serious shortages of electricity in the coming years, if not now.
With its size and nimbleness, SMC Global Power will be at the forefront of energy expansion to meet expanding national demand.
At present, SMC Global Power already contributes a substantial portion of its mother company’s revenues and profits.
In the whole of 2018, SMC Global Power chalked up revenues of P120.1 billion, up 45 percent, and operating profits of P33 billion, up 37 percent. In 2018, SMC Global Power accounted for only 12 percent of SMC group revenues and a stunning 28 percent of total operating income.
If SMC Global Power were a listed company and with an earnings multiple of ten times income, SMC Global Power would easily be worth P330 billion in market value, if not much more.
SMC Global Power has generating assets worth easily P490 billion. SMC Global Power is the holding company for San Miguel’s power generating assets—including supply and sale.
With its subsidiaries, associates, and joint ventures, SMC Global Power is one of the largest power companies in the Philippines. It benefits from diversified fuel sources, including natural gas, coal and hydroelectric.
San Miguel Corp. entered the power industry in 2009, thanks to the vision and foresight of Ramon S. Ang, the vice chairman, president and chief operating officer of San Miguel Corp. Back in 2002, he envisioned to change San Miguel’s portfolio of business to include not just beer, beverages, foods, and packaging but growth industries like power generation, fuel and oil refining and marketing, and infrastructure.
San Miguel was already the largest food and consumer products company.
With the diversification, San Miguel, almost overnight, became the largest infra company in terms of toll operations, the largest fuel and oil company (Petron), and now, the largest power generator and supplier.
With RSA’s guidance, SMC Global Power acquired rights to administer the output produced by Independent Power Producers (“IPPs”) in privatization auctions conducted by the government through the Power Sector Assets and Liabilities Management Corp. (“PSALM”).
Through its subsidiaries, San Miguel Corp. became the Independent Power Producer Administrator (“IPPA”) of the following plants:
(1) San Miguel Energy Corp. (“SMEC”) became the IPPA for the Sual Power Plant, a coal-fired thermal power plant located in Sual, Pangasinan, in November 2009;
(2) Strategic Power Devt. Corp. (“SPDC”) became the IPPA for the San Roque Power Plant, a hydroelectric power plant located in San Manuel, Pangasinan in January 2010; (3) South Premiere Power Corp. (“SPPC”) became the IPPA for the Ilijan Power Plant, a natural gas-fired combined cycle power plant located in Ilijan, Batangas, in June 2010.
The Sual Power Plant, San Roque Plant and the Ilijan Power Plant are collectively referred to as the “IPPA Power Plants”. SMEC, SPPC and SPDC are collectively referred to as the “IPPA Subsidiaries.”
An IPPA under the IPP Administration Agreement (the “IPPA Agreement”) has the right to sell electricity generated by the power plants owned and operated by the IPPs without having to bear any of the large upfront capital expenditures for power plant construction or maintenance.
As an IPPA, SMEC, SPDC and SPPC also have the ability to manage both market and price risks by entering into bilateral contracts with offtakers while capturing potential upside from the sale of excess capacity through the Philippines Wholesale Electricity Spot Market (“WESM”).