Ghost Month: August 11 - September 6

San Miguel Corporation

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SMC proposes to build Caticlan-Boracay bridge

DIVERSIFIED conglomerate San Miguel Corp. (SMC) will be submitting today an unsolicited proposal to the government for a P3-billion bridge connecting Caticlan to Boracay island.

“We are going to submit the proposal for the unsolicited offer to build the bridge of Caticlan-Boracay tomorrow,” SMC President and Chief Operating Officer Ramon S. Ang told reporters in a briefing after the annual shareholders’ meeting of Top Frontier Investment Holdings, Inc. in Mandaluyong yesterday. Top Frontier holds 66.09% of SMC.

Mr. Ang said the bridge will connect the two islands which have an actual gap of 1.1 kilometers. He said the project can be completed within two years after securing approval from the government.

The proposed bridge will also include a pipe that can handle the sewage and waste from Boracay.

“It can handle the sewage pipe and lahat ng sewage from Boracay to Caticlan, and then from Caticlan we can bring in fresh water to Boracay para ’di na kailangan mag-deep well. And also it can bring out all the solid waste,” Mr. Ang said, noting that the amount of waste generated in Boracay stood at 170 tons a day before the island’s six-month closure last April.

To regain its P3-billion investment, Mr. Ang said a fee will be imposed on vehicles and pedestrians who will use the bridge, as well as the waste, sewage, fresh water, and power lines that will be passing through it.

Mr. Ang noted that the investment recovery period will take around 10 to 15 years.

Asked why the company is proposing to build the project, Mr. Ang said this will help recover its investments in the Caticlan airport in Boracay.

The company is currently expanding Caticlan airport’s apron areas, or the parking spaces of aircrafts.

“Kailangan naming i-expand ’yung apron to be able to handle 28 aircrafts. And then kulang na lang ngayon ’yung passenger terminals (We need to expand the apron to handle 28 aircraft. What is needed now are the passenger terminals),” Mr. Ang said.

The airport expansion will cost SMC around P15 billion, according to Mr. Ang. The project is expected to be completed by the end of 2019.

For its traditional businesses, SMC plans to increase production of its liquor unit, Ginebra San Miguel, Inc. (GSMI) with the construction of four new manufacturing plants.

Mr. Ang said the company is choosing from eight potential locations for the plants. It will take two years to build the four manufacturing plants.

The company will also be completing a brewery in Sta. Rosa, Laguna with a capacity of two million hectoliters per year. In addition to this, SMC will be adding seven more breweries in Pangasinan, Quezon, Cebu, Bacolod, Cagayan de Oro, Bicol, and Iloilo.

SMC’s unit, San Miguel Food and Beverage, Inc. (FB), recently gained approval from the Philippine Stock Exchange to execute a share swap that would formally place San Miguel Pure Foods, Inc., GSMI, and San Miguel Brewery, Inc. under one entity.

Trading of FB shares are currently suspended, until such time that the newly formed unit meets the minimum public ownership (MPO) rule of 15%. FB’s public float is currently at around 4%.

Mr. Ang said the share sale, which would allow it to comply with the MPO rule, is targeted within the year. It may however opt to ask for an extension should it fail to get the necessary regulatory approvals or be prevented from selling the shares due to market volatility.

SMC’s recurring profit grew by 31% to P19.4 billion during the first quarter of 2018, supported by a 19% increase in consolidated revenues to P234.3 billion.


SMC to ‘invest heavily’ in renewable energy

DIVERSIFIED conglomerate San Miguel Corp. (SMC) plans to build up to 10,000 megawatts (MW) of renewable energy facilities in the next 10 years, adding to its existing installed capacity coming mostly from traditional coal and gas power plants.

“San Miguel is going to invest heavily on renewable energy,” Ramon S. Ang, SMC president and chief operating officer, told reporters.

Among renewable energy resources, he identified hydropower, wind, ocean tide and battery storage as the company’s possible investment ventures. He declined to disclose details on which of these will corner the biggest share, saying competitors might beat him in the projects.

“We predict to invest up to 10,000 megawatts in the next 10 years,” Mr. Ang said.

He said the required investment in renewable energy would be substantial as these remain costlier to build than a coal-fired power plant, except for solar energy. He brushed off solar energy, saying its availability is limited as experienced by other countries that had to resort to other sources to maintain the delivery of the required power capacity.

“The idea is to put up as many as possible,” Mr. Ang said, adding that each of the target projects has a good potential even the small ones.

“Sana (Hopefully), each hydro can produce 1,000 MW,” he said.

Mr. Ang said initial studies have shown good “wind profile” in an area in Luzon, which the company is considering to build a wind farm. He said a wide area within the country’s main island remains viable for a wind energy project.

“We have a report already — a very good wind profile, a very big capacity can be installed. And the land for that project is already owned by San Miguel,” he said.

SMC, through its energy subsidiaries, has an installed capacity of around 4,000 MW after the addition of the 630-MW Masinloc coal-fired power plant, which it bought for $1.9 billion in December last year from the equity holders of the plant’s owner Masin-AES Pte. Ltd.

In the same media briefing, Mr. Ang gave an update on the case between SMC unit Petron Corp. and state-led National Oil Co. (PNOC).

In October last year, Petron Corp. filed a case against PNOC for breach of a binding and compulsory sale-leaseback contract, which the listed company said threatens to hurt its operations, its shareholders and the Philippine economy.

Petron had asked the Mandaluyong Regional Trial Court for the issuance of a temporary restraining order to “stop PNOC from performing acts aimed at ousting Petron of its leased properties.” The company sought the court’s help over PNOC’s “threats, breach of sale and leaseback agreement.”

Petron said it had offered to negotiate the agreement with PNOC as early as 2016, but it had been constrained to seek judicial intervention after the government company said earlier last year that it would terminate the lease.

Mr. Ang said depending on the outcome of the case, he might elevate the legal dispute for international arbitration.

The case stemmed from a notice from PNOC directing Petron to abandon and clean up the contested sites on or before expiration of the lease, which is in August this year. Petron said PNOC had offered the properties covered by the leases to interested new independent oil companies, “in total disregard of the rights of Petron.”

Petron has existing lease agreements with PNOC for the sites of its $3-billion refinery in Bataan, 24 bulk plants and 67 gasoline stations. The company supplies more than a third of the country’s petroleum requirements.

Mr. Ang said Petron’s leased properties are originally owned by it and acquired over several years to be used for its refinery, distribution and sales operations. Petron, however, was compelled to give up its land to PNOC in 1993 to comply with the requirements of its privatization.

“To secure foreign and local investments in Petron and ensure stability of its operations, the transfer of the properties was enabled through a deed of conveyance and lease agreements that guaranteed its long-term and continuous use by Petron,” the company previously said. 

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San Miguel says recurring profit jumps 29% in 1st half

DIVERSIFIED conglomerate San Miguel Corp. (SMC) grew its recurring profit by 29% in the first six months of 2018, following higher volumes and favorable selling prices across its units.

In a statement issued Thursday, SMC reported a recurring net income of P35.5 billion as of end-June, supported by a 27% jump in consolidated revenues to P499 billion.

The listed company said that including the impacts of mark-to-market losses due to foreign exchange translation, net income would have stood at P27.6 billion, 6% higher year-on-year.

“Increased business focus and a lot of hard work were key to our group’s stellar performance. We’re encouraged by the results we’ve had so far, and are very hopeful that this momentum will carry through for the rest of the year,” SMC President and Chief Operating Officer Ramon S. Ang was quoted as saying in a statement.

SMC’s core interests are in food and beverage, power, fuel and oil, and infrastructure.

The newly consolidated food and beverage arm under San Miguel Food and Beverage, Inc. (SMFB) delivered a 20% increase in net income to P15.4 billion. This followed a 15% uptick in combined sales revenues to P137.4 billion.

The food business alone generated a profit of P3.1 billion, as consolidated revenues went up 12.4% to P62.9 billion due to the strength of its agro-industrial and branded value-added businesses.

The beer unit through San Miguel Brewery, Inc. expanded its revenues by 18% to P62.5 billion. Its net income accordingly grew by 26% to P11.3 billion for the first semester.

Ginebra San Miguel, Inc. posted a net income of P506 million, after revenues went up 19% to P12 billion due to the growth of its Ginebra San Miguel and Vino Kulafu brands.

Petron Corp. exhibited profit growth of 16% to P9.5 billion from January to June, fueled by the sales volumes from both Philippine and Malaysian operations. The company also benefited from the rising prices of crude oil and finished products.

Petron’s consolidated revenues reached P273.5 billion, 32% higher than the P207 billion it logged in the same period a year ago.

Meanwhile, SMC Global Power Holdings Corp. saw its consolidated revenues climb by 41% to 57.4 billion, as it recognized additional contributions from Masinloc, Limay, and Malita, alongside higher average realization prices for Sual’s bilateral and spot sales, and higher spot sales from Ilijan.

The power unit’s operating income stood at P17 billion for the first half, 28% higher than the P13.3 billion it posted in the same period a year ago.

For the packaging business, the San Miguel Yamamura Packaging Group expanded its operating income by 17% to P1.6 billion in the first semester. Sales revenues went up by a fourth to P17.6 billion following strong sales from the glass, plastics, and metal products. The company also noted the positive performance of its Australian operations.

The infrastructure business also recorded an 11% increase in consolidated revenues to P12.1 billion, as the company saw higher traffic volume from its operating toll roads. These include the South Luzon Expressway, Skyway Stage 1 and 2, and the Ninoy Aquino International Airport Expressway. Its operating income likewise gained 19% to P6.2 billion.


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