San Miguel Corporation

...RSA comments on rice and airport

SMC unit plans to import palay

THE FOOD AND BEVERAGE unit of diversified conglomerate San Miguel Corp. (SMC) said it plans to import unmilled rice should the government pass a law lifting quantitative restrictions (QR) on the volume of rice imports annually.

SMC President and Chief Operating Officer Ramon S. Ang said the company can undertake rice importation to help ensure food security and to assist local farmers.

“When the government passes the rice tariffication law, we will get into it quickly to import palay, put up a rice mill. We can bring in rice in bulk,” Mr. Ang told reporters after San Miguel Food and Beverage, Inc.’s (SMFB) special stockholders’ meeting in Mandaluyong City on Wednesday.

“We can offer this to the government. We can help the government, the intention is to help food security of the country and help local farmers and supply consumers with reliable and good quality price at a low price,” he added.

Mr. Ang said the company has the capacity to put up grain mills beside its existing feed mills, citing its facilities in Darong, Davao; Iloilo; Barong, Negros Oriental; Mandaue, Cebu; San Fabian, Pangasinan; Mabini, Batangas; and Sariaya, Quezon.

Asked how much volume of rice can be imported, Mr. Ang said one grain terminal will be able to handle three to four million tons each year.

The executive explained SMFB can import rice from Asian countries such as Cambodia, Vietnam, and Thailand which can readily supply the Philippines with its rice needs.

Since the government will impose tariffs on the imported rice, Mr. Ang said this can be used to subsidize the needs of local farmers.

Mr. Ang’s comments come amid the passage House Bill No. 7735 or the Revised Agricultural Tariffication Act in the House of Representatives last Aug. 14. Under the bill, the National Food Authority will have the sole authority to undertake rice importation, as well as the power to allocate import permits for rice and corn importation.

The Senate also expects to green light the measure before the end of September.

Socioeconomic Planning Secretary Ernesto M. Pernia earlier said the rice tariffication bill will help lower rice prices once the QR is replaced with tariffs.

Meanwhile, Mr. Ang said the San Miguel group has enough financial muscle to finance its P750-billion Bulacan airport project, following comments from Finance Secretary Carlos Dominguez III questioning its subsidiary, San Miguel Holdings Corp. (SMHC)’s ability to push through with the project.

“The historical performance of the company reflects that we are more than capable of handling the project: strong balance sheet, consistent profitability, and sustained growth and liquidity. All these support our expansion and acquisition activities,” Mr. Ang said.

The company said it has already undertaken several big-ticket projects in the past, including the Ninoy Aquino International Airport Expressway, the Tarlac-Pangasinan-La Union Expressway, and the Boracay Airport runway extension project.

It also has several on-going projects, such as the Metro Rail Transit Line 7, Skyway Stage 3, and South East Metro Manila Expressway.

“SMC has already undertaken a lot of major projects and have delivered on a number of them so the expertise, know-how, and innovativeness are there. We also work with the best experts and contractors so when the time comes to start construction on the airport, we expect to hit the ground running,” Mr. Ang said.

SMHC looks to complete the Bulacan airport in five to seven years, with P100 billion expected to be spent every year. This matches the level of company’s cash from operating activities on a simple, annualized basis.


...hilig talaga ni SMC sa mga unsolicited proposals

SMC seeks gov’t OK for P3-billion Caticlan-Boracay bridge

MANILA, Philippines — Diversified conglomerate San Miguel Corp. (SMC) said it is hopeful of securing government approval soon for its plan to build a P3-billion bridge connecting Caticlan to Boracay Island.

“I hope the government will finally approve the bridge,” SMC president and COO Ramon Ang said.

The unsolicited proposal has already been submitted to the Department of Public Works and Highways (DPWH) more than a month ago, Ang said.

He said with the bridge, the government would not have to rehabilitate Boracay regularly as there would be a pipe that can handle the sewage and waste from the tourist island.

The popular tourist island has ben closed since April for rehabilitation, but is set to re-open next month.

SMC’s proposed bridge will connect the two islands which have an actual gap of 1.1 kilometers.

Ang said the project could be completed within two years after securing approval from the government.

The proposed bridge handles the sewage pipe and all the sewage from Boracay to Caticlan, and then from Caticlan, fresh water can be transported to Boracay.

“It can bring the solid waste and it can bring electricity,” Ang added.

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, SMC will charge a users’ fee for 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.

The project, Ang said, would also be in synergy with SMC’s Caticlan airport in Boracay.

The company is currently expanding the Caticlan airport to handle more passengers.

Aside from the Boracay Bridge, SMC also proposed other infrastructure projects, including a proposal to build a $15-billion airport in Bulacan to decongest NAIA.


...nag-adjust na si SMC sa contract proposal nya Smile basta matuloy lang Bulacan airport project

DoTr to review revised concession contract for Bulacan airport

THE government has received from Bulacan airport proponent San Miguel Holdings Corp. (SMHC) the revised contract for the project on Monday, which contained altered provisions to accommodate requests from the Department of Transportation (DoTr), it said on Tuesday.

Transportation Undersecretary for Planning Ruben S. Reinoso, Jr. said in an economic briefing the new concession terms for the New Manila International Airport took into account the issues that have been flagged by the DoTr in previous meetings.

“Based on a discussion on Sept. 6, the San Miguel Holdings Corp. submitted a revised concession agreement yesterday (Sept. 17). So it’s now under review, and due for another negotiation on Monday (Sept. 24),” he said.

Mr. Reinoso told reporters that while they had not gone through all the pages of the revised draft contract, it is expected to contain changes in three main provisions: what constitutes a material adverse government action, what constitutes a change in law that would warrant government compensation, and how would payment be determined in case either parties commits any fault.

“[The initial version of the contract] is very broad. So we wanted it to be more specific. We wanted more details. Kasi pag broad ’yung language (Because when the language is broad), sometimes it becomes subject to dispute in the future,” he said.

The next step once the terms and conditions of the contract are finalized would be getting the approval of the National Economic and Development Authority’s investment coordination committee (NEDA-ICC), Mr. Reinoso said. This would be done simultaneously with the preparations for the Swiss challenge.

Under the Swiss challenge, other firms are invited to submit counterproposals to that of SMHC’s, but as original proponent, the company may match.

Mr. Reinoso added, “Hopefully if everything is agreed upon, the proponent will be granted final approval and awarding of the contract by early next year or hopefully towards the end of the year.”

Last week, Mr. Reinoso told reporters they were being cautious in approving the concession terms for the Bulacan airport proposal to ensure it would not contain any contingent liability that might be interpreted as government guarantee.

Being an unsolicited proposal, the Bulacan airport project is not allowed to exhibit any form of government guarantee, in accordance with Republic Act No. 7718 or the Build-Operate-Transfer (BOT) Law.

“We are careful that if we feel this is tantamount to a government guarantee, then we tell them. They have to give us something that we will accept as not a government guarantee,” Mr. Reinoso said.

Contingent liabilities are payments that come from untoward incidences in the course of a project. While Mr. Reinoso said contingent liabilities are “fine,” it becomes alarming once it turns into a real liability.

The Department of Finance last week also deflected comments that they were delaying the final approval of the project, noting it was simply ensuring that the Bulacan airport would not cost unnecessary expenses on the government.

“It is my responsibility to not only look after all of government assets, but also manage our contingent liability,” Finance Secretary Carlos G. Dominguez III said.

He likewise questioned the viability of the airport proposal because of SMHC’s supposed insufficient equity of P60 billion in 2016 to back the P735-billion project.

Mr. Dominguez said if the SMHC wants the project to push through, it needs the financial support of parent company San Miguel Corp. through a joint and several liability agreement.

SMHC’s proposal is to construct, operate and maintain a 2,500-hectare airport in Bulacan with an 8.4-kilometer toll road connecting to the North Luzon Expressway. It was conditionally approved by the NEDA board on Apr. 25, but is still subject for another round of evaluation for questions on its financial viability.


San Miguel units complete share-swap deal

SAN MIGUEL Food and Beverage, Inc. (SMFB) has completed the share-swap transaction consolidating the traditional units of parent San Miguel Corp. (SMC) under its portfolio.

In a disclosure on Thursday, SMFB said it had completed the P336.35-billion transaction involving its issuance of 4.24 billion new shares to SMC, in exchange for the company’s 7.86 billion common shares in San Miguel Brewery, Inc. (SMB) and 216.97 million shares in Ginebra San Miguel, Inc. (GSMI).

SMFB now serves as the holding company for SMC’s food and beverage, liquor, and brewery businesses, with SMB and GSMI as its subsidiaries. It now holds an ownership of 51.16% and 78.26% in SMB and GSMI, respectively, while SMC’s stake in SMFB will increase to 95.87% from 85.37% as of September last year.

Following the completion of the share swap, SMFB said it had filed an application with the Philippine Stock Exchange (PSE) to list the new shares it had issued to SMC.

The share-swap transaction is part of the San Miguel group’s internal restructuring, in a bid to create a “significant consumer food and beverage vertical market under SMC.” The company also expects the restructuring to enhance its trading liquidity and broaden the shareholder base to institutional and retail investors.

SMFB’s public float now stands at 4.12%, less than half of the minimum public ownership rule of 10% set by the Securities and Exchange Commission (SEC). The company targets to conduct a follow-on offering worth up to P142 billion by year-end to meet this requirement, filing with the SEC last August a registration statement to sell up to 1.02 billion common shares at up to P140 each.

The company looks to announce the final price of the shares on Oct. 19, after securing the approval of both the SEC and the PSE. The offering is scheduled to run from Oct. 23 to 29, with the crossing of the offer shares slated for Nov. 6.

The completion of the share-swap deal came amid a complaint filed by Josefina Multi-Ventures, Inc., a minority stockholder of GSMI, for an alleged violation of the mandatory tender offer rule before SMFB’s consolidation.

Josefina Multi-Ventures said in a case filed with the SEC that SMFB should have conducted a tender offer for the benefit of the minority shareholders of GSMI.

The SEC noted that it had created a special panel to hear the complaint.

SMFB grew its net income attributable to the parent by 16.7% to P9.26 billion in the first six months of 2018, after gross revenues expanded by 15.4% to P137.44 billion.

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San Miguel plans power plants’ transition to biomass technology

SAN MIGUEL Corp. (SMC) said on Wednesday that it was planning to replace coal with rice husks to fuel its circulating fluidized bed (CFB) power plants to boost the income of farmers while the conglomerate moves towards renewable and sustainable energy generation.

“Instead of burning or dumping rice husks, we want to fully utilize this agricultural waste product both as energy source for our power plants and income source for our rice farmers,” said Ramon S. Ang, SMC president and chief operating officer, in a statement.

“This way, we reduce our emission further, encourage more farmers to increase rice production, make their lives better and help address a perennial food security challenge,” he added.

SMC will convert its existing power plants using CFB “clean coal” technology into biomass power facilities. Its power unit SMC Global Power Holdings Corp. operates two new facilities in Limay, Bataan and Malita, Davao.

The plants use CFB combustion technology, which SMC said is among the world’s most advanced pollution-mitigating technologies for power plants, yielding lower emissions. But the listed company said emissions from rice husk-based fuel are expected be even lower.

Mr. Ang said SMC’s transition into biomass technology could also boost rice farming in the country.

“If we encourage more farmers to plant rice by providing them additional sources of income, our rice sufficiency and food security improves. At the same time, we use palay husks to generate more environment-friendly energy,” he said.

He said the company is willing to build the necessary infrastructure and facilities to support rice farmers to collect husks that will be bought from them.

Earlier this month, Mr. Ang said SMC could go into rice importation to help address the current rice shortage, but only if scheme that imposes import tariffs but lifts quantity limits is passed.

SMC operates grains terminals and silos nationwide, which can be used to stockpile rice to help ensure food supply and high-quality rice at low prices. The tariffs to be imposed on importing rice could be used to support local farmers and boost the farm sector.

Mr. Ang earlier this year said SMC is boosting its renewable energy capacity with a target capacity of 10,000 MW in the next 10 years. He said the company was looking at tidal energy, wind power, and more hydroelectric power plants.

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BIR confirms San Miguel share swap transaction is tax-free

DIVERSIFIED conglomerate San Miguel Corp. (SMC) has received clearance from the Bureau of Internal Revenue (BIR) for the tax-free transfer of its common shares to its newly consolidated food and beverage unit.

In a disclosure to the stock exchange on Monday, SMC said the BIR issued last Friday BIR Rule No. 010-2018, confirming the tax-free transfer of its common shares in San Miguel Brewery, Inc. (SMB) and Ginebra San Miguel, Inc. (GSMI) to San Miguel Food and Beverage, Inc. (SMFB).

The share swap transaction includes the transfer of 7.86 billion shares in SMB and 216.97 million shares in GSMI to SMFB, in exchange for 4.24 billion new common shares in SMFB to be issued to SMC out of its capital increase. The transaction is valued at P336.35 billion.

With the tax exemption, SMC said it will apply for a certificate authorizing registration of SMFB’s ownership over the SMB and GSMI shares in the stock and transfer books of the two companies.

The transaction forms part of SMC’s consolidation of its traditional businesses under SMFB, which now holds its liquor, brewery, and food and beverage units. Following the share swap, SMFB now holds 51.16% and 78.26% in SMB and GSMI, respectively. SMC will also increase its stake in SMFB to 95.87% from 85.37%.

The consolidation intends to create a “significant consumer food and beverage vertical market under SMC,” while also aiming to enhance its trading liquidity.

SMFB is now looking to raise up to P142 billion in a follow-on offering to comply with the minimum public ownership rule of 10%, as its public float fell to 4.12% after the share swap.

The company has already secured approval from the Securities and Exchange Commission to proceed with the share sale, consisting of a base size of 887 million shares and an over-allotment option of 133.05 million shares priced up to P140 each. Funds raised from the offering will be used to fund SMC’s infrastructure projects.

The share sale is currently awaiting approval from the Philippine Stock Exchange.

As per its latest prospectus, SMFB targets to price the offering by Oct. 19, with the offering to run from Oct. 23 to 29. The shares will then be crossed at the exchange by Nov. 6.

SMFB’s net income expanded by 20% to P15.4 billion in the first six months of 2018, following the 15% increase in consolidated revenues to P137.4 billion.

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