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SMC Global Power
- Sector: Energy
- Sub Sector: Independent Power Producers
- Country: Philippines
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Fundamental View
AS OF 19 May 2025We see lower non-call risk for SMC GP’s c.2025 and c.2026 perps owing to strong near-term parental funding support, its recent c.2024 perp refinancing, and recent bond exchange/tender with a new $900 mn c.2029 perp issuance.
We see an improving credit outlook for SMC GP aided by lower thermal coal input costs, new contracts, and capacity additions. Net cash inflows of $2.1-$2.2 bn from the completion of an LNG deal is also positive.
While SMC GP improved its cost passthrough contractual mix from end-FY23 onwards, the company still remains exposed to high thermal coal input costs (~40-50% of contracts).
SMC GP incurs sizable capex that has led to additional debt incurrence and elevated credit metrics.
Business Description
AS OF 19 May 2025- SMC GP is a leading power generation and distribution company in the Philippines. As at 31 December 2021, its total generation capacity stood at 4.7 GW, accounting for ~20% of the national grid.
- The bulk of its revenues is derived from power generation (~82%), with the remainder from electricity distribution and retailing (~18%).
- It operates 7 power generating plants across diversified energy sources, comprising coal (~62%), natural gas (~25%), hydro (~12%) and battery energy storage (~1%).
- Through long-term power supply agreements and retail supply contracts, SMC GP either sells electricity directly to customers (including large Philippines power distribution company Manila Electric Company, distribution utilities and other industrial customers), or through the Philippine Wholesale Electricity Spot Market.
- SMC GP acts as the Independent Power Producer Administrator (IPPA) for three power plants (~54% of total capacity), where it has the right to sell electricity generated by the IPPs without having to bear large upfront capital expenditures for plant construction and maintenance.
- SMC GP also distributes and retails electricity services through its wholly-owned subsidiary Albay Power and Energy, which distributes power in the province of Albay, Luzon.
- SMC GP is a wholly-owned unlisted subsidiary of San Miguel Corporation, one of the largest and most diversified conglomerates in the Philippines based on total revenues and assets.
Risk & Catalysts
AS OF 19 May 2025SMC GP still has $307 mn/$1.2 bn of c.2025 and c.2026 perps outstanding to be addressed, though we see low non-call risks.
A moderate portion of SMC GP’s off-take contracts do not contain cost pass-through mechanisms. This exposes the company to a rise in thermal coal input costs that could squeeze its EBITDA margins.
SMC GP incurs sizable capex that has spurred additional debt incurrence. Consequently, its credit metrics remain elevated.
Over 80% of SMC GP’s installed capacity is thermal coal or gas-fired, which may be viewed unfavorably from an ESG perspective.
Key Metric
AS OF 19 May 2025| PHP bn | FY22 | FY23 | FY24 | 1Q24 | 1Q25 |
|---|---|---|---|---|---|
| Debt to Book Cap | 69.2% | 62.8% | 64.4% | 63.0% | 61.1% |
| Net Debt to Book Cap | 66.4% | 59.4% | 57.7% | 59.1% | 53.2% |
| Debt/Total Equity | 224.6% | 168.7% | 181.2% | 170.0% | 157.4% |
| Debt/Total Assets | 79.0% | 73.8% | 73.8% | 72.7% | 75.3% |
| Gross Leverage | 19.4x | 12.9x | 11.9x | 12.6x | 10.8x |
| Net Leverage | 18.6x | 12.2x | 10.7x | 11.8x | 9.4x |
| Interest Coverage | 1.4x | 2.2x | 2.3x | 2.2x | 2.4x |
| EBITDA Margin | 13.2% | 26.4% | 26.6% | 27.3% | 34.4% |
CreditSight View Comment
AS OF 19 May 2025We have an Outperform recommendation on SMC GP. We think refinancing risk on the c.2025–2026 perps has meaningfully decreased with the completion of its bond exchange and tender offers. We are comfortable with SMC GP’s improving credit outlook, potential for forthcoming parental support, and management’s willingness and ability to repay the perps. The completion of the $3.3 bn LNG deal is also positive. We continue to see low non-call risk for the c.2025 perps, grow more comfortable with the c.2026 perps that could be refi-ed with new $ perps, and see the 8%+ yields on the c.2029 perps as attractive. Key risks we are watchful of include any weakening of parental funding support (due to SMC’s own sizable infra capex) and overly aggresive capex..
Recommendation Reviewed: May 19, 2025
Recommendation Changed: September 09, 2024
Who We Recommend
Security Bank (PH)
BNP Paribas
UnionBank of the Philippines
